2014 (5) TMI 280 - HC - Income Tax

Maintainability of appeal - Escapement of income u/s 144/147 of the Act - Addition of interest u/s 234B of the Act Held that - The assessee rightly contended that the department is not entitled to prefer an appeal following the Instruction No.3 of 2011 dated 9th February, 2011 issued by the C.B.D.T - the amount of interest claimed u/s 234B of the Act of the AO cannot be taken into account for the purpose of determining the tax effect - the appeal has been filed by violating the Instructions issued by the CBDT, which were binding upon the revenue u/s 268A of the Income Tax Act Decided against Revenue.

Summary

Issues:
Challenge to Tribunal's order under section 260A of the Income Tax Act based on tax effect calculation.

Analysis:
The appeal before the Calcutta High Court concerned a judgment and order by the Tribunal allowing the assessee's appeal against an assessment under sections 147/144 of the Income Tax Act. The Assessing Officer had determined that the total taxable income escaped was Rs.18,69,000, with a tax payable of Rs.6,87,615 and interest under section 234B amounting to Rs.6,25,982. The CIT (Appeal) and the Assessing Officer's orders were set aside by the Tribunal, leading to the revenue's appeal under section 260A.

The respondent's counsel argued that as per CBDT Instruction No.3 of 2011, appeals should not be filed before the High Court under section 260A when the tax effect is within Rs.10,00,000. The definition of 'tax effect' provided in the Instruction excludes interest unless its chargeability is in dispute. The appellant's counsel contended that the interest claimed under section 234B should not be considered for determining the tax effect, as the liability to pay tax automatically includes interest unless the tax already paid covers the liability. The court agreed that the chargeability of interest was not the issue in the appeal before the Tribunal, and interest followed the claim on principal as a matter of course.

Referring to a previous Division Bench judgment, the court held that the appeal violated CBDT Instructions, which are binding under Section 268A of the Income Tax Act. Consequently, the court dismissed the appeal solely on the ground of violating the Instructions. As a result of the appeal's dismissal, the connected application was also disposed of as infructuous.