2024 (11) TMI 560 - AT - Income Tax

Maintainability of revenue appeal on low tax effect before Tribunal - HELD THAT - As in the instant case the tax effect by virtue of relief given by the first appellate authority is less than Rs. 60,00,000/-. As per CBDT Instruction bearing No. 9 of 2024 issued on 17th September, 2024, CBDT has directed its subordinate authorities not to challenge the order of CIT(Appeals) before Tribunal if tax effect by virtue of relief given by the ld. CIT(Appeals) is less than Rs. 60,00,000/- and such order could only be challenged if it comes within exceptions provided in the Instruction and if these cases do not fall in any of the exceptions then such appeals are not maintainable. On due consideration of the above facts and circumstances, we dismiss this appeal of the Revenue for want of tax effect. However, in case on re-verification of the facts at the end of the AO, it comes out that tax effect is more or this case falls in any of the exceptions provided in the CBDT Instruction (supra). Then Revenue will be at liberty to file Miscellaneous Application for revival of these appeals.

Issues Involved:
1. Applicability of CBDT Circulars on monetary limits for filing appeals.
2. Determination of tax effect and exceptions to monetary limits.
3. Dismissal of Revenue's appeal due to low tax effect.

Issue-wise Detailed Analysis:

1. Applicability of CBDT Circulars on Monetary Limits for Filing Appeals:

The judgment primarily revolves around the applicability of the Central Board of Direct Taxes (CBDT) Circulars, specifically Circular No. 5/2024 dated 15th March 2024, and Circular No. 9/2024 dated 17th September 2024. These circulars set monetary limits for filing appeals by the Department before various judicial forums, including the Income Tax Appellate Tribunal (ITAT), High Courts, and the Supreme Court. The purpose of these circulars is to reduce litigation by setting thresholds below which appeals should not be filed. The monetary limits were initially set at Rs. 50,00,000 for ITAT, Rs. 1,00,00,000 for High Court, and Rs. 2,00,00,000 for the Supreme Court, and were later revised to Rs. 60,00,000, Rs. 2 crore, and Rs. 5 crore respectively. The Tribunal noted that the appeal in question did not meet these thresholds and thus should not have been filed.

2. Determination of Tax Effect and Exceptions to Monetary Limits:

The determination of the 'tax effect' is crucial in deciding whether an appeal should be filed. The 'tax effect' is defined as the difference between the tax on the total income assessed and the tax that would have been chargeable had the total income been reduced by the disputed issues. The circulars also outline exceptions where appeals can be filed irrespective of the monetary limits. These include cases involving constitutional validity, illegal or ultra vires orders, information from law enforcement agencies, pending prosecutions, adverse comments against the Department, unquantifiable tax effects, undisclosed foreign income/assets, organized tax evasion, court-mandated cases, and specific tax matters like TDS/TCS disputes. In this case, the Tribunal found that the tax effect was below the revised monetary limit of Rs. 60,00,000 and did not fall under any of the exceptions, rendering the appeal non-maintainable.

3. Dismissal of Revenue's Appeal Due to Low Tax Effect:

The Tribunal, after reviewing the records and considering the submissions from both parties, concluded that the appeal by the Revenue should be dismissed due to the low tax effect. The Counsel for the assessee argued that the appeal was not maintainable as it did not meet the monetary threshold set by the CBDT Circulars, and the Department's representative could not counter this claim. The Tribunal emphasized that the objective of the CBDT Circulars is to reduce unnecessary litigation and provide certainty to taxpayers. It was noted that if upon re-verification, it is found that the tax effect exceeds the limit or falls under any exceptions, the Revenue could file a Miscellaneous Application for revival of the appeal within the statutory time limit. However, based on the current facts, the appeal was dismissed.

In conclusion, the Tribunal dismissed the Revenue's appeal due to the tax effect being below the prescribed monetary limit, aligning with the CBDT's directives aimed at minimizing litigation. The decision underscores the importance of adhering to the guidelines set forth in the CBDT Circulars, ensuring that appeals are filed judiciously and only when necessary.

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