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Issues involved: Determination of maintainability of appeals based on tax effect as per CBDT circular u/s 268A of the Income Tax Act, 1961.
Summary: The High Court considered the Tax Appeals arising from the Income Tax Appellate Tribunal's judgment. The substantial question of law framed was whether the Tribunal was correct in setting aside the Commissioner of Income Tax's order u/s 263 when the Assessing Officer did not initiate proceedings u/s 271(1)(c) of the Act. The respondent assessee raised a preliminary objection regarding the maintainability of the appeals due to the tax effect involved. The Court referred to the statutory provision of section 268A of the Income Tax Act, introduced by the Finance Act, 2008, which gives statutory recognition to CBDT's power of issuing circulars to limit appeals based on tax effect. The Court cited a previous case where it was observed that the Tribunal should give weightage to the Circular issued by the Board and consider it obligatory to do so. The appeals in question arose during the period when a specific CBDT circular was in operation, which prescribed a monetary limit of tax effect for appeals to the High Court. The Court examined the CBDT circular's provisions, particularly para 5, which specified that appeals should be filed based on the tax effect in the relevant assessment year. In this case, the appeals related to the levy of penalty u/s 271(1)(c) of the Act, with penalties ranging from 100 to 300 percent of the tax evasion amount. Even after considering the maximum possible penalties for all appeals involving the same assessee, the total penalties did not exceed the limit set by the Board in its circular. The Court dismissed the appeals due to their low tax effect, clarifying that the legal issues raised were not addressed. The appeals were disposed of accordingly.
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