2023 (2) TMI 714 - HC - Income Tax

Maintainability of revenue appeal before HC on the ground of tax effect - whether the appeal filed by the revenue comes under the exception clause as enumerated in circular no. 3/2018 dated 11.07.2018? - CIT has initiated the proceeding under Section 263 but never referred to the audit objection - HELD THAT - In the case at hand, the appeal filed by the Revenue in year 2020 against the impugned order dated 20.01.2020, for Assessment Year 2010-11 appears to be not maintainable and liable to be dismissed in limine, as the amount of disputed issue in the aforesaid Tax Appeal is 2,05,96,503/- and the amount of tax in dispute on the said disputed issue is 68,64,814/- only (33.33% including Surcharge and Education cess) which is much below of Rs. 1,00,00,000/-. Therefore, in view of the aforesaid Circulars (Annexure-A A/1 issued by CBDT) and also in view of the settled proposition of law in this regard, the instant appeal filed by the department is otherwise not maintainable and therefore liable to be dismissed in limine. Thus it is crystal clear that on the one hand the tax effect in the instant case is much below the monetary limit as enumerated in Circular No. 3/2018 read with Circular No. 17 of 2019 and on the other hand none of the exception clause much less the audit objection is involved in this case and as such, we are having no hesitation in dismissing this appeal on the question of maintainability itself. Consequently, the instant appeal is dismissed at the admission stage itself.

Summary

Issues:
1. Appeal against ITAT order allowing respondent's appeal on merit.
2. Maintainability of appeal based on tax effect and circular no. 3/2018 dated 11.07.2018.

Analysis:
1. The appeal was filed against the ITAT order allowing the respondent's appeal and deleting the disallowance of expenditure amounting to Rs. 2,05,96,503/- on account of Security Deposit, Retention Money deposit, etc. The CIT(A) had initially dismissed the appeal filed by the assessee, leading to the appeal before the ITAT, which reversed the CIT(A)'s decision on 20.01.2020.

2. The main issue in this case was the maintainability of the appeal filed by the Revenue based on the tax effect and the circular no. 3/2018 dated 11.07.2018. The circular set a monetary limit of Rs.1,00,00,000/- for filing appeals under section 260A of the Income Tax Act, 1961. The disputed amount in the tax appeal was Rs. 2,05,96,503/-, with a tax in dispute of Rs. 68,64,814/-, which was below the prescribed limit.

3. The respondent raised a preliminary objection regarding the maintainability of the appeal due to the tax effect falling below the limit set by the circular. The Revenue argued that the audit objection was accepted by the CIT, making the appeal an exception to the monetary limit clause in the circular.

4. The court examined the documents and circulars related to the monetary limit for filing appeals under section 260A. It was found that the tax effect in the case was below the prescribed limit, rendering the appeal not maintainable as per the circular.

5. The court further analyzed the audit objection raised by the revenue and its acceptance. It was observed that the audit objection was not accepted by the department, as clarified in the communication between the assessing officer and the CIT. The absence of any mention of audit objection in the orders or communications indicated that it was not a basis for the appeal.

6. The court also reviewed the order passed by the CIT under Section 263 and found no reference to the audit objection being accepted. The order highlighted the erroneous assessment by the AO, focusing on the nature of expenditures rather than audit objections. This lack of mention of audit objections further supported the dismissal of the appeal based on maintainability.

7. In conclusion, the court dismissed the appeal at the admission stage itself, emphasizing that the tax effect was below the prescribed limit and no exception clause, including the audit objection, applied in this case. The appeal was deemed not maintainable based on the monetary limit set by the circular.