2012 (11) TMI 514 - HC - Income Tax

Non-genuine interest - CIT(A)approved the Creditworthiness and identity of cash creditors - Held that - Circular dated 27th March, 2000 issued by the Central Board of the Direct Taxes was binding upon the Department and, therefore, the appeal preferred by revenue against the order of the CIT(A) dated 26.7.2006 wherein tax effect was less than rupees two lac ought not to have been filed. Appeal is dismissed as not maintainable.

Summary

Issues:
Appeal under Section 260-A of the Income Tax Act against the order passed by the Income Tax Appellate Tribunal based on the creditworthiness and identity of the cash creditors.

Analysis:
The case involved an appeal filed under Section 260-A of the Income Tax Act against the order of the Income Tax Appellate Tribunal. The main issue revolved around the creditworthiness and identity of the cash creditors. The assessing officer initially disallowed an interest amount of Rs. 48,000 as non-genuine, which was then deleted by the Commissioner of Income Tax (Appeals) based on evidence produced by the assessee. The Revenue, feeling aggrieved, appealed before the Tribunal. The Tribunal, considering the circular dated 27th March, 2000 issued by the Central Board of Direct Taxes, raised an objection that the Department could not have filed an appeal due to the tax effect being less than two lakh. The Tribunal dismissed the appeal and upheld the order of the Commissioner of Income Tax Appeals.

In the analysis, it was highlighted that under section 268A of the Act, the Board has the power to issue circulars regarding fixing monetary limits for filing appeals. The circular dated 27th March, 2000 set monetary limits for appeals based on tax effects. It was emphasized that the circular was binding on all authorities and that the Revenue was not entitled to file an appeal before the Tribunal as the tax in dispute was less than two lakh rupees. The argument presented was that the appeal did not involve significant questions or have a far-reaching or recurring effect.

The judgment emphasized the importance of the circular dated 27th March, 2000, which specified monetary limits for filing appeals in tax matters. It was noted that the appeal before the Appellate Tribunal could only be filed if the tax limit exceeded one lakh rupees. Exceptions were outlined where the monetary limit did not apply, such as cases involving revenue audit objections, adverse orders on Board's instructions, prosecution proceedings against the assessee, or constitutional validity challenges. Since none of these exceptions applied in the case at hand, the judgment concluded that the circular was binding on the Department. Consequently, the appeal was deemed not maintainable and was dismissed.

Overall, the judgment focused on the application of the circular's monetary limits and exceptions in determining the maintainability of the appeal before the Tribunal, ultimately leading to the dismissal of the appeal based on the tax effect being below the specified limit.