A two-judge bench of the Supreme Court, on Wednesday categorically held that the circular issued by the Central Board of Direct Taxes (CBDT) prescribing monetary limit for filing appeals is applicable to pending appeals also.
Earlier, the Top-Court had took a divergent view in this matter. The Karnataka High court, had struck down the circular finding the same as illegal and ultra vires to the Constitution. Later, the Bombay, Delhi and Madhya Pradhesh High Courts had accepted the same view.
However, the High Courts of Madras, Kerala, Chhattisgarh and the Punjab and Haryana had took a contrary view.
Subsequently, a three Judge bench of Supreme Court in titled Surya Herbal Ltd. case (supra) has passed following order:
“Liberty is given to the Department to move the High Court pointing out that the Circular dated 9th February, 2011, should not be applied ipso facto, particularly, when the matter has a cascading effect. There are cases under the Income Tax Act, 1961, in which a common principle may be involved in subsequent group of matters or large number of matters. In our view, in such cases if attention of the High Court is drawn, the High Court will not apply the circular ipso facto. For that purpose, liberty is granted to the Department to move the High Court in two weeks.”
A bench of Justices R F Nariman and Sanjay Kishan Kaul said that “The retrospective applicability of the Circular dated 9.2.2011 was not interfered with, but with two caveats – (i) Circular should not be applied by the High Courts ipso facto when the matter had a cascading effect; (ii) where common principles may be involved in subsequent group of matters or a large number of matters. It was opined that in such cases, the attention of the High Court would be drawn and the Department was even given liberty to move the High Court in two weeks. In our view this order holds the field and should continue to hold the field.”
The bench opined that the matter needs to be put to rest and a clarity be obtained in view of the impact of this issue on pending cases before the High Courts as well as the cases which have been disposed of by various High Courts by applying the Circular of 2011 to pending litigations.
Dismissing the Revenue appeals, the bench observed that “In our view the matter has been squarely put to rest taking further care of the interest of the Revenue by the order passed by the three Judges Bench of this Court in Surya Herbal Ltd. case (supra), which had put two caveats even to the retrospective application of the Circular. The subsequent orders have been passed by the two Judges Bench without those orders being brought to the notice of the Court, a duty which was cast on the Department to have done so to avoid the ambiguity which has arisen. Thus, the said view of the three Judges Bench would hold water and the Circular would apply even to pending matters but subject to the two caveats provided in Surya Herbal Ltd. Case.”
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