DIRECTOR OF INCOME TAX, CIRCLE 26(1) NEW DELHIversusS.R.M.B. DAIRY FARMING (P) LTD.

                           [2017] 11 S.C.R. 1118


A      DIRECTOR OF INCOME TAX, CIRCLE 26(1) NEW DELHI
                                     v.
                  S.R.M.B. DAIRY FARMING (P) LTD.
                      (Civil Appeal No. 19650 of2017)
B                          NOVEMBER 23, 2017
        [R. F. NARIMAN AND SANJAY KISHAN KAUL, JJ.]
          Income Tax Act, 1961:

c          Circular/Government order/Notification - Circular No.3 of
    2011 dated 9.2.2011 issued by IT department providing that appeals
    are not to be filed before the High Courts where tax impact was less
    than Rs.JO lakhs - Applicability of the circular to pending matters
    - Held: Circular dated 9.2.2011 would apply even to pending
    matters but subject to the two caveats provided in order passed by
D   a three-Judge Bench of Supreme Court in Surya Herbal case - The
    two caveats are: (i) Circular dated 9.2.2011 should not be applied
    by High Courts ipso facto when the matter has a cascading effect;
    (ii) where common principles may be involved in subsequent group
    of matters or large number of matters - Order passed in Surya
E
    Herbal case holds the field - Appeals of Revenue accordingly
    dismissed.

          National Litigation Policy, 2011 - Purpose of - Discussed.

          Dismissing the appeals, the Court
F       HELD: The matter has been squarely put to rest taking
  further care of the interests of the Revenue by the order passed
  by the three Judges Bench of this Court in Surya Herbal Ltd.,
  which had put two caveats even to the retrospective application
  of the Circular. The said view of the three Judges Bench would
G hold water and Circular would apply even to pending matters but
  subject to the two caveats provided in Surya Herbal Ltd. case.
  [Para 25) [1133-G; 1134-A-C]

          CIT Central-Ill v. Surya Herbal Ltd. (2011) 15 SCC
          482 - Followed
H
                                  1118
. DIRECTOR OF LT, CIRCLE 26(1) NEW DELHI v. S.R.M.B.             1119
              DAIRY FARMING (P) LTD.

    Suchitra Components Ltd. v. Commissioner of Central          A      ·
    Excise, Guntur 2007 (208) ELT 321 (SC);
    Commissioner of Central Excise, Bangalore v. Mysore
    Electricals Industries Ltd. 2006 (204) ELT 517 (SC) -
    relied on.
     Commissioner of Income Tax, Bangalore v. Ranka &            B
     Ranka 2012(284) ELT 185 (Kar.); Commissioner of
     Income Tax v. Pithwa Engg. Works (2005) 276 ITR 519
     (Born.); Com111:issioner of Income Tax v. Madhukar K.
     Inamdar (HUF) (2009) 318 ITR 149 (Born);
     Commissioner of Income Tax v. As/wk Kumar Manibhai
     Patel & Co. (2009) 317 ITR 386 (MP); Commissioner           c
     of Income Tax v. P.S. Jain & Co. (2011) 335 ITR 591
     (Delhi); Commissioner of Income Tax v. Varindera
     Construction Co. (2011) 331 ITR 449 (P&H)(FB);
     Commissioner of Income Tax v. Navbharat Explosives
     Co. P. Ltd. (2011) 337 ITR 515 (Chhattisgarh);              D
     Commissioner of Income Tax v. Kodanand 'Tea Estates
     Co. (2005) 275 ITR 244 (Mad.); CWT v. John L.
     Chacko/a (2011) 337 ITR 385 (Ker); Commissioner
     of Income Tax-VII, New Delhi v. Suman Dhamija (2015)
     16 SCC 176; Commissioner of Income Tax & Am: V.
     Century Park (2015) 14 SCC 704 - referred to.                E

                     Case Law Reference
(2011) 15 sec 482                  followed       Paras 19, 25
2012(284) ELT 185 (Kar.)           referred to     Paras
                                                                  F
(2005) 276 ITR 519 (Born.)         referred to     Para 14
(2009) 318 ITR 149 (Born)          referred to     Para 15
(2009) 317 ITR 386 (MP)            referred to     Para 16
(2011) 335 ITR 591 (Delhi)         referred to     Para 16
                                                                  a·
(2011) 331 ITR 449 (P&H)(FB)       referred to     Para 17
(2011) 337 ITR 515 (Chhattisgarh) referred to      Para 18
(2005) 275 ITR 244 (Mad.)          referred to     Para 18
(2011) 337 ITR 385 (Ker)           referred to     Para 18
                                                                  H
1120             SUPREME COURT REPORTS                         [2017] ll S.C.R.


 A     (2015) 16 sec 176                 referred to               Para 21
       (2015) 14 sec 104                 referred to               Para 22
       2007 (208) ELT 321 (SC)           relied on                 Para24
       2006 (204) ELT 517 (SC)           relied on                 Para 24
B

            CIVIL APPELLATE JURISDICTION: Civil Appeal No. 19650
       of2017.
        From the Judgment and Order dated 19.04.2011 of the High Court
C of Delhi at New Delhi in ITA No. 4412005
                                         WITH
              CivilAppealNo.19651 of2017.
             Arjjit Prasad, T. M. Singh, Ms. N. Annapoomi, Mrs. Anil Katiyar,
       Advs for the Appellant.
D
             S. B. Upadhyay, Sr. Adv, Pawan Upadhyay, Sarvjit Pratap Singh,
       Nishant Kr., Ms. Sharmila Upadhyay, Salil Kapoor, Sumit Lalchandani,
       Kamal Mohan Gupta, Advs for the Respondent.
             The Judgment of the Court was delivered by
E            SANJAY KISHAN KAUL, J. 1. Leave granted.
         2. The propensity of Government Departments and public
  authorities to keep litigating through different tiers of judicial scrutiny is
  one of the reasons for docket explosion. The Income Tax Department
  of the Government oflndia is one of the major litigants. There are two
F departmental scrutinies at the level of the Assessing Officer and the
  Commissioner oflncome Tax (Appeals) and thereafter an independent
  judicial scrutiny at the Income Tax Appellate Tribunal (hereinafter
  referred to as the 'ITAT') level followed by the legal issue which can be
  inquired into by the High Courts. The last tier is, of course, the jurisdiction
G under Article 136 of the Constitution of India before the Supreme Court.
              3. Mindful of the phenomenon of the docket explosion and the
       rising litigation in the country, the Union oflndia in order to ensure the
       conduct of responsible litigation framed what is today known as the
       National Litigation Policy, to bring down the pendency of cases and get
       meaningful issues decided from the judicial forums rather than multiple
H
     DIRECTOR OF LT, CIRCLE 26(1) NEW DELHI v. S.R.M.B.                        1121
     DAIRY FARMING (P) LTD. [SANJAY KISHAN KAUL, J.]

tiers of scrutiny just for the sake of it. The Government, being a litigant A
in well over 50 per cent of the cases, has to take a lead in not being a
compulsive litigant.
        4. It is towards the aforesaid avowed object that the Income Tax
Department, from time to time, has come out with administrative circulars/
notifications for the Department not to litigate where the revenue impact      B
is low.
         5. In the present proceedings, we are concerned with the
implementation oflnstruction No.3 of2011 dated 9.2.2011, providing for
appeals not to be filed before the High Court(s) where the tax impact
was less than Rs.10 lakh. It also contains certain other conditions which       c
will be reverted to later, but suffice to say that this Instruction was in
supersession of the earlier Instruction No.1979 of 2000 dated 27.3.2000
where the limit of the tax effect was Rs.4 lakh. The Instruction/Circular
 in question is stated to have a prospective effect as per the Revenue
 and, thus, cases which were pending in the High Court(s) and had been
 filed' prior to the Instruction in question (InstructionNo.3) but had tax      D
 effect of less than Rs.10 lakh were, thus, required to be determined on
 their merits and not be dismissed by applying the circular/instruction.
     6. There has been a divergence of legal opinion on this aspect
amongst the High Courts.
                                                                                E
       7. There have also been certain orders passed by this Court which
appear to have a divergence of view and we consider it necessary to
examine this issue in detail so that conflicting orders do not arise and the
High Courts are also guided appropriately. This is also necessary, as in
the mean time, a large number of cases have been disposed of on the
application of the Instruction/Circular in question though the appeals were     F
preferred by the Revenue prior to the Instruction/Circular being issued
as a large number of High Courts took that view.
 High Courts of the View that the Circular in guestion would apply
 to pending appeals as well:
                                                                                G
 A. Karnataka High Court:
       8. Commissioner of Income Tax, Bangalore v. Ranka &
 Ranka1• The issue was squarely addressed by the Division Bench of
 the Karnataka High Court recognizing that the concept of providing the
 1
  2012(284) ELT 185 (Kar.)                                                      H
1122           SUPREME COURT REPORTS                         [2017) 11 S.C.R.


A monetary limit was not new and has been invoked from 1992. The limit
   was raised from time to time. The clause in the circular has explained
   the meaning of 'Tax Effect' as the "difference between the tax on total
   income assessed and the tax that would have been chargeable had such
   total income been reduced by the amount of income in respect of the
   issues against which appeal is intended to be filed without impact of
B
   interest." The different clauses protected the interest of the Revenue
  so as not to have any precedentiary impact. There were, however,
  certain exclusions from this, i.e., challenge to constitutional validity of an
  Act or Rule, declaration of any Board Order, Notification, Instruction or
  Circular being held to be illegal or ultra vires, audit objections of the
C Revenue Department being accepted by the Department. These
  Circulars have been given statutory recognition having been issued under
  Section 268A of the Income Tax Act, 1961 (hereinafter referred to as
  the 'IT Act').
         9. The judgment took note of the fact that the Madras High Court,
D Kerala High Court, Chhattisgarh High Court and the Punjab and Haryana
  High Court had taken a contra view, opining that the existing Circular/
  Instruction prevailing at the relevant time when the appeal/reference
  was made would apply and there would be no retrospective application
  of the circular. On the other hand, the Bombay High Court, Madhya
  Pradesh High Court, Delhi High Court had taken the view, which was
E sought to be taken by the Karnataka High Court.
         10. The line of reasoning adopted is that as the value of money
  went down and the cases of the Revenue increased, the choking docket
  required such an endeavour and there is no reason why the same policy
  should not be applied to old matters to achieve the objective of the policy
F laid down by the Central Board of Direct Taxes ('CBDT'). An earlier
  Circular dated 5.6.2007 issued by the CBDT was also taken note of,
  which required all appeals pending before the Court to be examined,
  with direction to withdraw the cases wherein criteria for monetary limit
  as per prevailing instructions was not satisfied unless the question oflaw
G involved or raised in the appeal referred to High Court was of recurring
  nature, and therefore, required to be settled by a higher court.
         11. The Bench considered the issuance of the Circular in the
  conspectus of the National Litigation Policy Document Released. The
  said Policy Document which has been extracted in the judgment for its
H reliance has been reproduced hereiriunder:
DIRECTOR OF LT, CIRCLE 26(1) NEW DELHI v. S.R.M.B.                        1123
DAIRYFARMING (P) LTD. [SANJAY KISHAN KAUL, J.]

  "Introduction                                                            A
  Whereas at the National consultation for strengthening the judiciary
  toward reducing pendency and delays held on October 24/25, 2009,
  the Union Minister for Law and Justice, presented resolutions
  which were adopted by the entire conference unanimously.
  And wherein the said resolution acknowledged the initiative              B
  undertaken by the Government of India to frame the National
  Litigation Policy with a view to ensure conduct of responsible
  litigation by the Central Government and urges every State
  Government to evolve similar policies.
   The National Litigation Policy is as follows:                           c
   The Vision/Mission      .
   I. The National Litigation Policy is based on the recognition that
   the Government and its various agencies are the pre-dominant
   litigants in courts and Tribunals in the country. Its aim is to transform D
   the Government into an efficient and responsible litigant. This policy
   is also based on the recognition that it is the responsibility of the
   Government to protect the rights of citizens, to respect fundamental
   rights and those in charge of the conduct of the Government
   litigation should never forget this basic principle.
                                                                             E
    "Efficient litigant" means
   - Focusing on the core issues involved in the litigation and
   addressing them squarely.                ·
   - Managing and conducting litigation in a cohesive, co-ordinated
   and time-bound manner.                                 ·                 F
   - Ensuring that good cases are won and bad cases are not
   needlessly persevered with.
   - A litigant who is represented by competent and sensitive legal
   persons: competent in their skills and sensitive to the facts that
   the Government is not, an ordinary litigant and that a litigation        G
   does not have to be won at any cost.
   "Respo11sible litigant" means

   - That litigation will not be resorted to for the sake oflitigating.
                                                                            H
1124       SUPREME COURT REPORTS                            [2017] 11 S.C.R.


 A     - That false pleas and technical points will not be taken and shall
       be discouraged.

       - Ensuring that the correct facts and all relevant documents will
       be placed before the court.

B      - That nothing will be suppressed from the court and there will be
       no attempt to mislead any court or tribunal.

       2. The Government must cease to be a compulsive litigant. The
       philosophy that matters should be left to the courts for ultimate
       decision has to be discarded. The easy approach, "Let the court
c      decide" must be eschewed and condemned-

       3. The purpose underlying this policy is also to reduce the
       Government litigation in courts so that valuable court time would
       be spent in resolving other pending cases so as to achieve the
       goal in the principles incorporated in the National mission for judicial
D
       reforms which includes identifying bottlenecks which the
       Government and its agencies may be concerned with and also
       removing unnecessary Government cases. Prioritisation in litigation
       has to be achieved with particular emphasis on welfare legislation,
       social reform, weaker sections and senior citizens and other
E      categories requiring assistance must be given utmost priority.

       In respect of filing of appeals in revenue matters it is stated as
       under:

       "(G) Appeals in revenue matters will not be filed:
F
       (a) if the stakes are not high and are less than that amount to be
       fixed by the Revenue authorities:

       (b) if the matter is covered by a series of judgments of the Tribunal
       or of the High Court which have held the field and which have not
G      been challenged in the Supreme Court:

       (c) where the assessee has acted in accordance with long standing
       industry practice:

       (d) merely because of change of opinion on the part of the
H      jurisdictional officers.
   DIRECTOR OF LT, CIRCLE 26(1) NEW DELHI v. S.R.M.B.                           1125
   DAIRY FARMING (P) LTD. [SANJAY KISHAN KAUL, J.]

       Review of pending cases                                                  A

       (A) All pending cases involving the Government will be reviewed.
       This due diligence process shall involve drawing upon statistics of
       all pending matters which shall be provided for by all Government
       departments (including public sector undertakings). The Office
       of the Attorney General and the Solicitor General shall also be B
       responsible for reviewing all pending cases and filtering frivolous
       and vexatious matters from the meritorious ones.

       (B) Cases will be grouped and categorized. The practice of
       grouping should be introduced whereby cases should be assigned C
       a particular number of identity according to the subject and statute
       involved. In fact, further sub-grouping will also be attempted. To
       facilitate this process, standard forms must be devised which
       lawyers have to fill up at the time of filing of cases. Panels will be
       set up to implement categorization, review such cases to identify
       cases which can be withdrawn. These include cases which are D
       covered by decisions of courts and cases which are found without
       merit withdrawn. This must be done in a time bound fashion."

          12. We consider it appropriate to refer to some of the observations
· in the judgment of the Karnataka High Court, which have our imprimatur,
  as under:                                                                      E

        "22. The Government has formulat~d the National Litigation Policy
        with a view to ensure conduct of responsible litigation by the
        Central Government and urges every State Government to evolve
        similar policies. Its aim is to transform Government into an efficient F
        and responsible litigant. "Efficient litigant" means ensuring that
        good cases are won and bad cases are not needlessly persevered
        with. The litigation should not be resorted to for the sake of
        litigating. The Government must cease to be a compulsive litigant.
        The philosophy, "that matters should be left to the courts for
        ultimate decision", has to be discarded. The easy approach, "Let G
        the court decide," must be eschewed and condemned. The purpose
        underlying this policy is also to reduce the Government litigation
        in courts so that valuable court time would be spent in resolving
        other pending cases, so as to achieve the goal in the National
         Legal Mission to reduce average pendency time from 15 years to H
1126       SUPREME COURT REPORTS                           [2017] I I S.C.R.


 A     3 years. All pending cases involving the Government has to be
       reviewed with the intention of filtering frivolous and vexatious
       matters from the meritorious one. Panels h!:lve to be set up to
       implement categorization, review such cases, to identify cases,
       which can be withdrawn. These include cases which are covered
       by decisions of courts and the cases which are found without
 B
       merit. Such cases have to be withdrawn. This must be done in a
       time bound fashion.

        23. Instruction No. 3 of201 I is issued subsequent to the aforesaid
        National Litigation Policy. A perusal of the aforesaid policy makes
c       it clear that though the said instruction was issued as a measure
        for reducing litigation, it was issued in supersession of the earlier
        instruction enhancing the monetary limits and prescribing certain
       conditions. The very fact that clause 11 provides that this instruction
       will apply to appeals filed on or after February 9, 2011, and where
       appeals have been filed before that date, the same will be governed
D      by the instructions on this subject, operative at the time when the
       said appeal was filed, makes it clear that the said instruction is not
       applicable to the pending proceedings. The National Litigation
       Policy provides that appeals in revenue matters should not be
       filed if the stakes are not high and are less than that amount to be
E      fixed by the Revenue authorities, it equally provided that cases
       which are found without merit should be withdrawn. Similarly,
       cases which are covered by the decision of the courts also have
       to be withdrawn. For that purpose, a nodal officer has to be
       appointed and all pending cases have to be reviewed and frivolous
       and vexatious matters have to be filtered from the meritorious
F      cases and the same are withdrawn. In other words, the National
       Litigation Policy dealt with the pending cases and wanted the
       pending cases to be reduced by way of withdrawal, so that
       valuable time of the courts would be spent in resolving other pending
       cases so as to achieve the goal in the National Legal Mission to
G      reduce the average pendency from time from 15 years to 3 years.

       24. The National Litigation Policy expressly stated that the
       Government must cease to be a compulsive litigant. The philosophy,
       that the matters should be left to the courts for ultimate decision is
       to be discarded and the easy approach that "let the court decide",
H
DIRECTOR OF 1.T, CIRCLE 26(1) NEW DELHI v. S.R.M.B.                     1127
DAIRY FARMING (P) LTD. [SANJAY KISHAN KA!JL, J.]

  must be eschewed and condemned. The Revenue has not applied A
  its mind in this direction. No attempt is made to reduce the pendency
  of the litigation by filtering frivolous and vexatious matters from .
  meritorious ones and the said cases are withdrawn. The only
  measure taken for reducing the litigation is, by raising the monetary
  limit. However, as the same is made prospective, it had no
  application 'to the pending cases. Therefore, the said Instruction B
   No. 3 of 2011 do not fulfil the requirement prescribed by the
   National Litigation Policy. It only partially satisfies the requirement
   in respect of future litigation. Under the aforesaid instruction, the
   crucial date is the date of filing of the appeal. It is that date when
   the tax effect is less than the monetary limit prescribed, the · C
   Revenue is precluded from filing such appeals. Though the date
   of filing of the appeal may be the criteria, that by itself would not
   provide a rationale sufficient to distinguish between pending cases
   and cases to be filed in future. The earlier monetary limit was
   fixed in the year 2005. So it is after six years, the monetary limit is D
    enhanced. If only Instruction No. 3 of2011 had been made
    applicable to the pending cases also, as laid down   ' in the National
    Litigation Policy, the object of the policy would have been fulfilled.
    One of the ways of giving effect to the said policy is to make that
    instruction applicable retrospectively to all pending appeals as on
    the date of the circular. It would substantially serve the object of E
    the policy.

   25. It is in this context, the question arises, when the instruction
   expressly states that the benefit of the said policy is prospective,
   still can the courts place a construction on such instruction so as
   to make it retrospective. In this context, the apex court in the F
   case of CCE v. Mysore Electricals Industries Ltd. reported in
   [2006] 204 ELT 517 (SC): [2007] 8 RC 1, dealing with the
   question how a beneficial circular is to be construed, has
   approached this question in the following manner. At paragraph
   13 of the judgment, it is stated that the learned counsel further .G
   submitted that the circular being oppressive and against the
   respondent, has to apply only prospectively and cannot be applied
   retrospectively. In other words, a beneficial circular has to be
    applied prospectively. Thus, when the circular is against the
    assessee they have a right to claim the enforcement of the same
                                                                        H
1128       SUPREME COURT REPORTS                           [2017] 11 S.C.R.


 A     prospectively. It is further submitted that for the period in question,
       trade notices had been issued classifying the circuit breakers under
       heading No. 85.35 or 85.36. When the approved classification
       was proposed to be revised to reclassify the single panel circuit
       breakers under heading No.85.37 of the tariff, such re-classification
       can take effect only prospectively from the date of communication
B
       of the show-cause notice proposing reclassification.

       26. Following this judgment, the apex court in the case of Suchitra
       Components Ltd. v. CCE reported in [2007] 208 ELT 321 (SC)
       held as under:
c      'The point raised by the learned counsel for the appellant is covered
       by the recent judgment of this court in Civil Appeal No. 4488 of
       2005. CCE v. Mysore Electricals Industries Ltd. reported in
       [2006] (204) ELT 517 (SC). In the said judgment, this court
       held that a beneficial circular has to be applied retrospectively
D      while oppressive circular has to he applied prospectively. Thus,
       when the circular is against the assessee, they have the right to
       claim the enforcement of the same prospectively."

       27. In the instant case, Instruction No. 3 of2011 is more beneficial
       than Instruction No. 2 of2005. Iflnstruction No. 3 of201 l is also
E      made applicable to the pending appeals before this court, it would
       grant relief to the assessee. Apart from granting relief to the
       assessee, if a number of appeals pending before this court are
       disposed of on the basis of the said circular, the precious time
       which would be saved by this court could be better utilized for
F      deciding disputes where the tax effect is enormous. That apart,
       the duration, an appeal takes in this court would be reduced as
       desired by the National Litigation Policy.

       28. It is also not out of context to mention that periodically, the
       Revenue introduces what is called as the Kar Vivadh Samadhan
G      Scheme and the Voluntary Disclosure oflncome Scheme to annul
       black money and to give benefit to persons who are not prompt in
       filing returns and paying tax. But unfortunately, persons who are
       paying tax regularly but have succeeded before the Tribunal in
       showing that there is no tax liability, are made to face these
H
DIRECTOR OF LT, CIRCLE 26(1) NEW DELHI v. S.R.M.B.                          1129
DAIRY FARMING (P) LTD. [SANJAY KISHAN KAUL, J.]

  litigations, instead of concentrating their time and energy in A
  productive work. Under these circumstances, we are of the view
  that it is settled law that any notification issued under this fiscal
  legislation granting exemption from payment of tax has to be
  construed strictly. Any circulars/instructions issued conferring the
  benefit on the assessees who are still to come to the court and
                                                                        B
  who already inside the court, at any rate, if such a benefit is given
   to the pending matters, it would be only in the nature of one-time
  settlement, which most of the financial institutions throughout the
   country extend to defaulters who have borrowed money and who
   refuse to pay the same.
                                                                             c
  29. It is also not out of place to mention herein that Parliament
  wanted to grant statutory recognition to these orders/instructions/
  circulars, issued by the Department from time to time
  retrospectively to take care to protect the interests of the Revenue
  by introducing sub-sections (2) and (3) in section 268A of the
  Act. This benefit conferred on these assessees would be only in            D
  the nature of one-time settlement because if the same issue arises
  for consideration in the subsequent years and the tax effect is
  more than Rs. I 0 lakhs, it is not open to them to plead that either
  the Department is estopped from claiming such amount or that
  the order passed by this court dismissing the appeals on the ground        E
  that the tax effect being within the monetary limit would come in
  the way of the Department proceeding against the assessee. The
  circular also makes it clear that in the pending appeals, where the
  constitutional validity of the provisions of the Act or Rule are under
  challenge, or where the Board's o_rder, notification, instruction or
  circular h~s been held to be illegal or ultra vires or whether the         F
  Revenue audit objection in the case has been accepted by the
  Department, notwithstanding the fact that the tax effect is less
  than the monetary limit fixed under the aforesaid circular, still it is
  open to the Department to request the court to permit them to
  prosecute such appeals. Thus, the Department has to apply its              G
  mind in all the pending appeals and point out to the court, which
  are those appeals in which they intend to prosecute. Therefore,
   sufficient safeguards have been made to protect the interests of
   the public revenue. By this approach we would be saving the time

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1130             SUPREME COURT REPORTS                           [2017] 11 S.C.R.


A             of the court, the time of the Department and public time in general
              and giving effect to the Nation Litigation Policy, 2011, so that it
              can be used for better and productive purpose."
              13. The Division Bench also pointed out the anomaly in the working
       of the Circular, were it to apply only prospectively, in the following words:
B             "31. Yet another anomaly which requires to be noticed is, if a
              Tribunal where the number of cases which are pending are more,
              decides the appeal, subsequent to these latest circulars and the
              amount involved is less than Rs. 10 lakhs, the assessee in such
              cases get the benefit of the latest circular. However, ifthe Tribunal
             has decided a case expeditiously or in Tribunals where the pendency
             is less and if the subject-matter of the appeal preferred by the
             Revenue in such cases is more than Rs. 4 lakhs and less than Rs.
              10 lakhs, the assessees in those appeals are denied the benefit of
             the latest circular. In other words, where there is huge pendency
             of cases in the Tribunal or court, an appeal filed earlier is disposed
D            of after the circular, the benefit accrues to the assessee. However,
             in Tribunals and the courts where the pendency of cases is less,
             an appeal filed recently is decided before the circular or where
             the assessee co-operates with the court in speed disposal of the
             appeal and the appeal is disposed of before the date of circular,
E            he is denied the benefit of the circular. Therefore, the benefit to
             which the assessee is entitled to should not be dependant on the
             date of the decision, over which neither the assessee nor the
             Revenue has no control. In this context, the circular would be
             discriminatory, if it is held to be prospective only. It could be saved
             from such vice of discrimination by holding it as retrospective.
F
             32. Though Circular/Instruction 3 of 2011 is issued by the
             Department in pursuance of the power conferred under the
             statutory provisions while issuing such circular/instruction, the
             Department has not kept in mind the object with which such
             circulars/instructions are issued from time to time. The object
G            sought to be achieved by such circulars/instructions and also the
             law declared by the apex court, the National Litigation Policy,
             2011, as well as the various schemes introduced by the Department
             granting relief to persons who have not even filed returns and
             paid taxes, are kept in mind, to bring the circular/instruction in
H
  DIRECTOR OF I.T, CIRCLE 26(1) NEW DELHI v. S.R.M.B.                      I 131
  DAIRY FARMING (P) LTD. [SANJAY KISHAN KAUL, J.]

        harmony with the National Litigation Policy, it would be appropriate A
        to hold that the benefit of such circular/instruction also applies to
        the pending cases in appeal in various courts and Tribunals on the
        date of the circular/instruction."
B. Bombay High Court:
                                                                            B
       14. Commissioner of Income Tax v. Pithwa Engg. Works 2 :
This judgment of the Division Bench pertains to the Circular dated
27 .3.2000 enhancing the previous limit but the ratio is the same.

        15. In Commissioner of Income Tax v. Madhukar K. Inamdar
(HUF) 3 the Circular dated 15.5.2008 was examined, opining that it was      C
in public interest if the Revenue concentrates on the cases wherein tax
effect is substantially high rather than running after tht; assessees wherein.
the tax impact is less than Rs.4 lakhs, considering the cost of litigation
and other administrative cost which may be much more than the tax
recovery, especially in the context of the Circular dated 5.6.2007 requiring D
the current matters also to be examined.

C & D. Madhya Pradesh High Court & Delhi High Court:

       16. In Commissioner of Income Tax v. Ashok Kumar Manibhai
Patel & Co. 4 and Commissioner of Income Tax v. P.S. Jain & Co. 5:           E
In both the above cases, the Circular in question was dated 27.3.2000,
but the ratio is the same.

High Courts of the View that the Circular in question would awly
only prospectively:
                                                                             F
A. Punjab & Harvana High Court:

     . 17. In Commissioner of Income Tax v. Varindera Construction
Co. Instruction No.5/2008 dated 15.5.2008 was held to apply only
    6

prospectively. The Court disagreed with the view taken by other High
Courts to the contra.                                                        G
 '(2005) 276 ITR 519 (Born.)
 3(2009) 318 ITR 149 (Born)

 4
    (2009) 317 ITR 386 (MP)
 "(2011) 335 ITR 591 (Delhi)
  6 (2011) 331 ITR 449 (P&H)(FB)
                                                                             H
1132            SUPREME COURT REPORTS                          [2017] 11 S.C.R.


 A B, C & D. Chhattisearh Hieh Court; Madras Hieh Court & Kerala
   Hieh Court:

         18. In Commissioner of Income Tax v. Navbharat Explosives
  Co. P. Ltd.7; Commissioner of Income Tax v. Kodanand Tea Estates
  Co8• and CWT v. John L. Chackola9, the opinion is to the same effect
B as aforesaid applying the circular prospectively as they state so.

       The view of lhe Supreme Court:

         19. The view adopted by the Delhi High Court making the Circular
  applicable to pending matters came up before a thre~ Judge Bench of
C this Court in SLP(C) No.CC 13694/2011 titled CIT Central-Ill v. Surya
  Herbal Ltd. when the following order was passed on 29.8.2011:

            "Delay condoned.

            Liberty is given to the Department to move the High Court pointing
D           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
E           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."

F        20. The aforesaid order, in our view, actually should have laid the
  controversy to rest. 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 Court$ ipso facto when the matter
  had a cascading effect; (ii) where common principles may be involved
G 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
    7 (2011) 337 ITR 515 (Chhattisgarh)

    '(2005) 275 ITR 244 (Mad.)
H   '(2011) 337 ITR 385 (Ker)
      DIRECTOR OF LT, CIRCLE 26(1) NEW DELHI v. S.R.M.B.                         1133
      DAIRY FARMING (P) LTD. [SANJAY KISHAN KAUL, J.]

Court in two weeks. In our view this order holds the field and should            A
continue to hold the field.

      21. Unfortunately, this order was not brought to the notice of the
subsequent two Judges Bench of this Court in Commissioner of Income
Tax-VII, New Delhi v. Suman Dhamija 10 again arising from a Delhi
High Court order, wherein it was simply stated that since the appeals            B
were preferred before 2011 and the Instructions were dated 9.2.2011,
the earlier cases would not be covered by the Instruction. This order in
turn had been followed by another two Judges Bench in Civil Appeal
No.16815/2017 titled The Comn1issioner of Income Tax Bangalore I
& Anr. v. Mis. Gemini Distilleries dated 12.10.2017.           '                  c
      22. Once again, in another matter Commissioner of Income Tax
&Anr. V. Century Park 11 , the line adopted by the three Judges Bench
in Surya Herbal Ltd. case (supra) has been followed.

       23. We have already given our imprimatur to the observations D
made by the Karnataka High Court in a detailed analysis in Ranka &
Ranka case (supra), which has dealt with the litigation policy philosophy
behind applying the Circular and the benefit being extended in view
thereof to all Assessees where appeals have been pending, but below
the financial limit, as otherwise an anomalous situation would arise.
                                                                          E
         24. We may also take note of the judgment of this Court in Suchitra
  Components Ltd. v. Commissioner of Central Excise, Guntur12 on
  the general principle of application of Circulars. Reliance was placed
  on the view expressed in Commissioner of Central Excise, Bangalore
  v. Mysore Electricals llldustries Ltd. 13 opining that a beneficial circular    F
· has to be applied retrospectively while an oppressive circular has to be
  applied prospectively.

         25. We are of the view that the matterneeds 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             G
 of by various High Courts by applying the Circular of 2011 to pending
 10
    (2015) 16 sec 176
 21
    (2015) 14 sec 704
 12 2007 (208) ELT 321 (SC)

 13
    2006 (204) ELT 517 (SC)                                                       H
1134               SUPREME COURT REPORTS                          [2017) 11 S.C.R.


A litigations. 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
B
  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 (supra).
c
                26. The appeals of the Revenue are, thus, dismissed in the aforesaid
       terms.



       Devika Gujral                                                Appeals dismissed.