2015 (12) TMI 1786 - AT - Income Tax

Maintainability of appeal - monetary limit - HELD THAT - CBDT has issued Circular No.21 of 2015 dated 10.12.2015, vide which it has revised the monetary limit to ₹ 10,00,000/- for not filing the appeal before the Tribunal. From Clause 10 of the above circular it is clear that these instructions are applicable to the pending appeals also and there is clear cut instruction to the department to withdraw or not to press the appeals filed before the ITAT wherein tax effect is less than ₹ 10,00,000/-. These instructions are operative retrospectively to the pending appeals. CBDT Circular No.21 of 2015 dated 10.12.2015 and also the provisions of Section 268A of Income Tax Act, 1961, we are of the view that the Revenue should not have filed the instant appeal before the Tribunal - We dismiss the appeal filed by the department.

Summary

Issues:
Appeal against CIT(A) order - Tax effect less than Rs. 10,00,000 - Applicability of Section 268A - CBDT Circular No.21 of 2015 - Withdrawal of appeals below monetary limits.

Analysis:
The department filed an appeal against the CIT(A) order, where the tax effect was less than Rs. 10,00,000. During the hearing, the department acknowledged the tax effect threshold but supported the AO's decision. However, Section 268A of the Income Tax Act, inserted with retrospective effect, empowers the Board to set monetary limits for appeals. The Board's instructions are binding on income-tax authorities. The CBDT Circular No.21 of 2015 revised the monetary limit to Rs. 10,00,000 for not filing appeals before the Tribunal. The circular clarified that appeals should be based on merit, not solely on exceeding monetary limits.

The Circular defined "tax effect" as the difference in assessed total income and the income if disputed issues were excluded. The AO must calculate tax effect for each assessment year separately. Appeals should be filed only for years where tax effect exceeds the limit, except for composite orders involving common issues. The Commissioner must record reasons for not filing appeals due to monetary limits. The department can appeal in subsequent years if tax effect surpasses limits. Adverse judgments on specific issues should be contested regardless of tax effect.

The Circular emphasized that not filing appeals below limits does not imply acceptance of decisions. It instructed representatives to clarify this before the Tribunal. Adverse judgments on constitutional validity, Board orders, Revenue Audit objections, or foreign assets must be contested. Writ and non-income tax matters are not bound by monetary limits. The Circular applied retrospectively to pending appeals. The Tribunal, considering Section 268A and the Circular, dismissed the department's appeal without delving into the case's merits.

The Tribunal's decision was based on the CBDT Circular and Section 268A, concluding that the appeal should not have been filed due to the low tax effect. The Circular's instructions applied to pending appeals, directing withdrawal or not pressing of appeals below Rs. 10,00,000. The Tribunal's decision to dismiss the appeal aligned with the Circular's guidelines, emphasizing the importance of adhering to monetary limits for filing appeals.

This judgment highlights the significance of complying with monetary limits set by the CBDT and Section 268A, ensuring appeals are based on merit and tax effect thresholds. The Tribunal's decision to dismiss the appeal underscores the need for strict adherence to these guidelines to streamline the appeal process and reduce unnecessary litigation.