2019 (1) TMI 2037 - AT - Income Tax

Department appeals against relief given by CIT(A) - Addition u/s 69A - CIT(A) deleted the addition - Revenue is aggrieved by the order of ld. CIT(A) in respect of the relief given by him - HELD THAT - As per the recent announcement of Central Board of Direct Taxes (CBDT) dated 11.07.2018 (Circular No. 3 of 2018), no Department appeals are to be filed against relief given by ld. CIT(A) before the Income Tax Appellate Tribunal unless the tax effect, excluding interest, exceeds Rs. 20 lakhs and it further states that the instructions will apply retrospectively to the pending appeals also. In the present case, since it is an undisputed fact that on the additions which are in dispute, the tax effect is less than Rs. 20 lakhs and in the absence of any material placed on record by the Revenue to demonstrate that the issue in the present appeal is covered by exceptions provided in para 10 of the aforesaid CBDT Circular, monetary limit prescribed by the instructions of the aforesaid CBDT Circular would be applicable to the present appeal of the Department. We therefore hold the present appeal of Revenue to be not maintainable on account of low tax effect - grounds of the Revenue are dismissed. Additions have been made in the case of assessee on protective basis - HELD THAT - When the assessment where substantive additions have been set aside, assessment in the case of assessee in whose hands the protective additions does not stand. Thus, the appeal assessee is allowed sans merit.

Summary

Issues:
1. Appeal by Revenue challenging deletion of addition under section 69A of the Income Tax Act, 1961.
2. Maintainability of Revenue's appeal based on low tax effect.
3. Appeal by Assessee challenging assessment order passed under section 147/143(3) on protective basis.
4. Discharge of primary burden of proof by Assessee.
5. Violation of principles of natural justice in the assessment proceedings.
6. Application of section 69A of the IT Act, 1961 in the assessment.
7. Confirmation of addition as undisclosed income against returned income.
8. Charging of interest under section 234B and initiation of penalty proceedings under section 271(1)(c) of the IT Act, 1961.

Analysis:

1. The first issue involves the Revenue's appeal against the deletion of an addition under section 69A of the Income Tax Act, 1961. The Tribunal dismissed the Revenue's appeal citing the recent CBDT Circular, which set a monetary limit of Rs. 20 lakhs for Department appeals against relief given by the CIT(A). As the tax effect in this case was less than Rs. 20 lakhs and no exceptions applied, the Tribunal held the appeal not maintainable due to low tax effect.

2. The second issue pertains to the maintainability of the Revenue's appeal based on low tax effect. The Tribunal applied the CBDT Circular's monetary limit of Rs. 20 lakhs for Department appeals. As the tax effect in this case was below the prescribed limit and no exceptions were demonstrated by the Revenue, the Tribunal dismissed the appeal without expressing any opinion on the merits of the case.

3. The third issue involves the Assessee's appeal challenging the assessment order passed under section 147/143(3) on a protective basis. The Tribunal noted that substantive additions in another case were set aside, leading to the dismissal of the protective additions made in the Assessee's case. Consequently, the Tribunal allowed the Assessee's appeal as the additions were made on a protective basis.

4. The fourth issue concerns the Assessee's discharge of the primary burden of proof. The Assessee provided circumstantial and documentary evidence, along with witness names and money delivery details. Despite this, the Tribunal found that the protective additions made in the Assessee's case were not sustainable after the substantive additions in another case were set aside.

5. The fifth issue addresses the violation of principles of natural justice in the assessment proceedings. The Assessee alleged that the CIT(A) reached conclusions without examining evidence or witnesses and without providing an opportunity for cross-examination. The Tribunal, however, focused on the lack of sustainability of protective additions due to the dismissal of substantive additions in another case.

6. The sixth issue involves the application of section 69A of the IT Act, 1961 in the assessment. The Assessee contested the application of this section, but the Tribunal's decision was primarily based on the dismissal of substantive additions in a related case, leading to the dismissal of protective additions in the Assessee's case.

7. The seventh issue concerns the confirmation of addition as undisclosed income against the returned income. The Tribunal allowed the Assessee's appeal as the protective additions were not sustainable after the substantive additions in another case were set aside.

8. The final issue addresses the charging of interest under section 234B and the initiation of penalty proceedings under section 271(1)(c) of the IT Act, 1961. The Tribunal did not delve into these issues extensively due to the dismissal of the protective additions based on the dismissal of substantive additions in another case.

In conclusion, the Tribunal dismissed the Revenue's appeal due to low tax effect, allowed the Assessee's appeal as protective additions were not sustainable, and did not extensively address the issues related to interest and penalty proceedings due to the primary focus on the sustainability of additions.