2008 (9) TMI 870 - HC - Income Tax

Summary

Issues:
- Whether interest is to be levied on the tax determined on the basis of returned income or on the assessed income in view of the amendments made in sections 234A and 234B of the Income-tax Act, 1961?
- Whether appeals with tax effect less than Rs. 50,000 each are fit to be entertained and adjudicated based on statutory limits set by the Central Board of Direct Taxes?

Analysis:
The judgment involves two main issues. Firstly, the question of whether interest should be levied on the tax determined based on the returned income or the assessed income due to amendments in sections 234A and 234B of the Income-tax Act, 1961. The appeals were admitted to address this substantial question of law. Secondly, the issue pertains to the competency of entertaining appeals with a tax effect of less than Rs. 50,000 each, based on the monetary limits set by the Central Board of Direct Taxes.

Regarding the first issue, the respondent-assessee argued for the dismissal of the appeal due to the insertion of section 268A of the Income-tax Act by the Finance Act, 2008, with retrospective effect from April 1, 1999. The Central Board of Direct Taxes had set a monetary limit for filing appeals, and it was highlighted that the tax effect in both cases was less than Rs. 50,000 each. The contention was made that appeals below this limit should not be entertained and adjudicated. The argument was supported by the statutory provisions and notifications issued by the Central Board of Direct Taxes.

On the second issue, it was contended that while the notification of October 28, 1992, prohibited making references when the tax effect was less than Rs. 50,000, it did not bar the filing of appeals. However, the court rejected this argument, emphasizing that the monetary limits set by the Board for reference should also apply to appeals. The court highlighted the statutory nature of the instruction fixing the monetary limit for filing appeals and concluded that the appeals with tax effects below the specified limit were incompetent.

In conclusion, the appeals were dismissed solely on the ground that they did not meet the statutory monetary limits set by the Central Board of Direct Taxes for filing appeals. The judgment underscored the importance of adhering to the statutory provisions and instructions issued by the relevant authorities in determining the competency of appeals based on tax effects.