2015 (12) TMI 1886 - AT - Income Tax

Maintainability of appeal before Tribunal - low tax effect - HELD THAT - In view of the latest CBDT Circular No.21/2015 dated 10th December, 2015, the appeals of the Department are not maintainable inview of the tax effect being less than the monetary limit prescribed by the said Circular. The tax effect in filing the appeal before the Tribunal should be above Rs.10 lakhs in view of the above said Circular. The above Circular has clearly mentioned to have retrospective effect and is to have application to the pending appeals. Accordingly, in view of the said Circular, all the appeals of the Revenue are dismissed as not maintainable.

Summary

Issues:
Appeals filed by the revenue below the specified tax limits based on the CBDT Circular No. 21/2015 dated 10th December, 2015.

Analysis:

1. Applicability of CBDT Circular No. 21/2015:
The judgment pertains to appeals filed by the revenue against separate orders of the CIT(A) for different assessees and assessment years. The Tribunal observed that as per the CBDT Circular No. 21/2015, appeals should not be filed where the tax effect does not exceed the specified monetary limits. The Circular, issued to reduce litigation, mandates that appeals should be filed based on the tax effect and not merely due to the amount exceeding the limits. The Circular has retrospective effect and applies to pending appeals as well.

2. Definition of "Tax Effect" and Calculation:
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. The tax effect excludes interest unless the chargeability of interest is under dispute. In cases of penalty orders, the tax effect refers to the quantum of penalty deleted or reduced. The Assessing Officer is required to calculate the tax effect separately for each assessment year and file appeals only for years where the tax effect exceeds the specified limit.

3. Recording Non-filing of Appeals:
In instances where appeals are not filed due to the tax effect being below the monetary limit, the Commissioner of Income-tax must explicitly record the decision. This ensures that the Department is not presumed to have accepted the decision on disputed issues. The Department retains the right to file appeals for the same or other assessment years if the tax effect surpasses the specified limits, emphasizing that non-filing does not indicate acceptance of the decision.

4. Contesting Adverse Judgments:
The Circular specifies certain issues, such as challenges to the Constitutional validity of provisions, illegal Board orders, accepted Revenue Audit objections, or undisclosed foreign assets, where adverse judgments should be contested on merits irrespective of the tax effect being below the monetary limits. This ensures that critical legal issues are not overlooked based solely on the tax impact.

5. Applicability and Retrospective Effect:
The Circular applies retrospectively to pending appeals and future filings in High Courts and Tribunals. Appeals below the specified tax limits may be withdrawn. However, the instructions applicable at the time of filing will govern appeals before the Supreme Court. The Circular does not apply to writ matters and direct tax issues beyond income tax, which will follow relevant statutory provisions.

6. Conclusion:
Based on the CBDT Circular and the principles outlined therein, the Tribunal dismissed all appeals of the Revenue as not maintainable. This decision aligns with the Circular's objective of reducing litigation by ensuring appeals are filed based on the tax effect and merit of the case rather than solely on monetary considerations.

This comprehensive analysis of the judgment highlights the key aspects of the CBDT Circular and its impact on the appeals filed by the revenue before the Tribunal.