Case Note & Summary
The High Court of Judicature at Bombay heard a group of seven writ petitions filed by the Revenue, namely the Commissioner of Income Tax-TDS-1, challenging orders passed by the Income Tax Appellate Tribunal under Section 234E of the Income Tax Act, 1961. The common question involved was the maintainability of the writ petitions in view of the availability of a statutory appeal under Section 260A of the Act and the monetary limits prescribed by the Central Board of Direct Taxes. The lead petition was against Emsons Exim Pvt. Ltd., and other similar assessees were respondents in connected matters. The Revenue contended that although the tax effect in each case was below the monetary limit of rupees one crore as per CBDT Circular No.17 of 2019 dated 8 August 2019, the issue involved interpretation of a Section and had a cascading effect; therefore, the High Court should entertain the writ petitions under Article 226 of the Constitution of India despite the statutory alternative remedy. No one appeared for the respondent assessees. The Court observed that the CBDT had issued Circular No.3 of 2018 dated 11 July 2018, as amended by Circular dated 20 August 2018, prescribing monetary limits for filing appeals by the Department, and specifically enumerated exceptions in paragraph 10, such as constitutional validity challenges, ultra vires Board orders, undisclosed foreign income, and pending prosecution cases. It was undisputed that the present matters did not fall within any of those exceptions. The Court referred to paragraph 7 of Circular No.3 of 2018, which required the Pr. Commissioner/Commissioner to record that an appeal is not being filed only because the tax effect is less than the monetary limit, and clarified that this would not amount to acquiescence in the decision. The Court noted that the Revenue itself relied on the Supreme Court decisions in CIT v. Surya Herbal Ltd and Director of Income Tax v. S.R.M.B. Dairy Farming (P) Ltd, where liberty was given to the Department to argue that the circular should not be applied ipso facto in cases having a cascading effect. However, the Court held that such an argument had to be raised by filing a statutory appeal under Section 260A of the Act, demonstrating that the circular should not apply, and not by invoking writ jurisdiction. The Court also emphasized that tax authorities are bound by CBDT directions issued under Section 268A(4) of the Act, and that the power under Article 226 is meant to effectuate law, not to direct statutory authorities to act contrary to law. The Court summarized the principles governing exercise of writ jurisdiction in the presence of an alternate remedy as laid down in Radha Krishan Industries v. State of Himachal Pradesh, including that exceptions arise only for enforcement of fundamental rights, violation of natural justice, lack of jurisdiction, or challenge to vires. It found that none of these exceptions were fulfilled in the present case. Consequently, the High Court declined to exercise extraordinary jurisdiction under Article 226 and dismissed all the writ petitions on the ground of maintainability, leaving the Revenue to pursue its statutory remedy under Section 260A of the Income Tax Act, 1961.
Headnote
A) Income Tax - Maintainability of Writ Petition - Alternative Statutory Remedy - Constitution of India, Article 226; Income Tax Act, 1961, Sections 260A and 234E - The Revenue challenged an ITAT order under Section 234E by way of writ petition despite availability of statutory appeal under Section 260A and tax effect below monetary limit - The High Court held that when an effective alternate remedy exists, writ jurisdiction should not ordinarily be exercised, and no exceptions were fulfilled - Held that the writ petitions were not maintainable and dismissed them (Paras 2, 12-14). B) Income Tax - CBDT Circulars on Monetary Limits - Exceptions to Filing Appeals Below Tax Effect Limit - Income Tax Act, 1961, Section 268A(4); CBDT Circular No.3 of 2018 dated 11 July 2018, as amended by Circular dated 20 August 2018 and Circular No.17 of 2019 dated 8 August 2019 - The CBDT prescribed monetary limits for filing appeals, with enumerated exceptions such as constitutional validity, ultra vires orders, undisclosed foreign income, and pending prosecution - The subject matter of the petitions did not fall within any exception under clause 10 - Held that the Revenue could not claim exemption from the monetary limit circular (Paras 4-5). C) Income Tax - Cascading Effect - Ipso Facto Application of CBDT Circular - Income Tax Act, 1961, Section 268A(4); CBDT Circular No.3 of 2018 as amended - The Supreme Court in Surya Herbal Ltd permitted the Department to argue that the circular should not be applied ipso facto where the matter has a cascading effect - The Revenue asserted cascading effect but did not file a statutory appeal demonstrating this - Held that the cascading effect argument must be raised in a statutory appeal under Section 260A, not in a writ petition (Paras 6, 9, 11). D) Constitution - Writ Jurisdiction - Exceptions to Alternative Remedy Rule - Constitution of India, Article 226 - The Supreme Court in Radha Krishan Industries summarized exceptions where writ petition may be entertained despite alternate remedy, including violation of natural justice, lack of jurisdiction, enforcement of fundamental rights, and challenge to vires - None of these exceptions were satisfied - Held that the High Court declined to exercise extraordinary jurisdiction (Paras 12-13). E) Income Tax - Binding Nature of CBDT Instructions - Section 268A(4) of Income Tax Act, 1961 - CBDT directions issued under Section 268A(4) are binding on Income Tax authorities and intended to reduce litigation - The Court observed that tax authorities are creatures of the Income Tax Act and must follow CBDT monetary limits - Held that the Revenue cannot bypass CBDT instructions by invoking writ jurisdiction (Para 11).
Issue of Consideration
Whether the writ petitions filed by the Revenue under Article 226 of the Constitution of India were maintainable when an appeal under Section 260A of the Income Tax Act, 1961 was available and the tax effect was below the monetary limit prescribed by CBDT Circular No.17 of 2019; and whether the claim of cascading effect justified invoking writ jurisdiction.
Final Decision
The High Court dismissed all writ petitions as not maintainable. It held that the Revenue had an effective alternative statutory remedy under Section 260A of the Income Tax Act, 1961, and none of the exceptions to the rule of alternative remedy applied. The Court declined to exercise extraordinary jurisdiction under Article 226 of the Constitution of India.
Law Points
- Writ jurisdiction under Article 226 cannot be invoked when an effective alternative statutory remedy is available
- CBDT circulars prescribing monetary limits for filing appeals are binding on income tax authorities under Section 268A(4) of Income Tax Act
- 1961
- the exceptions to monetary limits are enumerated in paragraph 10 of CBDT Circular No.3 of 2018 as amended
- a claim of cascading effect must be raised in statutory appeal under Section 260A
- not in a writ petition
- the Supreme Court in Surya Herbal Ltd and S.R.M.B. Dairy Farming permitted non-ipso facto application of monetary limit circular only by moving the High Court in appeal
- the principles in Radha Krishan Industries govern exceptions to alternative remedy
