Circular No. DIT(L&R)-I/SLP/393/2011/4589

Section 268A of the Income-tax Act, 1961 - Appeals and Revision - Filing of Appeal or Application for Reference by Income-tax Authority - Cbdt's Instruction No. 3/2011, Dated 9-2-2011 Revising Monetary Limits NOT to Apply Ipso Facto to Appeals Filed Prior to 9-2-2011

What this is

Circular No. DIT(L&R)-I/SLP/393/2011/4589 was issued by the Central Board of Direct Taxes on 2 September 2011. Its subject is Section 268A of the Income-tax Act, 1961 - Appeals and Revision - Filing of Appeal or Application for Reference by Income-tax Authority - Cbdt's Instruction No. 3/2011, Dated 9-2-2011 Revising Monetary Limits NOT to Apply Ipso Facto to Appeals Filed Prior to 9-2-2011.

This fixes the monetary limits below which the department will not appeal. It binds the department only: it is not a rule about the merits, and an assessee cannot draw an inference from a withdrawn appeal.

What it does

Tells field officers how to deal with departmental appeals dismissed for low tax effect. The Delhi High Court had summarily dismissed a large number of appeals filed before 9 February 2011 on the footing that the tax effect was below the revised monetary limits in Instruction No. 3/2011 dated 9 February 2011, although para 11 of that Instruction made the revised limits applicable only to appeals filed on or after that date and left earlier appeals to the instructions then in force. In CIT v. Surya Herbal Ltd. the Supreme Court, by its order of 29 August 2011, gave the Department liberty to move the High Court within two weeks to point out that the circular of 9 February 2011 should not be applied ipso facto, particularly where the matter has a cascading effect or a common principle runs through a group of matters. The Board therefore directs that review petitions be filed in the High Court in all such cases, including those where a special leave petition proposal has already gone to the Directorate of Legal and Research, and that no further such proposals be sent.

Why it was issued

Appeals filed before the revised limits took effect were being dismissed on the strength of them, and the Supreme Court's order in the Surya Herbal case gave the Department a route back to the High Court.

Who it reaches

Assessees whose departmental appeals were dismissed for low tax effect and who now face a review petition
Assessees whose issue recurs across years or across a group of matters, where the cascading-effect point is taken
Officers handling appeal and special leave petition proposals

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.268A	s.373

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

SECTION 268A OF THE INCOME-TAX ACT, 1961 - APPEALS AND REVISION - FILING OF APPEAL OR APPLICATION FOR REFERENCE BY INCOME-TAX AUTHORITY - CBDT's INSTRUCTION NO. 3/2011, DATED 9-2-2011 REVISING MONETARY LIMITS NOT TO APPLY IPSO FACTO TO APPEALS FILED PRIOR TO 9-2-2011
LETTER NO. DIT(L&R)-I/SLP/393/2011/4589, DATED 2-9-2011
1. Kindly refer to the above.
2. In a large number of cases Hon'ble Delhi High Court has summarily dismissed the appeals filed by the department prior to 9-2-2011 on the ground that the tax effect involved was less than the revised monetary limits of tax effect involved prescribed by CBDT Instruction No. 3/2011, dated 9-2-2011.
3. As per Instruction No. 3/2011 the revised monetary limit was applicable only for the appeals filed on or after 9-2-2011 i.e. the date of issue of Instruction. As per para 11 of the Instruction, it was clarified that the appeals filed earlier would be governed by the old instructions operative at the time of filing.
4. On this issue SLP was filed in Supreme Court and one case namely Surya Herbal came up for hearing before the Hon'ble Supreme Court on 29-8-2011. The order passed by the Hon'ble Court in that case in SLP(C) CC No. 13694 of 2011 is enclosed herewith (see Annexure). The Supreme Court has directed that review petition be filed in High Court within two weeks. In such cases the attention of the High Court may be drawn to the observations of Supreme Court with a prayer not to apply the Instruction No. 3/2011 ipso facto in respect of appeals filed prior to 9-2-2011.
5. In view of the above, the Board desires that in all such cases (including the cases in which proposal to file SLP has been sent to Directorate of Legal & Research) immediate steps be taken to file review petition in High Court pointing out the observations of Supreme Court. The officers may be advised not to send any proposals henceforth to file SLP in such cases.
ANNEXURE
SUPREME COURT OF INDIA
Commissioner of Income-tax Central-III
v.
Surya Herbal Ltd.

CHIEF JUSTICE; K.S. RADHAKRISHNAN AND SWATANTER KUMAR, J.

CC NO. 13694/2011

AUGUST 29, 2011
Goolam E. Vahanvati, Rupesh Kumar, Anand Kannan and B.V. Balaram Das for the Petitioner.
ORDER
Delay condoned.
Liberty is given to the Department to move the High Court pointing out that the Circular, dated 9-2-2011, 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.
The special leave petition is, accordingly, disposed of.

nn

What to watch

The revised limits in Instruction No. 3/2011 apply only to appeals filed on or after 9 February 2011; earlier appeals are governed by the instructions in force when they were filed.
The Supreme Court did not hold the limits inapplicable — it gave liberty to move the High Court, and left it to the High Court not to apply the circular ipso facto once its attention is drawn to a cascading effect.
The route chosen is a review petition in the High Court, not a special leave petition; officers were told to stop sending such proposals.
A cascading effect or a common principle across matters is the argument that keeps a low-tax-effect appeal alive.

Where you meet it

On a review petition in the High Court seeking to restore a departmental appeal dismissed on monetary limits, or when resisting one.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 9/2024 — ]1.No.279!Misc'!M-74/2024-/T.I 17 September 2024
Circular No. 23/2019 — Exception to monetary limits for filing appeals specified in any circular issued under section 268A of the income tax ac 6 September 2019
Circular No. 17/2019 — Further enhancement of monetary limits for filing of appeals by the department before income tax appellate tribunal high 8 August 2019

← Press Release · Circular No. 7/FT&TR/2011 [F.NO.500/15/2011-FT&TR-I] →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.