2018 (11) TMI 585 - AT - Income Tax

Maintainability of appeal - Monetary limits - tax effect - Revision of monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal - 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. Keeping in view the CBDT Circular No. 3 of 2018 dated 11.07.2018, we are of the view that the Revenue should not have filed the instant appeal before the Tribunal.

Issues involved:
1. Maintainability of appeal by the department based on Circular No.3/2018.
2. Interpretation of the revised monetary limit for filing appeals before the ITAT.
3. Applicability of the amended circular and its impact on pending appeals.
4. Decision on the appeal filed by the Revenue based on the monetary limit.

Detailed Analysis:
1. The primary issue in this case was the maintainability of the department's appeal before the ITAT based on Circular No.3/2018 dated 11.07.2018. The appellant argued that the appeal was not maintainable as per the circular, which increased the monetary limit for tax effect for filing appeals before the ITAT to ?20 lakhs. However, the respondent contended that the circular provided exceptions for filing appeals in certain circumstances, such as when the tax effect cannot be quantified or in specific cases like undisclosed foreign income/assets or where prosecution is pending.

2. The tribunal analyzed the revised monetary limits specified in the circular for filing appeals before the ITAT. The circular clarified that appeals should not be filed solely based on the tax effect exceeding the monetary limits, emphasizing that the decision to appeal should be based on the merits of the case. It defined the "tax effect" as the difference between the tax on the total income assessed and the tax that would have been chargeable if the disputed issues were resolved differently. The tribunal also outlined the calculation method for tax effect in cases involving sections 115JB or 115JC of the Income-tax Act.

3. The tribunal further examined the applicability of the amended circular and its impact on pending appeals. It noted that the instructions in the circular were applicable retrospectively to pending appeals, directing the department to withdraw or not press appeals where the tax effect was less than ?20,00,000. The tribunal emphasized that the circular applied equally to cross objections and instructed that pending appeals below the specified tax limits should be withdrawn or not pressed.

4. Finally, based on the analysis of the circular and its implications, the tribunal concluded that the Revenue should not have filed the appeal before the Tribunal as the tax effect did not exceed the revised monetary limit of ?20,00,000. Consequently, the tribunal dismissed the department's appeal, highlighting the retrospective application of the circular to pending appeals and emphasizing compliance with the monetary limits for filing appeals before the ITAT.

In summary, the judgment focused on the interpretation and application of Circular No.3/2018 regarding the monetary limits for filing appeals before the ITAT, addressing the maintainability of appeals, calculation of tax effect, and the impact on pending appeals, ultimately resulting in the dismissal of the department's appeal based on the revised monetary limit.

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