ITA No. 281/Jp/2008: Revenue has impugned first appellate order allowing deduction under s. 80-IB of Act ignoring decision of Hon ble Supreme Court in case of Lucky Minmat (P) Ltd. vs. CIT (2000) 162 CTR (SC) 404. At outset of hearing learned Authorised Representative raised preliminary objection on maintainability of appeal preferred by Revenue in violation of CBDT Instruction r/w s. 268A of Act. learned Authorised Representative submitted that as per CBDT Instruction No. 2 of 2005, dt. 24th Oct., 2005 [(2005) 198 CTR (St) 41] (effective from 31st Oct., 2005) Department has been instructed not to prefer appeals before Tribunal where Revenue involves tax effect upto Rs. 2 lacs only. He submitted, that vide Finance Act, 2008, new s. 268A has been inserted regarding filing of appeal or application for reference by IT authorities. learned Authorised Representative while referring provisions laid down under s. 268A submitted that instructions or directions issued by Board to IT authorities as to fixing monetary limits for regulating filing of appeal has now been given statutory recognition. Sub-s. (4) to this s. 268A provides that Tribunal while hearing such appeal shall give regard to order, instructions or directions so issued. Hence now in view of this section, monetary limit for filing of appeal needs to be taken into consideration before admitting appeal filed by Department. learned Authorised Representative also referred recent Instruction No. 5 of 2008, dt. 15th May, 2008 [(2008) 217 CTR (St) 1] of CBDT directing IT authorities again not to file appeal where tax effect does not exceed prescribed monetary limit. It has been further clarified therein that by not filing appeal, it cannot be presumed that Department has acquiesced disputed issue and that it shall not be precluded from filing appeal in case of assessee for other assessment year or in case of other assessee, if tax effect exceeds prescribed monetary limit. learned Authorised Representative also placed reliance on following decisions in support: (i) CWT vs. Girdhari Lal Saraf (1991) 91 CTR (Raj) 225: (1991) 190 ITR 264 (Raj); (ii) CIT vs. Ratan Chand Lodha (1993) 110 CTR (Raj) 141: (1993) 203 ITR 503 (Raj); (iii) CWT vs. Executors of Late D.T. Udeshi (1992) 101 CTR (Bom) 290: (1991) 189 ITR 319 (Bom); (iv) CIT vs. Camco Colour Co. (2002) 173 CTR (Bom) 255: (2002) 254 ITR 565 (Bom). learned Departmental Representative on other hand, submitted that in present appeal legal issue is involved hence, same is allowed to be preferred by Department even if tax effect is below prescribed limit as same is falling in exception to CBDT Instruction No. 2 of 2005, hence, appeal is very much maintainable. He placed reliance on decision of Hon ble jurisdictional High Court in case of CIT vs. Rajasthan Patrika Ltd. (2002) 178 CTR (Raj) 414: (2002) 258 ITR 300 (Raj). learned Authorised Representative rejoined with this submission that in case of CIT vs. Rajasthan Patrika Ltd. (supra) Hon ble High Court held that these are administrative instructions, if Department prefers to file appeal or make reference to that Court, in view of their Lordship on such administrative instructions, appeal of Department should not be dismissed or reference should not be rejected. This decision in view of newly inserted s. 268A with retrospective effect from 1st April, 1999, cannot be now helpful to IT authorities and therefore, same cannot be followed. After considering above submissions, I find substance in preliminary objection raised by learned Authorised Representative in view of newly inserted provisions of s. 268A vide Finance Act, 2008. For ready reference s. 268A of Act is being reproduced hereunder: "268A.(1) Board may, from time-to-time, issue orders, instructions or directions to other IT authorities, fixing such monetary limits as it may deem fit, for purpose of regulating filing of appeal or application for reference by any IT authority under provisions of this chapter. (2) Where, in pursuance of orders, instructions or directions issued under sub-s. (1), IT authority has not filed any appeal or application for reference on any issue in case of assessee for any assessment year, it shall not preclude such authority from filing appeal or application for reference on same issue in case of (a) same assessee for any other assessment year (b) any other assessee for same or any other assessment year, (3) Notwithstanding that no appeal or application for reference has been filed by IT authority pursuant to orders or instructions or directions issued under sub-s. (1), it shall not be lawful for assessee, being party in any appeal or reference, to contend that IT authority has acquiesced in decision on disputed issue by not filing appeal or application for reference in any case. (4) Tribunal or Court, hearing such appeal or reference, shall have regard to orders, instructions or directions issued under sub-s. (1) and circumstances under which such appeal or application for reference was filed or not filed in respect of any case. (5) Every order, instruction or direction which has been issued by Board fixing monetary limits for filing appeal or application for reference shall be deemed to have been issued under sub-s. (1) and provisions of sub-ss. (2), (3) and (4) shall apply accordingly." After having gone through, above provisions, I concur with submission of learned Authorised Representative that instructions or directions issued by Board to IT authorities as to fixing monetary limits for regulating filing of appeal has now been given statutory recognition. This s. 268A has been inserted with retrospective effect from 1st April, 1999. As per sub-s. (4) to s. 268A it has become now mandatory for Tribunal or Court, hearing such appeal or reference to have regard to orders, instructions or directions issued under sub-s. (1) and circumstances under which such appeal or application for reference was filed or not filed in respect of any case. Hence, now in view of this section, monetary limit for filing of appeal needs to be taken into consideration before entertaining appeal filed by Department. decision of Hon ble Rajasthan High Court in case of CIT vs. Rajasthan Patrika Ltd. (supra), dt. 18th July, 2002, relied upon by learned Departmental Representative, is thus now not helpful to Revenue after insertion of s. 268A with retrospective effect from 1st April, 1999 vide Finance Act, 2008. When this decision was pronounced by Hon ble jurisdictional High Court, in my view statutory provisions under which CBDT was passing instructions regarding monetary limit was sub-s. (1) to s. 119 of Act, sub-s. (1) to s. 119 of Act provides that Board may from time- to-time issue such orders, instructions and directions to other IT authorities as it may deem fit for proper administration of this Act, and such authorities and all other persons employed in execution of this Act shall observe and follow such orders instructions and directions of Board. Thus, plea was available with Department that CBDT instructions are internal instructions or administrative instructions, violation of which by Department at most attracts insubordination which is not expected from Government officer and it does not in anyway give right to assessee to enforce such instruction. Under these circumstances, in my humble view Hon ble jurisdictional High Court in case of Rajasthan Patrika Ltd. (supra) appears to might have held that these are administrative instructions and if Department prefers to file appeal or make reference to that Court, in view of their Lordship on such administrative instructions appeal of Department should not be dismissed or reference should not be rejected. CBDT also issues circulars. Sub-s. (2) to s. 119 of Act provides circumstances in cls. (a) to (c) under which Board may, if it considers necessary or expedient or desirable so to do pass general or special orders setting forth directions or instructions and any such order may, if Board is of opinion that it is necessary in public interest so to do, be published and circulated in prescribed manner for general information. By cl. (c) to sub-s. (2) to s. 119 of Act it has been specified that Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of provisions of Chapter IV or Chapter VI-A, where assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to some conditions mentioned in sub-cls. (i) and (ii), provided that Central Government shall cause every order issued under this clause to be laid before each House of Parliament. I am thus of view that only those orders of Board which are passed under sub-s. (2) to s. 119 of Act, which is generally named as CBDT circular give right to assessee/third party to enforce same. Now in view of provisions laid down under s. 268A even those instructions passed by Board under sub-s. (i) to s. 119 of Act have acquired statutory recognition. In this regard, I find support from provisions mentioned in sub-s. (5) to s. 268A of Act as per which every order, instruction or direction which has been issued by Board fixing monetary limits for filing appeal or application for reference shall be deemed to have been issued under sub-s. (1) and provisions of sub-ss. (2), (3) and (4) shall apply accordingly. user of word shall in sub-ss. (4) and (5) reflects very object of legislature behind same. issuance of recent Instruction No. 5 of 2008, dt. 15th May, 2008 by CBDT directing IT authorities not to file appeal where tax effect does not exceed prescribed monetary limit, reflects serious concern of CBDT on matter. Vide clause No. 11 of this instruction, reported in (2008) 217 CTR (St) 1 it has been made clear that this instruction will apply to appeals filed on or after 15th May. 2008, however, cases where appeals have been filed before 15th May, 2008 will be governed by instructions on this subject, operative at time such appeal was filed. Vide clause No. 12 of instruction it has been declared as "12. This issues under s. 268A(1) of IT Act, 1961". In said Instruction, dt. 15th May. 2008 Board has also clarified exceptions where monetary limits specified will not apply. There is no dispute in present case before us that tax effect in appeal is below Rs. 2 lacs in view of CBDT Instruction No. 2 of 2005, dt. 24th Oct., 2005 (effective from 31st Oct., 2005). only objection of learned Departmental Representative remained that in ground of appeal legal issue has been raised hence, appeal preferred by Department falls under exception of instruction even if tax effect is below prescribed monetary limit for not filing appeal. On examining this plea, I do not find substance therein as issue as to whether assessee is entitled for claiming deduction under s. 80-IB of Act is covered by decision of Hon ble jurisdictional High Court in case of Arihant Tiles & Marbles (P) Ltd. vs. ITO (2007) 211 CTR (Raj) 169 wherein referring decision of Hon ble Supreme Court in case of Lucky Minmat (P) Ltd. (supra), Hon ble High Court has held that conversion of marble blocks into slabs and tiles, engaging, processes of cutting and sawing or sizing or polishing of marble blocks into stabs and tiles which results in making raw marbles usable, amounts to manufacture. Hon ble High Court has also been pleased to refer intention behind CBDT Circular No. 729, dt. 1st Nov., 1995 [(1995) 129 CTR (St) 1] as well as Central Excise Act, wherein such activities amount to manufacture. Hon ble High Court has observed that marble block as mineral produced from earth by itself is not usable for any purpose and various processes applied to make it usable, amounts to manufacture. issue raised in ground instead is based on facts of each case as to whether processes applied by assessee to make article commercially viable amount to production or manufacture to make assessee eligible for claiming deduction under s. 80-IB or not. Thus, present appeal does not fall under exceptions to CBDT instructions, as pleaded by learned Departmental Representative. Under these circumstances, I am of view that present appeal preferred by Revenue violates CBDT Instruction No. 2 of 2005, dt. 24th Oct., 2005 (effective from 31st Oct., 2005), hence not maintainable. preliminary objection raised by learned Authorised Representative is thus allowed in favour of assessee. appeal is accordingly dismissed. Even on merits of case we do not find substance in ground raised b y Revenue as submissions of learned Authorised Representative made in this regard has not been controverted that assessee small scale industrial undertaking located in industrially backward district of category B is engaged in business of manufacturing or producing, marketing and selling of tiles, slabs of sandstone after cutting, sawing and polishing them from raw blocks of sandstone. industrial undertaking is also registered as manufacturing unit with District Industrial Forum, Karauli and activities of undertaking have also been regarded as manufacturing activities by Department of commercial taxes while granting necessary exemption under provisions of relevant statute. learned Authorised Representative has also cited several decisions including CIT vs. Mysore Minerals Ltd. (2001) 166 CTR (Kar) 142: (2001) 250 ITR 725 (Kar) and CIT vs. Sesa Goa Ltd. (2004) 192 CTR (SC) 577: (2004) 271 ITR 331 (SC) in support. learned Departmental Representative on other hand has placed reliance on decisions of Hon ble Supreme Court in case of Lucky Minmat (P) Ltd. (supra), which decision, as discussed above has already been taken into account by Hon ble jurisdictional High Court while deciding issue in case of Arihant Tiles & Marbles (P) Ltd. vs. ITO (supra). I thus do not find reason to interfere with decision of learned CIT(A) holding assessee, proprietor of undertaking eligible for claimed deduction under s. 80-IB of Act respectfully following decision of Hon ble jurisdictional High Court in case of Arihant Tiles & Marbles (P) Ltd. vs. ITO (supra). same is upheld. ground is thus rejected. appeal is thus dismissed. C.O. No. 30/Jp/2008 first appellate order has been objected by assessee basically on basis that learned CIT(A) has erred in holding issuance of notice under s. 148 of Act valid and sustaining addition of Rs. 34,250 made by AO on account of low household withdrawals. Heard and considered arguments advanced by parties. Objection No. 1 submission of learned Authorised Representative in this regard remained that reopening proceedings have been invoked by AO after four years of filing return of income on basis of changed opinion in view of decision of Hon ble Supreme Court in case of Lucky Minmat (P) Ltd. (supra). He submitted that return of income was filed on 31st Oct., 2002 whereas notice under s. 148 has been issued on 9th March, 2007. There was no concealment of facts or necessary information nor any fresh material is on record to justify action of reopening. learned Departmental Representative on other hand has placed reliance on first appellate order on issue. I find substance in above contentions of learned Authorised Representative, because similar issue has already been decided in favour of assessee therein by Hon ble jurisdictional High Court in case of Arihant Tiles & Marbles (P) Ltd. vs. ITO (supra) keeping in mind decision of Hon ble Supreme Court in case of Lucky Minmat (P) Ltd. (supra). learned CIT(A) was thus not justified in upholding validity of notice under s. 148 of Act which was nothing but due to change of opinion of AO, which cannot be reason for belief for opening assessment. I thus while setting aside orders of lower authorities on issue allow objection in this regard in favour of assessee and in consequence assessment made in furtherance to said invalid notice under s. 148 is also held as not maintainable. Objection No. 2 Though, on merit I do not find reason to interfere with findings of lower authorities as in family having 6 members viz. assessee herself, her husband, two college going sons and two school going daughters AO has rightly arrived at conclusion that withdrawal of Rs. 73,750 for household purposes was not sufficient. He has therefore, rightly estimated household expenses at Rs. 1,500 per month for each member of family to work out annual household expenditure at Rs. 1,08,000 resulting into addition of Rs. 34,250. learned CIT(A) has rightly upheld this addition. objection is thus rejected. finding on this objection has however, become academic only in view of above findings on objection No. 1. cross-objection is partly allowed. In summary appeal preferred by Department is dismissed and cross- objection is partly allowed. *** INCOME TAX OFFICER v. SMT. INDRA DEVI GUPTA