2018 (4) TMI 1582 - HC - Income Tax

Maintainability of appeal - tax effect - Assessee to be treated as legal representative u/s 159 - Held that - Admittedly the tax effect in both the assessment years is less than the threshold limit. Tax Limit in the circular dated 15.05.2008 is 4, 00, 000/-. We may point out that though the appeals were presented on 12.06.2006 they were numbered only in the year 2008. On the date of presentation of the appeal i.e. on 12.06.2006 Circular Instruction No.2/2005 dated 24.10.2005 was in vogue which instructed the Department that appeals shall not be filed under Section 260A of the Income Tax Act if the tax effect is less than 4, 00, 000/-.

Summary

Issues:
1. Whether the assessee can be treated as a legal representative under section 159 of the Income Tax Act?
2. Whether the Tribunal was correct in upholding the order of the Commissioner of Income Tax (Appeals)?

Analysis:
Issue 1:
The appeals were filed by the Revenue challenging the order passed by the Income Tax Appellate Tribunal for the assessment years 1998-1999 and 1995-96. The assessee had accounted for a sum as a gift from his deceased father, claiming it was lent to debtors who acknowledged the assessee as the legal heir. The Revenue treated the income as unexplained, leading to an appeal by the assessee before the Commissioner of Income Tax (Appeals). The CIT (A) directed the Assessing Officer to issue notices to complete the assessment proceedings, following Supreme Court decisions. The Tribunal upheld the CIT (A)'s decision, leading to the Revenue's appeal. The Tribunal directed the Assessing Officer to issue notices in the name of legal heirs and assess the income as per law, which the Revenue did not find grounds for appeal.

Issue 2:
For the assessment year 1995-96, similar facts were presented, and the assessee succeeded before the Tribunal. The Revenue appealed against the common order passed by the Tribunal, raising questions on the correctness of the Commissioner of Income Tax (Appeals) order. The Tribunal directed the Assessing Officer to issue notices in the name of legal heirs and assess the income as per law. The tax effect in both assessment years was below the threshold limit mentioned in Circular Instruction No.2/2005. The Circular Instructions by CBDT were considered, and it was concluded that the appeals should not have been filed by the Revenue in 2006. Therefore, the Tax Case Appeals were dismissed based on the application of the Circular issued by CBDT, and substantial questions of law were left open.

In conclusion, the judgment highlighted the issues of legal representation under the Income Tax Act and the application of Circular Instructions by CBDT in determining the admissibility of appeals based on tax thresholds. The dismissal of the appeals was based on the tax effect falling below the prescribed limit, emphasizing the importance of proper examination of cases on merits before filing appeals.