2019 (8) TMI 1402 - AT - Income Tax

Low tax effect - maintainability of appeal - HELD THAT - This is purport of litigation policy wherein appeals filed by Revenue below threshold limits of tax effects are withdrawn by Revenue before Hon ble Courts/tribunal. Thus keeping in view CBDT circular no. 3/2018 dated 11-07-2018 and as modified vide communication dated 20.08.2018, we are inclined to dismiss these three appeal filed by Revenue due to low tax effect involved in this appeal which is below ₹ 20 lacs being covered by circular dated 11.07.2018 as further modified on 20.08.2018. While disposing of these three appeals filed by Revenue due to low tax effect vide CBDT Circular no. 3/2018 dated 11.07.2018 and as further modified by communication dated 20.08.2018, we clarify that we have not commented on the merits of the issue s in these three appeals. We are granting liberty to Revenue that if at any stage Revenue wants to agitate the matter/issue in these three appeals in accordance with the clauses as are contained in the afore-stated circular number 3/2018 dated 11.07.2018 and modification dated 20.08.2018 based on cogent reasons/evidences that these appeals are covered under exceptions carved out in aforesaid CBDT circular , the Revenue is hereby granted liberty to file miscellaneous application(s) praying for recall of these orders in accordance with law

Summary

Issues Involved:
1. Applicability of CBDT Circular No. 3/2018 regarding low tax effect.
2. Definition and scope of "external sources" under para 10(e) of the CBDT Circular.
3. Whether Directorate of Income-tax (Investigation) qualifies as an "external source."

Detailed Analysis:

1. Applicability of CBDT Circular No. 3/2018 regarding low tax effect:
The Revenue filed three appeals, each with a tax effect less than ?20 lakhs. The assessee's counsel argued that these should be dismissed based on the CBDT Circular No. 3/2018, which stipulates that appeals with a tax effect below ?20 lakhs should not be filed or pursued. The Revenue contended that these appeals fall under exceptions provided in para 10(e) of the Circular, which allows for appeals based on information from "external sources" in the nature of law enforcement agencies.

2. Definition and scope of "external sources" under para 10(e) of the CBDT Circular:
Para 10(e) of the Circular specifies that exceptions to the low tax effect rule include cases where additions are based on information from external sources such as CBI, ED, DRI, SFIO, or Directorate General of GST Intelligence. The Revenue argued that the Directorate of Income-tax (Investigation) should be considered an external source.

3. Whether Directorate of Income-tax (Investigation) qualifies as an "external source":
The Tribunal examined whether the Directorate of Income-tax (Investigation) qualifies as an "external source" under para 10(e). It was concluded that the Directorate of Income-tax (Investigation) is an internal agency under the Ministry of Finance and the CBDT, and not an external source. The Tribunal emphasized that the term "external sources" refers to agencies outside the Income-tax Department, as illustrated by the examples in para 10(e). Therefore, information from the Directorate of Income-tax (Investigation) does not meet the criteria for the exception.

Conclusion:
The Tribunal dismissed the three appeals due to the low tax effect, as per the CBDT Circular No. 3/2018 and its modification dated 20.08.2018. The Tribunal clarified that the Directorate of Income-tax (Investigation) is not considered an "external source" under para 10(e) of the Circular. The Tribunal granted liberty to the Revenue to file for recall if they can provide cogent reasons or evidence that these appeals fall under the exceptions in the Circular.

Order:
All three appeals filed by the Revenue in ITA No. 818-820/Mum/2017 are dismissed due to the low tax effect. The Tribunal pronounced the order in the open court on 08.07.2019.