2019 (8) TMI 1748 - AT - Income Tax

Maintainability of appeal - Monetary limit - Low tax effect - DR submitted that the appeal is protected under the exception provided in paragraph 10(e) of Circular No. 3/2018 dated 11.07.2018 as amended by the Central Board of Direct Taxes vide letter dated 20.08.2018 -Addition u/s 68 - HELD THAT - It is undisputed position that the tax effect of the quantum additions being contested by the revenue is less than prescribed monetary limit of ₹ 50 Lacs and the same is covered by recently issued low tax effect Circular No.17/2019 dated 08/08/2019 issued by Central Board of Direct Taxes CBDT . This recent circular further enhances the monetary limit fixed in earlier Circular No.3 of 2018 dated 11/07/2018 issued by CBDT as amended on 20/08/2018. The aforesaid limits, as per para 13 of the Circular no. 3 of 2018 dated 11/07/2018, applies to pending appeals also. So far as the plea of Ld. DR is concerned, we find that information received from DGIT (Investigation) would not constitute external sources within the meaning of clause (e) of para 10 of circular no. 03/2018 dated 11/07/2018 as amended on 20/08/2018. This view has been taken in Late Amarchand P. Shah 2019 (8) TMI 1402 - ITAT MUMBAI wherein it has been held that Directorate of Income Tax (investigation) works under the aegis of investigation division of CBDT who is its controlling authority and hence, could not be called as external source. We dismiss the appeal with a liberty to the revenue to seek recall of the appeal, if at a later stage, it is found that the matter is covered by any exceptions provided in the aforesaid circular or in case the tax effect of the quantum additions as agitated by revenue exceeds the prescribed monetary limit.

Summary

Issues:
1. Disallowance under section 68 of the Income Tax Act.
2. Threshold monetary limit for appeal dismissal.
3. Interpretation of circulars issued by the Central Board of Direct Taxes.
4. Consideration of information from Directorate of Income Tax (Investigation) as an external source.

Issue 1: Disallowance under section 68 of the Income Tax Act
The appeal by the revenue contested the order of the Ld. Commissioner of Income Tax (Appeals) for the Assessment Year 2007-08, specifically challenging the deletion of an addition of ?1,00,00,000 on account of disallowance under section 68 of the Income Tax Act. The Ld. Authorized Representative for the assessee argued that the tax effect of the quantum additions was below the prescribed threshold monetary limit of ?50 Lacs, as per a circular issued by the Central Board of Direct Taxes.

Issue 2: Threshold monetary limit for appeal dismissal
The Ld. Authorized Representative contended that the appeal should be dismissed due to the quantum additions falling below the monetary limit set by the CBDT circular. However, the Ld. Departmental Representative argued that the additions were based on information from the Directorate of Income Tax (Investigation), suggesting an exception to the monetary limit as per Circular No. 03 of 2018.

Issue 3: Interpretation of circulars issued by the Central Board of Direct Taxes
Upon examination, it was established that the tax effect of the contested quantum additions was indeed below the prescribed monetary limit of ?50 Lacs, as per Circular No.17/2019 issued by the CBDT. This circular had increased the limit set in a previous circular, and it was noted that these limits applied to pending appeals as well.

Issue 4: Consideration of information from Directorate of Income Tax (Investigation) as an external source
The Tribunal clarified that information received from the Directorate of Income Tax (Investigation) did not qualify as an external source under the relevant circular. Citing a precedent, it was explained that the Directorate operates under the investigation division of the CBDT and, therefore, could not be classified as an external source. Consequently, the appeal was dismissed, with the revenue given the option to seek a recall if the matter fell under any exceptions outlined in the circular or if the tax effect exceeded the prescribed monetary limit.

In summary, the Tribunal dismissed the revenue's appeal concerning the disallowance under section 68 of the Income Tax Act, citing that the tax effect of the quantum additions was below the monetary limit specified in the CBDT circular. The decision was based on the interpretation of relevant circulars and the classification of information from the Directorate of Income Tax (Investigation) as not constituting an external source.