2011 (2) TMI 1246 - HC - Income Tax

Whether I.T.A.T. Was justified in confirming the order of the DCIT(A) deleting the amount on the basis of finding given by the Tribunal vide order dated 25.9.1989 when the said order was not in conformity with the earlier findings of the Tribunal for the Asstt. Years 1976-77 and 77-78 respondent raised a preliminary objection that in the case tax liability is less than Rs.2 lakh so the aforesaid reference is incompetent and may be decided in the light of the judgment of this Court in Commissioner of Income- Tax vs. Ashok Kumar Manibhai Patel and Co. (2007 - TMI - 35003 - MADHYA PRADESH HIGH COURT) Held that - Board Circular dt.27.3.2000 was applicable even to the old references which are still pending and are undecided. By circular dated 27.3.2000 financial limit to the extent of tax liability of Rs.2 lakh was fixed which is applicable in this case question need not be answered in the light of the aforesaid circular of the CBDT and the judgment of this Court in Ashok Kumar Manibhai Patel and Co.(supra) reference is disposed of finally

Summary

Issues:
- Competency of the reference under section 256(2) of the Income Tax Act 1961 due to the tax liability being less than Rs.2 lakh

Analysis:
The High Court of Madhya Pradesh addressed a reference from the Income Tax Appellate Tribunal regarding the justification of confirming the deletion of Rs.1,38,000 based on a previous Tribunal order. The respondent's counsel raised a preliminary objection, citing a judgment regarding tax liability below Rs.2 lakh. The court noted the factual agreement on the tax liability's amount and the insistence on answering the reference question by the revenue's counsel. The court referred to a previous case and a circular by the Central Board of Direct Taxes (CBDT) regarding monetary limits for filing appeals based on tax effect.

The CBDT's circular dated 15.5.2008 specifies monetary limits for filing appeals before different appellate bodies based on tax effect. The circular defines "tax effect" and outlines the calculation process for different scenarios, emphasizing the need to file appeals only when the tax effect exceeds the specified monetary limits. It also provides guidelines for recording decisions not to file appeals due to the tax effect being below the limits and clarifies that such decisions do not imply acceptance of the disputed issues.

The court highlighted the relevance of the CBDT circular from 27.3.2000, which set a financial limit of Rs.2 lakh for tax liability, even for old pending references. Considering the settled legal position and the guidance provided by the CBDT circulars, the court concluded that the reference need not be answered in light of the circular and previous judgments. Consequently, the court disposed of the reference, aligning with the principles outlined in the CBDT circulars and relevant legal precedents.

In conclusion, the judgment emphasizes adherence to the monetary limits set by the CBDT for filing appeals based on tax effect, ensuring efficient handling of cases and reducing unnecessary litigation. The court's decision reflects the importance of following established guidelines and legal principles to streamline the appellate process and address matters effectively within the specified financial thresholds.