2015 (10) TMI 529 - AT - Income Tax

Monetary limit to prefer an appeal - maintainability of revenue appeal which is below the prescribed limit of tax effect - Held that - On query from the Bench, the Ld. DR could not point out any of the exceptions as provided in the Circular as that this is a loss case having tax effect more than the prescribed limit, which should be taken into account,or that this is a composite order for many assessment years where tax effect will be more than the prescribed limit as per para 5 of above instructions, or that this is a case, where, in the case of revenue, where constitutional validity of the provision of the Act or I.T. Rules 1962 are under challenge,or that Board s order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or that Revenue Audit Objection in the case has been accepted by the Department and the same is under challenge. The learned Standing Counsel for the Revenue is not disputing the fact that the tax effect in the present case is less than ₹ 4 Lakhs and that the assessee s case does not fall within the exceptions specified in Instruction No.1979, dated 27.3.2000. Thus appeals are dismissed as not maintainable. - Decided against revenue.

Summary

Issues:
- Appeal by revenue below prescribed monetary limits for filing appeals before ITAT and superior courts.

Analysis:
The appeal by revenue before the Appellate Tribunal ITAT Kolkata was dismissed as the tax effect was below the prescribed monetary limits for filing appeals. The tax effect in the appeal was below Rs. 2 lakhs, falling under the revised monetary limit of Rs. 3 lakhs set by the CBDT. The decision was based on the Board's Instruction No. 3/2011, which specified the monetary limits for filing departmental appeals. The CBDT circular clarified that appeals should not be filed solely based on tax effect exceeding the monetary limits, emphasizing that the filing of appeals should be decided on the merits of the case.

The CBDT circular defined "tax effect" as the difference between the tax on the total income assessed and the tax that would have been chargeable if the total income were reduced by the amount in dispute. It further detailed the calculation of tax effect for different scenarios, including cases involving interest, returned loss, and penalty orders. The circular also outlined the procedure for calculating tax effect for multiple assessment years and composite orders involving common issues.

Moreover, the circular highlighted that where an appeal is not filed due to the tax effect being below the monetary limit, the Commissioner of Income-tax should explicitly record the reason for not filing the appeal. It emphasized that the Department should not be precluded from filing an appeal against disputed issues in the future, even if the tax effect is below the specified monetary limits. The circular also addressed the need to contest adverse judgments on specific issues regardless of the tax effect.

In this case, the Ld. DR could not identify any exceptions to the circular that would warrant an appeal despite the tax effect being below the prescribed limit. As none of the exceptions applied, the appeal of the revenue was dismissed without delving into the merits of the case. The decision was based on the CBDT's Instruction No. 3/2011, which mandated adherence to the revised monetary limits for filing appeals. The judgment was pronounced on 27.08.2014, upholding the dismissal of the revenue's appeal due to the tax effect falling below the prescribed limit.