2020 (1) TMI 1400 - AT - Income Tax

Maintainability of appeal on low tax effect - as pleaded that Instruction No.3/2018 contains exceptional clause at Sl.No.8 of the Instruction says if a Revenue audit objection has been accepted by the Department, then the appeals of such issues would be contested on merit - HELD THAT - We have confronted the Ld. DR with the CBDT Instruction bearing No.5/2017 dated 23/01/2017. These instructions provide that even if an assessment is being reopened on account of audit objection but the additions are deleted by the CIT(A) on merit, then for the purpose of challenging the order of CIT(A) in further appeal the case would be required to be examined on merit. Simply the appeal would not be filed because the case falls within the exceptional clause of the CBDT Instruction for not filing the appeal where the tax effect by virtue of relief granted by the CIT(A) is less than the monetary limit for filing such appeals. In other words, the Department has to assess the merits of the dispute involved and they will not file further appeal against the order of the CIT(A) or ITAT in a mechanical manner. Department has not brought any substantial material on the record pointing out that appeal was filed after evaluation of merit on the issues involved. It sought to recall the order of the Tribunal merely on the basis of audit objection, which is not sufficient for recalling the Tribunal order. Therefore, we do not find any error in the order of the Tribunal. Thus the miscellaneous application is rejected.

Summary

Issues:
Recall of order due to low tax effect

Analysis:
The Revenue filed a Miscellaneous Application seeking the recalling of the common order passed by the ITAT Ahmedabad Bench in an appeal for AY 2010-11. The CIT(A) had restricted a disallowance made under section 14A to a lower amount. The Tribunal dismissed the Revenue's appeal citing low tax effect, as the tax relief granted by the CIT(A) was less than ?20 lakhs, falling below the threshold for maintainability as per Board Instruction No. 3 of 2018. The Revenue argued that the case fell within an exceptional clause of the Instruction due to being reopened on audit objection.

However, the Tribunal referred to CBDT Instruction No. 5/2017, which states that if additions are deleted by the CIT(A) on merit even in cases reopened on audit objection, the Department must examine the case on merit before filing further appeals. The Tribunal highlighted Circular No. 17, emphasizing that appeals should only be filed against adverse judgments after proper examination on merits. The Tribunal also cited a judgment of the Bombay High Court, which held that mere raising of an audit objection is not sufficient for recall of an order; the Revenue must prove that the objection was accepted by the Department.

The Tribunal found that the Revenue failed to bring forth substantial material showing that the appeal was filed after evaluating the merit of the issues involved. The Tribunal concluded that the attempt to recall the order based solely on an audit objection was insufficient, and there was no error in the Tribunal's order. As a result, the Miscellaneous Application filed by the Revenue was dismissed.

This detailed analysis of the judgment showcases the considerations around the recall of the order due to low tax effect, the application of relevant instructions and circulars, and the requirement for the Revenue to evaluate the merit of issues before filing appeals. The Tribunal's decision was based on the lack of substantial material indicating a merit-based evaluation by the Revenue, leading to the rejection of the Miscellaneous Application.