2020 (1) TMI 1172 - HC - Income Tax

Maintainability of appeal - low tax effect - Monetary limit - Tax effect in the present case is less than ₹ 2.00 lacs - Appellant has argued before this Court that the appeal cannot be disposed of in view of CBDT circular dated 10.12.2015 read with circular dated 11.07.2018 as there is an audit objection - HELD THAT - Learned counsel for the appellant has merely stated that there was an audit objection and therefore, in light of the Division Bench judgement of the Bombay High Court in M/S. NAWANY CONSTRUCTION CO. PVT. LTD. 2018 (9) TMI 800 - BOMBAY HIGH COURT mere raising of this objection in terms of a circular is not enough. The Revenue has not pointed out that this audit objection has been accepted by the department nor any record has been placed before us and therefore, present income tax appeal stands disposed of keeping in view the CBDT circulars dated 10.12.2015 and 11.07.2018.

Summary

Issues:
1. Interpretation of CBDT circulars regarding tax effect limits for contesting adverse judgments.
2. Requirement of acceptance of Revenue Audit objection by the Department for contesting appeals.
3. Adherence to circular conditions for contesting appeals.
4. Dismissal of appeal based on lack of evidence of accepted audit objection.

Analysis:
1. The appellant argued that the appeal cannot be disposed of due to an audit objection, citing CBDT circulars from 2015 and 2018. The respondent referred to a Bombay High Court judgment highlighting the conditions under which adverse judgments should be contested, even if the tax effect is below specified limits.

2. The Division Bench of the Bombay High Court emphasized the importance of the Revenue Audit objection being accepted by the Department for contesting appeals. The court noted that the mere raising of an objection is insufficient; the Revenue must demonstrate acceptance of the objection for it to be considered valid.

3. The court observed that the Revenue's attempt to bypass the conditions outlined in the circulars was not acceptable. It reiterated that the circulars bind the Revenue, and any conditions specified must be met and proven by the Revenue. In this case, as there was no evidence of the audit objection being accepted, the appeal was dismissed in line with the circular requirements.

4. The appellant's assertion of an audit objection was not substantiated by evidence of acceptance by the Department. As the Revenue failed to demonstrate acceptance of the objection, the court dismissed the income tax appeal, emphasizing the importance of complying with the conditions set forth in the CBDT circulars for contesting adverse judgments.