2018 (8) TMI 753 - AT - Income Tax

Monetary limit for filing of appeal by the revenue before the tribunal - recent instruction No.3/2018 dated 11/07/2018 revising the monetary threshold fixing the tax effect limit of ₹ 20 lacs for the revenue to file appeal before the ITAT - The CBDT also clarifies that this instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts/Tribunal. The Income Tax Act was amended and Section 268A has been introduced on the Statute book with retrospective effect. Held that - Considering the above CBDT circular, we found that this appeal of the revenue is not maintainable as the tax effect in this appeal is below ₹ 20 Lakhs. Accordingly, appeal of the revenue is dismissed. - Decided against the revenue.

Summary

Issues:
- Appeal by Revenue against CIT(A) order
- Tax effect threshold for filing appeal
- CBDT Circular on monetary limits for filing appeals
- Calculation of tax effect
- Applicability of tax effect limit to different assessment years
- Exceptions to monetary limits for filing appeals
- Maintenance of judicial folders for evidence
- Contesting adverse judgments on specific issues
- Applicability of monetary limits to cross objections
- Dismissal of Revenue appeal and assessee's cross objection

Analysis:
1. Appeal by Revenue against CIT(A) order: The appeal was filed by the Revenue and cross objection by the assessee against the order of CIT(A)-33, Mumbai for A.Y.2010-11 under section 143(3) r.w.s. 147 of the IT Act, 1961.

2. Tax effect threshold for filing appeal: The CBDT issued instruction No.3/2018 revising the monetary threshold for the Revenue to file appeals before ITAT to &8377; 20 lakhs. The tax effect in this appeal was below the prescribed limit, making the Revenue's appeal not maintainable.

3. CBDT Circular on monetary limits for filing appeals: Circular No.3/2018 dated 11th July 2018 revised the monetary limit to file appeals before the Tribunal by the Revenue to &8377; 20 lakhs. The circular applied retrospectively to pending and future appeals in High Courts/Tribunal.

4. Calculation of tax effect: The tax effect is defined as the difference between the tax on total income assessed and the tax chargeable if the total income were reduced by the amount in dispute. It includes tax, surcharge, and cess but excludes interest unless its chargeability is in dispute.

5. Applicability of tax effect limit to different assessment years: The tax effect is calculated separately for each assessment year, and appeals can be filed only for years where the tax effect exceeds the prescribed limit. Exceptions apply for composite orders involving multiple assessment years and common issues.

6. Exceptions to monetary limits for filing appeals: Certain issues like constitutional validity challenges, illegal Board orders, accepted Revenue Audit objections, and undisclosed foreign assets are to be contested on merits regardless of the tax effect.

7. Maintenance of judicial folders for evidence: The evidence of not filing appeals due to the circular must be maintained systematically for court purposes in the office of Pr. CsIT/ CsIT.

8. Contesting adverse judgments on specific issues: Adverse judgments on specific issues like constitutional validity challenges or illegal Board orders should be contested on merits even if the tax effect is below the monetary limit.

9. Applicability of monetary limits to cross objections: The monetary limit of &8377; 20 lakhs for appeals before ITAT also applies to cross objections under section 253(4) of the Act. Cross objections below this limit should be dismissed.

10. Dismissal of Revenue appeal and assessee's cross objection: The Revenue's appeal was dismissed due to the tax effect being below the threshold. Consequently, the cross objection filed by the assessee in support of the CIT(A) order was also dismissed.

This judgment highlights the importance of adhering to the revised monetary limits set by the CBDT for filing appeals, the calculation of tax effect, exceptions to the limits, and the systematic maintenance of evidence for non-filing of appeals. It emphasizes contesting adverse judgments on specific issues and the dismissal of appeals and cross objections falling below the prescribed monetary thresholds.