2016 (1) TMI 1445 - AT - Income Tax

Maintainability of appeal - low tax effect - HELD THAT - It is well settled proposition that the circulars issued by the CBDT are binding on the Income Tax Authorities. For this proposition, one may gainfully refer to the decisions in the case of Azadi Bachao Andolan 2003 (10) TMI 5 - SUPREME COURT and Pradip J Mehta Vs. CIT 2008 (4) TMI 6 - SUPREME COURT . Hence, the latest circular issued by the CBDT (referred supra) is binding on the income tax authorities. Accordingly, we find merit in the submissions of Ld A.R that this appeal of the revenue is not maintainable, since tax effect involved in this appeal is less than ₹ 10 lakhs. Accordingly, we dismiss the appeal filed by the revenue.

Summary

Issues:
- Appeal filed by Revenue against CIT(A) order for AY 2007-08
- Tax effect less than Rs. 10 lakhs
- Applicability of CBDT circular No.21/2015 on monetary limits for appeals
- Binding nature of CBDT circulars on Income Tax Authorities

Analysis:
1. The appeal was filed by the Revenue against the CIT(A) order for the assessment year 2007-08. During the hearing, it was noted that the tax effect involved in the disputed issues was less than Rs. 10 lakhs. The CBDT circular No.21/2015 dated 10.12.2015 specified new monetary limits for filing appeals before the Tribunal. The circular stated that appeals should not be filed if the tax effect does not exceed Rs. 10 lakhs. The circular clarified that the tax effect is the difference between the tax on the total income assessed and the tax that would have been chargeable had the total income been reduced by the amount in dispute.

2. The circular also mentioned that the tax effect includes notional tax on disputed additions in case of reduced or assessed losses. Additionally, in penalty orders, the tax effect is the quantum of penalty deleted or reduced. The circular emphasized that the filing of an appeal should be based on the merits of the case, not solely on exceeding monetary limits. It further stated that the circular applies retrospectively, including to pending appeals. The CBDT circulars are binding on Income Tax Authorities as per established legal principles.

3. Citing precedents like Azadi Bachao Andolan and Pradip J Mehta Vs. CIT, the Tribunal acknowledged the binding nature of CBDT circulars on Income Tax Authorities. Therefore, considering the tax effect involved in the appeal being less than Rs. 10 lakhs, the Tribunal found merit in the argument that the appeal was not maintainable as per the CBDT circular. Consequently, the appeal filed by the Revenue was dismissed based on the monetary limit set by the circular.

4. The Tribunal's decision to dismiss the appeal was in accordance with the CBDT circular's provisions and the legal precedents establishing the binding nature of such circulars on Income Tax Authorities. The order was pronounced in open court on 15th January 2016, thereby concluding the case based on the monetary limit specified in the circular.