2022 (2) TMI 1339 - AT - Income Tax

Maintainability of appeal on low tax effect - Revenue is in appeal before the Tribunal against the order of the learned Commissioner of Income-Tax - Disallowance u/s. 40(a)(ia) - HELD THAT - We find that this appeal of the Revenue is no longer maintainable in view of the CBDT Circular No. 17 of 2019 dated 08.08.2019. The mandatory limit for cases in which Revenue can challenge the relief granted by the CIT(A) now stands enhanced to Rs.50 lakhs. This concession granted by the Central Board of Direct Taxes (CBDT) is retrospective in effect inasmuch as it applies to all pending appeals as well. In view of the above position, the appeal of the Revenue is no longer maintainable and is dismissed as such. It is, however, made clear that on re-verification at the end of the Assessing Officer if it comes out that the tax effect of more than Rs.50 lakhs is being involved in the appeal or the appeal falls within the exemption clause of the Circular, then the Revenue will be at liberty to file Miscellaneous Application to recall the Tribunal order. The application should be filed within time limit prescribed in the Act. Appeal of the Revenue is dismissed due to low tax effect.

Summary

Issues:
- Disallowance under section 40(a)(ia) of the Income Tax Act
- Maintainability of Revenue's appeal based on CBDT Circular No. 17 of 2019

Analysis:
1. Disallowance under section 40(a)(ia) of the Income Tax Act:
The Revenue appealed against the order of the Commissioner of Income-Tax (Appeals) regarding the disallowance of Rs.1,97,194 under section 40(a)(ia) of the Income Tax Act for Assessment Year 2013-2014. The Revenue contended that the CIT(A) erred in law and on facts in deleting the disallowance. However, during the proceedings, it was brought to light that the tax effect in this case was below the limit prescribed by CBDT Circular No. 17 of 2019 dated 08.08.2019. The Departmental Representative acknowledged this fact, leading to the Tribunal's decision.

2. Maintainability of Revenue's appeal based on CBDT Circular No. 17 of 2019:
The Tribunal observed that the appeal of the Revenue was no longer maintainable due to the CBDT Circular No. 17 of 2019, which raised the limit for cases where the Revenue can challenge relief granted by the CIT(A) to Rs.50 lakhs. This circular had a retrospective effect, applying to all pending appeals. Consequently, the Tribunal dismissed the Revenue's appeal citing the enhanced limit set by the CBDT Circular. However, the Tribunal clarified that if upon re-verification by the Assessing Officer, it is found that the tax effect exceeds Rs.50 lakhs or falls within the exemption clause of the Circular, the Revenue could file a Miscellaneous Application within the prescribed time limit to recall the Tribunal order.

In conclusion, the Tribunal dismissed the appeal of the Revenue due to the low tax effect involved in the case, in compliance with the CBDT Circular No. 17 of 2019. The decision was pronounced on 23rd February 2022 in Ahmedabad.