2007 (4) TMI 302 - HC - Income Tax

Monetary limit u/s 260A - Held that guidelines issued in the circular by the Central Board of Direct Taxes and the law laid down by this court is being followed in the breach by the Department, we are constrained to direct the Commissioner of Income-tax No. VII, Mumbai City, Mumbai, who is personally present in the court pursuant to our notice, to move the Central Board of Direct Taxes with a request to issue appropriate circular in this behalf to all the Chief Commissioners of the Income-tax Department operating in the region directing them to instruct their respective advocates to withdraw pending appeals wherein the tax effect is less than Rs. 4 lakhs, unless the question of law involved or raised in the appeal or referred to this court is of a recurring nature, required to be settled by this court - The notice of motion does not survive

Summary

Issues:
Non-compliance with circulars of the Central Board of Direct Taxes regarding filing appeals under section 260A of the Income-tax Act when tax effect is less than Rs. 4 lakhs.

Analysis:
The High Court of Bombay, exercising appellate jurisdiction under section 260A of the Income-tax Act, noted the Income-tax Department's failure to adhere to circulars issued by the Central Board of Direct Taxes. These circulars, including one from October 24, 2005, clearly state that appeals should not be filed when the tax effect is below Rs. 4 lakhs. The court referenced previous judgments emphasizing the binding nature of such circulars on the Income-tax Department, with specific thresholds of Rs. 2 lakhs and later revised to Rs. 4 lakhs. Consequently, the court directed the Income-tax Department to withdraw appeals falling below the prescribed limit to enable the refund of court fees. Moreover, the Commissioner of Income-tax No. VII, Mumbai City, was instructed to approach the Central Board of Direct Taxes to issue a circular to Chief Commissioners for the withdrawal of pending appeals not meeting the tax effect threshold, unless the legal issue is significant and requires court resolution.

The court acknowledged the Income-tax Commissioner's apology and motion to withdraw the appeal in the present case, leading to the discharge of the show-cause notice. However, the matter was scheduled for a follow-up after four weeks to ensure compliance with the court's directives and the circulars issued by the Central Board of Direct Taxes. With the appeal withdrawn, the notice of motion was deemed irrelevant, and the Revenue was entitled to a refund of the court fee as per regulations. No costs were awarded in the judgment, and the case was adjourned for review after four weeks to monitor the implementation of the court's orders and circulars.