2018 (7) TMI 2254 - HC - Income Tax

Monetary limit for filing an appeal before High Court - HELD THAT - The tax effect in the present case as stated by the Appellants-Revenue is less than the prescribed limit of ₹ 50.00 lakhs for filing an appeal before High Court. Appellants-Revenue does not press this appeal and seeks leave of the Court to withdraw the present appeal in terms of paragraph-13 of the said Circular. Accordingly, in view of the aforesaid Circular issued by the Central Board of Direct Taxes, the present appeal is disposed of as withdrawn without answering the purported substantial questions of law.

Summary

Issues involved:
1. Revision of monetary limits for filing appeals by the Department before the Income Tax Appellate Tribunal, High Courts, and Supreme Court.
2. Definition of "tax effect" and its calculation for determining the filing of appeals.
3. Guidelines for filing appeals based on tax effect and disputed issues.
4. Instructions for recording non-filing of appeals due to monetary limits.
5. Contesting adverse judgments on specific issues despite tax effect.
6. Applicability of monetary limits to different types of direct tax matters.
7. Instructions regarding cross objections and references below specified monetary limits.
8. Retrospective application of the Circular to pending appeals.

Analysis:
1. The judgment addresses the revision of monetary limits for filing appeals by the Department before various tax authorities. The Circular issued by the Central Board of Direct Taxes on July 11, 2018, increased the monetary limit for filing appeals before the High Court from ?20,00,000 to ?50,00,000. The Circular emphasizes that appeals should not be filed solely based on exceeding the monetary limits but should be decided on the merits of the case.

2. The Circular defines "tax effect" as the difference between the tax on the total income assessed and the tax that would have been chargeable if the total income were reduced by the amount in dispute. It includes tax, surcharge, and cess but excludes interest unless the chargeability of interest is in dispute. The tax effect calculation is crucial for determining the filing of appeals based on the specified monetary limits.

3. Guidelines are provided for calculating the tax effect separately for each assessment year in cases with disputed issues spanning multiple years. Appeals can be filed only for years where the tax effect exceeds the monetary limit. The Circular also addresses scenarios involving penalty orders and composite orders across multiple assessment years.

4. Specific instructions are given for recording non-filing of appeals due to the monetary limits, ensuring that the Department is not precluded from filing appeals in subsequent years if the tax effect exceeds the limits. The Circular aims to prevent presumptions of Departmental acquiescence based on non-filing of appeals.

5. The judgment highlights the importance of contesting adverse judgments on certain issues regardless of the tax effect, such as challenges to the constitutional validity of laws, illegal Board orders, accepted Revenue Audit objections, and undisclosed foreign assets/accounts.

6. Differentiated instructions are provided regarding the applicability of monetary limits to various direct tax matters, excluding writ matters and non-income tax matters. Decisions to file appeals in cases without quantifiable tax effects are to be based on the merits of each case.

7. The Circular addresses the application of monetary limits to cross objections and references, specifying actions for cases falling below the prescribed limits. It also outlines the treatment of pending appeals below the monetary limits.

8. Lastly, the judgment clarifies the retrospective application of the Circular to pending appeals, emphasizing compliance with the revised monetary limits for all future appeals and references.