2019 (4) TMI 837 - HC - Income Tax

Monetary limits for filing appeals or seeking a reference - Low tax effect - maintainability of revenue appeal before High Court - HELD THAT - Latest set of instructions are contained in CBDT Circular dated 11.7.2018 which lays down the monetary limit at ₹ 50 Lakhs of tax effect to enable the Revenue to file appeal before the High Court against the judgment of the Income Tax Appellate Tribunal. All the Authorities of the Department are bound by these instructions and cannot prefer the appeal in disregard of such limits or directives. As per this provision, in case of a composite order of the Tribunal involving more than one assessment year and common issues, it would be open for the Revenue to prefer appeals in relation to all assessment years provided tax effect in one of the assessment year is higher than the monetary limit prescribed and the Revenue decides to carry the issue in appeal in such assessment years. In the present case, such facts are not involved. Revenue, however, argued that the order passed by the Appellate Commissioner gave rise to two separate appeals at the hands of the Revenue as well as the assessee. These appeals were decided separately by the Tribunal. The Revenue has decided to file appeal in both the cases. Such an instance, however, would not be covered by exception clause noted above contained in the CBDT Circular. This appeal is, therefore, dismissed on the ground of low tax effect.

Summary

Issues:
- Appeal against the judgment of the Income Tax Appellate Tribunal
- Disallowance of book profit as per clause (f) to Explanation 1 u/S. 115JB of the Income Tax Act, 1961
- Maintainability of the appeal based on the tax effect below the threshold limit
- Provisions of Section 268A of the Income Tax Act, 1961
- CBDT Circular dated 11.7.2018 setting monetary limits for filing appeals
- Exception clause for composite orders involving multiple assessment years and common issues

Appeal against ITAT Judgment:
The High Court was presented with an appeal by the Revenue challenging the judgment of the Income Tax Appellate Tribunal regarding the disallowance of book profit under clause (f) to Explanation 1 u/S. 115JB of the Income Tax Act, 1961. The primary question for consideration was whether the Tribunal was correct in not confirming the disallowance of a specific amount. The tax effect involved was significantly below the threshold limit set by the CBDT in its Circular dated 11.7.2018, which raised concerns about the maintainability of the appeal.

Provisions of Section 268A:
The Court delved into the provisions of Section 268A of the Income Tax Act, 1961, which empower the CBDT to issue orders fixing monetary limits for filing appeals or references by Income Tax Authorities. These provisions aim to regulate the filing of appeals and applications, ensuring consistency and adherence to specified limits. Notably, sub-sections (2) and (3) of Section 268A safeguard the Revenue against arguments of consistency or acquiescence.

CBDT Circular and Monetary Limits:
The CBDT Circular dated 11.7.2018 established a monetary limit of ?50 Lakhs for the tax effect to authorize the Revenue to file appeals before the High Court against ITAT judgments. This Circular binds all Department Authorities, mandating compliance with the prescribed limits and directives. However, exceptions were provided for cases involving composite orders of High Courts or appellate Authorities spanning multiple assessment years and common issues.

Exception Clause for Composite Orders:
The exception clause within the CBDT Circular allowed for appeals to be filed in all assessment years covered by a composite order if the tax effect in any one year exceeded the prescribed limit and the Revenue opted to challenge the issue in those specific years. In the case at hand, the Revenue sought to file appeals in separate cases arising from a single order by the Appellate Commissioner, which were decided individually by the Tribunal. The Court concluded that such a scenario did not fall under the exception clause, leading to the dismissal of the appeal due to the low tax effect involved.

In summary, the High Court dismissed the Revenue's appeal against the ITAT judgment concerning the disallowance of book profit, citing the low tax effect below the prescribed threshold limit set by the CBDT Circular. The Court emphasized the significance of Section 268A provisions in regulating appeals and highlighted the exception clause for composite orders involving multiple assessment years and common issues, which did not apply to the circumstances of the case.