2018 (10) TMI 498 - AT - Income Tax

Revision of monetary limits for filing of appeals - maintainability of appeal - Held that - From Clause 12 & 13 of the above said circular it is clear that these instructions are applicable to the pending appeals also and as per clause 13, there is clear cut instruction to the department to withdraw or not to press the appeals filed before the ITAT wherein tax effect is less than ₹ 20,00,000/-. These instructions are operative retrospectively to the pending appeals.

Summary

Issues involved:
- Appeal filed by the department against the order of ld. CIT(A)-1, New Delhi.
- Interpretation of Circular No.3/2018 by CBDT regarding the monetary limit for tax effect for filing appeals before ITAT.
- Application of the amended circular and exceptions for filing appeals on specific grounds.
- Calculation of tax effect for determining the filing of appeals.
- Applicability of the circular to pending appeals and retrospective effect.
- Decision on the maintainability of the appeal by the Revenue based on the CBDT Circular.

Interpretation of Circular No.3/2018:
The appeal before the ITAT was challenged by the assessee citing Circular No.3/2018 by the CBDT, which raised the monetary limit for filing appeals before the Tribunal to ?20 lakhs. The Revenue argued that the circular does not impose a blanket ban on filing appeals and listed exceptions where the monetary limit does not apply, including cases involving constitutional validity challenges, illegal orders, revenue audit objections, undisclosed foreign income/assets, law enforcement agency information, and pending prosecutions. The Tribunal noted that issues related to Section 153A/153C fall under the exceptions specified in the circular.

Calculation of Tax Effect:
The circular detailed the calculation of the tax effect, defining it as the difference between the tax on the total income assessed and the tax if the income were reduced by the disputed amount. It clarified that tax effect includes surcharge and cess but not interest unless its chargeability is in dispute. The circular also addressed scenarios involving returned losses, penalty orders, and computation under specific sections. It mandated the Assessing Officer to calculate the tax effect for each assessment year separately, allowing appeals only for years exceeding the monetary limit.

Applicability to Pending Appeals:
The Tribunal emphasized that the circular applied to pending appeals, directing the department to withdraw or not press appeals where the tax effect is below ?20,00,000. It highlighted that these instructions operated retrospectively, impacting ongoing appeals before the ITAT. Consequently, the Tribunal concluded that the Revenue should not have pursued the instant appeal based on the CBDT Circular.

In conclusion, the Tribunal dismissed the department's appeal, citing the CBDT Circular No.3/2018 and its amended provisions, which set the monetary limit for filing appeals before the ITAT. The judgment underscored the importance of adhering to the circular's guidelines, including exceptions for specific cases and the calculation of tax effect for determining appeal filings. The retrospective application of the circular to pending appeals was pivotal in the Tribunal's decision to reject the department's appeal, emphasizing compliance with the revised monetary limits for maintaining the appeal's validity.