2021 (4) TMI 315 - HC - Income Tax

Maintainability of appeal on low tax effect - Adhoc provision from the book value of stock to arrive the closing stock is permissible - HELD the appellant submits that the above appeal is not pursued by the Revenue on account of the Low Tax Effect in terms of Circular No.17/2019 dated 08.08.2019 issued by the Central Board of Direct Taxes. By the said Circular, the monetary limit for filing or pursuing an appeal before the High Court has been increased to ₹ 1 crore - HELD THAT - Tax Case Appeal is dismissed as withdrawn on account of the Low Tax Effect. The substantial questions of law framed are left open. In the event the tax effect in this case is above the threshold limit fixed in the said Circular, liberty is granted to the Revenue to make a mention to this Court to restore the appeal to be heard and decided on merits.

Summary

Issues involved:
1. Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the Assessment Year 2009-10.
2. Substantial questions of law raised by the Revenue in the appeal.

Analysis:

Issue 1: Appeal under Section 260A of the Income Tax Act, 1961
The High Court heard the appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961 against the order dated 05.08.2016 of the Income Tax Appellate Tribunal, Chennai. The appeal was directed against the order for the Assessment Year 2009-10. The Revenue raised substantial questions of law regarding various aspects of the assessment.

Issue 2: Substantial Questions of Law
The Revenue raised multiple substantial questions of law in the appeal. These questions pertained to the deduction of adhoc provision from the book value of stock for arriving at the closing stock, the acceptability of the assessee's method of valuation, relief granted by the Tribunal on the ground of failure to reconcile stock discrepancies, treatment of lease commitment charges as revenue expenditure, classification of tenancy rights acquired by the assessee, and deletion of addition towards stock discrepancy. The questions raised by the Revenue challenged the Tribunal's findings on these issues.

The learned Standing Counsel for the appellant informed the Court that the appeal was not pursued by the Revenue due to the Low Tax Effect as per Circular No.17/2019 issued by the Central Board of Direct Taxes. The monetary limit for filing or pursuing an appeal before the High Court had been increased to ?1 crore, and the tax effect in this case was below the threshold limit. Consequently, the Tax Case Appeal was dismissed as withdrawn on account of the Low Tax Effect, with the substantial questions of law left open. The Revenue was granted liberty to mention to the Court if the tax effect exceeded the threshold limit, in which case the appeal would be restored to be heard and decided on merits. No costs were awarded in this regard.