2019 (1) TMI 456 - AT - Income Tax

Monetary limits - Low tax effect - maintainability of appeal - Held that - CBDT has rightly taken a decision to revise the monetary limits in tune with the present value of money and with a view to reduce the litigation and offering relief to small tax payers. This is also in view of the fact that time and energy of the department could be used more productively and efficiently to catch hold of big fishes, who in turn would contribute more to the development of the country. On perusal of the Circular No. 3/2018 dated 11.07.2018 and the materials available on record, we do not see these cases falling under any of the exceptions contemplated in the said circular per se. We also find that this circular makes it very clear that the revised monetary limits shall apply retrospectively to pending appeals as well. In Commissioner of Customs vs Indian Oil Corporation Ltd (2004 (2) TMI 66 - SUPREME COURT OF INDIA) has settled the law that CBDT s circulars are very much binding on revenue authorities. We thus hold that all these Revenue s appeals deserve to be dismissed in terms of low tax effect. We make it clear that it shall very much open for the Revenue to seek necessary rectification in case it is found that any of these appeals involve operations of exception clauses in the tax effect circular as per law.

Summary

Issues:
1. Applicability of revised monetary limits in CBDT's Circular No. 3/2018 dated 11.07.2018 to pending appeals.
2. Interpretation of 'tax effect' as per the Circular.
3. Binding nature of CBDT's circulars on revenue authorities.

Analysis:
1. The judgment pertains to Revenue's appeals arising from various orders of the CIT(A) in assessments framed under sections 147, 143(3), or 144 of the Income Tax Act, 1961. The key contention revolves around the applicability of the revised monetary limits set by CBDT's Circular No. 3/2018 dated 11.07.2018 to pending appeals. The Circular specifies monetary limits for filing appeals before different forums, emphasizing that the decision to file an appeal should be based on the merits of the case, not solely on the tax effect.

2. The Circular defines 'tax effect' as the difference between the tax on the total income assessed and the tax chargeable if the total income were reduced by the amount in dispute. It includes surcharge and cess but excludes interest unless the chargeability of interest itself is under dispute. Notably, in cases involving penalty orders, the tax effect refers to the quantum of penalty deleted or reduced. The Tribunal analyzed the Circular and concluded that the cases under consideration did not fall under any exceptions mentioned, thereby warranting dismissal of the appeals due to the low tax effect.

3. The Tribunal underscored the binding nature of CBDT's circulars on revenue authorities, citing precedent where the Supreme Court held that such circulars carry legal weight. Consequently, the Tribunal dismissed the Revenue's appeals based on the low tax effect and highlighted that the Revenue could seek rectification if any appeal involved exceptions outlined in the Circular. Additionally, a cross objection by the assessee was dismissed for non-prosecution, further emphasizing adherence to procedural requirements.

In conclusion, the judgment underscores the significance of adhering to CBDT's circulars, particularly concerning monetary limits for filing appeals, and highlights the need for revenue authorities to evaluate appeals based on the prescribed tax effect thresholds to streamline litigation and provide relief to taxpayers.