filing appeal by Revenue: Instruction No. 3 of 2011, dated 9-2-2011 is retrospective: Department must show ‘cascading effect’.

In this appeal filed by the Revenue in the year 2010 the tax amount in dispute was Rs.6,69,770. CBDT Instruction No. 3 of 2011, dated 9-2-2011 prescribed the limit of Rs.10,00,000 for filing an appeal before the High Court u/s.260A of the Income-tax Act, 1961. The High Court observed that since the tax effect does not exceed Rs.10 lakh, the appeal is required to be dismissed in view of the CBDT Instruction No. 3 of 2011, dated 9-2-2011.

The Department contended that (i) as the appeal has been filed prior to the issuance of the Circular, the Circular did not apply; and (ii) as the appeal had a ‘cascading effect’ involved a ‘common principle’, the appeal could not be dismissed in view of the Supreme Court’s verdict in Surya Herbals.

The Bombay High Court dismissed the appeal and held as under: “

(i) In CIT v. Smt. Vijaya V. Kavekar, (Tax Appeal No. 78 of 2007 with Tax Appeal No. 76 of 2007) decided on 29-7-2011, a Division Bench of this Court, while interpreting the very Circular No. 3 of 2011, has held that the Circular has a retrospective operation and instructions contained in the Circular would apply even to the pending cases.

(ii) As regards Surya Herbals case, the appeal does not involve any ‘cascading effect’ as the Department has not shown whether there are other appeals which raise the same point.”