2018 (7) TMI 2267 - HC - Income Tax

Maintainability of appeal - monetary for filing an appeal before High Court - low tax effect - HELD THAT - The tax effect in the present case as stated by the Appellants-Revenue is less than the prescribed limit of Rs.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of the aforesaid Circular issued by the Central Board of Direct Taxes, the present appeal is dismissed as not pressed/withdrawn without answering the purported substantial questions of law.

Summary

Issues:
Revised monetary limits for filing appeals by the Department before the Income Tax Appellate Tribunal, High Courts, and Supreme Court.

Analysis:
The judgment discusses the revised Circular No.3/2018 issued by the Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, which revises the monetary limits for filing appeals by the Department before the Income Tax Appellate Tribunal, High Courts, and Supreme Court. The monetary limit for High Courts has been increased from Rs.20,00,000 to Rs.50,00,000 w.e.f. 11th July 2018. The Circular specifies that appeals shall not be filed in cases where the tax effect does not exceed the monetary limits provided. It clarifies that filing of appeal should be decided on the merits of the case and not merely based on exceeding the monetary limits. The Circular defines 'tax effect' as the difference between the tax on the total income assessed and the tax chargeable if the total income were reduced by the amount of income in dispute. It includes tax, surcharge, and cess but excludes interest unless interest chargeability is in dispute. In cases of penalty orders, the tax effect refers to the quantum of penalty deleted or reduced.

The Circular further elaborates that the Assessing Officer should calculate the tax effect separately for every assessment year in case of multiple disputed issues. Appeals can be filed for assessment years where the tax effect exceeds the monetary limit. However, in cases of composite orders involving multiple assessment years and common issues, appeals should be filed for all relevant years. The Circular also provides a formula for computing tax effect where income is determined under specific provisions. It mandates that if an appeal is not filed due to the tax effect being below the specified limit, the reason must be explicitly recorded by the Pr. Commissioner of Income-tax/ Commissioner of Income Tax.

Moreover, the Circular instructs that adverse judgments on specific issues like Constitutional validity challenges, illegal Board orders, Revenue Audit objections, or undisclosed foreign assets should be contested on merits regardless of tax effect. It clarifies that the monetary limits do not apply to writ matters and Direct tax matters other than Income tax. The Circular also addresses the filing of cross objections and references below the monetary limits for different forums. It emphasizes that the Circular applies to pending appeals retrospectively and provides instructions for withdrawal or not pressing of appeals below the specified tax limits.

In the case at hand, the tax effect was below the prescribed limit for filing an appeal before the High Court. The Appellants-Revenue did not press the appeal and sought to withdraw it in accordance with the Circular. Consequently, the appeal was dismissed as not pressed/withdrawn without addressing the substantial questions of law raised.