2018 (11) TMI 1890 - AT - Income Tax

Maintainability of Revenue appeal in Tribunal - low tax effect - Disallowance of deduction u/s.54F deleted by CIT-A - HELD THAT - Appeal of the Revenue is presented on 10/03/2017. On 11/07/2018 the CBDT has issued Instructions bearing No. 3 of 2018 under file No.F.No.279/Misc.142/2007-ITJ(Pt) prohibiting its subordinate authorities from filing of the appeal to the Tribunal against the order of the CIT(A) where the tax effect by virtue of the relief given by the CIT(A) is less than Rs. 20 lakhs. The instructions have been made applicable with retrospective effect meaning thereby these instructions are applicable on pending appeals also. In the present case tax effect on the total income assessed minus the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issue against which appeal is filed is less than Rs. 20 lakhs. Further the case of the Revenue does not fall within the ambit of exceptions provided in the Circular. Thus keeping in view the above CBDT circular and provisions of section 268A of the Income Tax Act we are of the view that the present appeal of the Revenue deserves to be dismissed.

Summary

Issues:
1. Disallowance of deduction u/s.54F of Rs. 73,94,404 made by the AO.
2. Applicability and maintainability of the appeal filed by the Revenue in view of recent CBDT Circular No.3/2018 dated 11.7.2018 restricting the filing of appeals where the tax effect is below Rs. 20 lakhs.

Analysis:
1. The judgment pertains to the Revenue's appeal for A.Y. 2013-14 challenging the deletion of disallowance of deduction u/s.54F of Rs. 73,94,404 made by the AO. The Tribunal noted that the CBDT Circular No.3/2018 dated 11.7.2018 restricts the filing of appeals by the Revenue where the tax effect is below Rs. 20 lakhs. The Revenue's appeal was filed on 10/03/2017, and the Circular was issued on 11/07/2018 with retrospective effect. The Tribunal found that the tax effect in this case was less than Rs. 20 lakhs, and the Revenue's case did not fall within the exceptions provided in the Circular. As a result, in accordance with the Circular and provisions of section 268A of the Income Tax Act, the Tribunal dismissed the Revenue's appeal due to the low tax effect.

2. The Tribunal raised a query regarding the applicability and maintainability of the Revenue's appeal in light of the CBDT Circular. The Revenue did not dispute the query and left the decision to the Tribunal. The Tribunal observed that the Circular prohibits subordinate authorities from filing appeals where the tax effect is below Rs. 20 lakhs, even for pending appeals. It was emphasized that if upon re-verification the tax effect is more, or if the Revenue's case falls within the exceptions provided in the Circular, the Department can approach the Tribunal for a recall of the order within the prescribed time period under the Act. The appeal of the Revenue was dismissed based on the low tax effect, with the option for the Department to seek a recall under specified circumstances.

3. The judgment highlights the importance of adhering to the CBDT Circular regarding the filing of appeals based on the tax effect threshold. It underscores the need for strict compliance with the Circular's provisions and the implications of not meeting the prescribed criteria for maintaining appeals before the Tribunal. The decision serves as a reminder for Revenue authorities to assess the tax effect before pursuing appeals to ensure alignment with the Circular's guidelines and exceptions.