2020 (8) TMI 880 - AT - Income Tax

Maintainability of appeal on low tax effect - exceptions where the monetary limit is not applicable - Miscellaneous Application of revenue seeking recalling of Tribunal s order whereby the appeal of the revenue was dismissed on the ground of low tax effect in view of the monetary limits provided in CBDT Circular No. 3 of 2018 - assessee has submitted that the assessee has come to know about this fact that the assessment was reopened by the AO based on the Audit Objection first time when the Miscellaneous Application has been filed by the revenue - HELD THAT - As per clause (c) of para 10 of the Circular it is clear that where the revenue Audit Objection in case of an assessee has been accepted by the Department, the appeal of the revenue has to be decided on merits irrespective of the low tax effect. Now it is fact on record that the Audit Objection was accepted by the department and the AO has disallowed interest expenditure as pointed out by the Audit Branch of the Revenue. Therefore, we find that the appeal of the revenue falls in the exception as provided in para 10(c) of the Circular No. 3 of 2018. Accordingly, we recall the impugned order dated 04.10.2019 and restore the appeal of the revenue at its original number and stage. The Registry is directed to list the appeal of the revenue for hearing on 9th October, 2020. The assessee shall have a liberty to raise the objection, if any against the decision of the AO based on the Audit Objection. The next date of hearing is announced in the open court and noted down by the parties, therefore, no separate notice of hearing shall be issued. Miscellaneous Application filed by the revenue is allowed.

Summary

Issues:
Recalling of Tribunal's order based on low tax effect and exception under para 10(c) of Circular No. 3/2018.

Analysis:
The judgment revolves around the Miscellaneous Application filed by the revenue seeking the recalling of the Tribunal's order dated 04.10.2019, which dismissed the revenue's appeal due to low tax effect as per the monetary limits specified in CBDT Circular No. 3 of 2018. The revenue argued that the assessment order was based on Audit Objections, falling under the exception outlined in para 10(c) of the Circular. The Tribunal considered the submissions from both parties and noted that the appeal was dismissed due to low tax effect as per the amended Circular No. 17 of 2019. However, para 10 of the Circular lists exceptions where the monetary limit does not apply, including cases where Revenue Audit objections have been accepted by the Department.

The Tribunal highlighted that under para 10(c) of the Circular, if Revenue Audit objections have been accepted by the Department, the appeal must be decided on merits regardless of the tax effect. Since the Audit Objection regarding interest expenditure was accepted by the Department, the Tribunal concluded that the revenue's appeal fell within the exception provided in para 10(c) of the Circular. Consequently, the Tribunal decided to recall the order dated 04.10.2019 and restore the revenue's appeal to its original number and stage for further proceedings. The Registry was directed to list the appeal for hearing on a specified date, allowing the assessee to raise objections against the decision based on the Audit Objection.

In conclusion, the Tribunal allowed the Miscellaneous Application filed by the revenue, emphasizing the importance of considering exceptions outlined in Circulars while determining the maintainability of appeals based on tax effect. The judgment underscores the significance of addressing cases where Revenue Audit objections have been accepted by the Department, necessitating a review of the appeal on its merits regardless of the tax effect involved.