2017 (8) TMI 1366 - AT - Income Tax

Monetary limit for filing of the appeal by the department before the Income Tax Appellate Tribunal - Addition on account of bogus purchases - Held that - , perused the orders of the lower authorities and the material produced before us. We find that the tax effect excluding the surcharge in the present appeal stands computed at ₹ 9,24,494/-. We are of the considered view that for the purpose of considering the amount of tax effect as envisaged in CBDT Circular No. 21/2015, dated 10/12/2015, what has to be considered is the amount of tax excluding the amount of surcharge and education cess. Thus we are of the considered view that as the tax effect involved in the present appeal is below the monetary ceiling contemplated in the CBDT Circular No. 21/2015, dated 10/12/2015, therefore, the appeal of the department is not maintainable.

Summary

Issues:
Appeal against deletion of addition on account of bogus purchases - Tax effect calculation for appeal validity.

Analysis:
1. The appeal was filed by the revenue against the deletion of an addition of ?31,92,484 on account of bogus purchases (accommodation entries) for the assessment year 2007-08. The Assessing Officer had made the addition based on information received during search and seizure operations on the Mahasagar group, indicating that the assessee had taken accommodation entries. The CIT(A) deleted the addition, leading to the revenue's appeal before the ITAT Mumbai.

2. The key contention revolved around the 'tax effect' involved in the appeal, as per the CBDT Circular No. 21/2015. The revenue argued that including surcharge, the tax effect exceeded the ?10 lakh limit specified in the circular, making the appeal valid. However, the authorized representative for the assessee contended that excluding surcharge, the tax effect was below the limit, citing a coordinate bench's order supporting this interpretation.

3. The ITAT Mumbai analyzed the tax effect calculation, excluding surcharge, and education cess. Referring to a previous case, the tribunal emphasized that for determining the tax effect under the CBDT Circular, surcharge and education cess should be excluded. As the tax effect in the present case fell below the ?10 lakh threshold set by the circular, the ITAT held that the revenue's appeal was not maintainable.

4. Ultimately, the ITAT Mumbai dismissed the revenue's appeal, concluding that the tax effect, when calculated excluding surcharge, was below the monetary limit specified in the CBDT Circular No. 21/2015. The decision was based on the interpretation that only the tax amount, without surcharge and education cess, should be considered for determining the appeal's validity under the circular.

This detailed analysis highlights the core issues of the appeal, the arguments presented by both parties regarding the tax effect calculation, and the ITAT Mumbai's decision based on the interpretation of the CBDT Circular No. 21/2015.