2020 (1) TMI 1402 - 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:
1. Recall of order due to low tax effect.
2. Interpretation of CBDT Circular No.03/2018.
3. Application of CBDT Instruction No.5/2017.
4. Consideration of Hon'ble Bombay High Court judgment.
5. Evaluation of merit for filing appeals.
6. Rejection of miscellaneous application.

Analysis:
1. The Appellate Tribunal, ITAT Ahmedabad, dealt with a Misc. Application filed by the Revenue to recall an order where the Tribunal summarily dismissed the Revenue's appeal due to low tax effect. The Revenue argued that their case falls under an exception clause of the CBDT Circular No.03/2018 and should be heard on merit despite the tax effect being below the specified limit.

2. The Tribunal highlighted the importance of CBDT Instruction No.5/2017, stating that even if an assessment is reopened due to an audit objection, if additions are deleted by the CIT(A) on merit, further appeal should be based on the merit of the dispute and not solely on the tax effect. The Tribunal emphasized the need for the Department to assess the merits of the case before filing further appeals.

3. The Tribunal referenced a judgment of the Hon'ble Bombay High Court in a similar matter, where the Court held that merely raising an audit objection is not sufficient for recalling an order. The Court emphasized that the Revenue must prove that the audit objection has been accepted by the Department and that conditions laid out in Circulars must be met before seeking a recall.

4. After considering the Circulars of the Board and the Bombay High Court decision, the Tribunal concluded that the Revenue failed to provide substantial material indicating that the appeal was filed after evaluating the merit of the issues involved. The Tribunal rejected the Revenue's application for recall, stating that seeking a recall based solely on an audit objection is not justified.

5. Additionally, the Tribunal addressed a typographical error in mentioning the assessment year in the case, clarifying it as a mere typographical mistake that does not impact the substance of the order. The Tribunal modified the assessment year in the order accordingly.

6. Ultimately, the Tribunal dismissed the Revenue's Misc. Application, upholding the original order and emphasizing the need for appeals to be based on the evaluation of merit rather than solely on tax effects. The decision was pronounced in court on 20th January 2020 in Ahmedabad.