2019 (6) TMI 344 - AT - Income Tax

Monetary limit - low tax effect - 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. 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 appeals before the Tribunal. The appeal of the department is dismissed.

Summary

Issues:
- Maintainability of appeals before ITAT based on Circular No.3/2018
- Applicability of amended circular on filing appeals
- Calculation of tax effect for determining appeal filing
- Instructions for withdrawal or not pressing of appeals based on monetary limits
- Applicability of circular to pending appeals
- Dismissal of department's appeal and assessee's cross objection

Analysis:
1. The main issue in this case pertains to the maintainability of appeals before the ITAT based on Circular No.3/2018 issued by the CBDT. The assessee argued that the appeals filed by the department were not maintainable due to the increase in the monetary limit for tax effect for filing appeals before the ITAT to ?20 lakhs.

2. The department contended that the amended circular provided exceptions to file appeals where tax effect is less than ?20 lakhs, such as in cases involving constitutional validity, illegal orders, undisclosed foreign income/assets, or law enforcement agency information. However, the ITAT held that the amended circular was not applicable to the present case, and the original circular setting the monetary limit at ?20 lakhs was applicable.

3. The judgment emphasized the importance of calculating the tax effect for determining appeal filing. The tax effect was defined as the difference between the tax on total income assessed and the tax that would have been chargeable if the total income was reduced by the amount in dispute. The circular provided detailed guidelines for calculating the tax effect for various scenarios, including penalty orders and returned losses.

4. Instructions were given for withdrawal or not pressing of appeals based on monetary limits. The circular specified that appeals should not be filed solely based on exceeding monetary limits and that decisions should be made on the merits of the case. It also outlined procedures for recording reasons for not filing appeals due to monetary limits and emphasized that non-filing of appeals did not imply acceptance of decisions.

5. The judgment clarified that the circular applied to pending appeals, instructing the department to withdraw or not press appeals filed before the ITAT where the tax effect was less than ?20 lakhs. The circular's instructions were to be followed retrospectively for pending appeals, ensuring compliance with the revised monetary limits.

6. Ultimately, the ITAT dismissed the department's appeal based on the CBDT Circular No.3/2018 and the guidelines provided therein. The cross objection filed by the assessee was also dismissed upon the partner's request for withdrawal. The judgment highlighted the importance of adhering to the circular's directives and ensuring compliance with the revised monetary limits for filing appeals before the ITAT.