2020 (1) TMI 1401 - 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 based on low tax effect, Interpretation of Board Instructions, Exceptional clause in Instruction No.3/2018, Merit-based assessment for filing appeals, Application of Circular No.5/2017, Precedent of Hon'ble Bombay High Court judgment.

Analysis:
The case involved a Miscellaneous Application by the Revenue seeking the recalling of a common order passed by the ITAT Ahmedabad Bench due to low tax effect. The assessment was finalized with an addition of ?4,88,008, leading to a total income of ?9,03,348. The CIT(A) had deleted the addition made under section 40(a)(ia) of the Income Tax Act. The Tribunal dismissed the Revenue's appeal citing a tax effect less than ?20 lakhs, following 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 Circular No.5/2017, emphasizing the need for a merit-based assessment before filing appeals. The Circular highlighted the importance of examining cases on merits rather than mechanically filing appeals. The Tribunal also considered the judgment of the Hon'ble Bombay High Court in a related case, which stressed the requirement for the Revenue to prove that audit objections had been accepted by the Department before seeking to recall orders based on such objections.

The Tribunal concluded that the Revenue failed to provide substantial material showing the appeal was filed after evaluating the merit of the issues involved. It noted that the attempt to recall the order based solely on audit objection was insufficient. Citing the Circular and the High Court precedent, the Tribunal rejected the Revenue's application, stating that recalling the order was unwarranted. The miscellaneous application filed by the Revenue was consequently dismissed.

In summary, the Tribunal's decision was based on the need for a merit-based assessment before filing appeals, as outlined in Circular No.5/2017, and supported by the judgment of the Hon'ble Bombay High Court. The Revenue's attempt to recall the order solely on the basis of audit objection was deemed insufficient, leading to the dismissal of the application.