2024 (11) TMI 1273 - HC - Income Tax

Maintainability of appeals filed by the Revenue before the ITAT on low tax effect - HELD THAT - On perusal of the circular dated 15.03.2024, which was later on, amended by Circular No. 09/2024, vide order dated 17.09.2024 issued by CBDT supersedes the circular dated 11.07.2018 and 08.08.2019, it is seen that it does not provide exception clause wherein the appeal can be filed notwithstanding that the tax effect entailed is less than the monitory limits under the exception given. The issue involved herein is no longer resintegra and present Income Tax Appeal stands allowed keeping in view non-existence of exception clause as well as monitory limit as per Circulars dated 15.03.2024 read with Circular dated 17/09/2024. Accordingly, order dated 31/05/2022 passed in M.A. Nos. 11 and 12/JAB/2020 (Annexure A/7) is hereby set aside.

Issues:
1. Interpretation of Circular No. 17/2019 regarding maintainability of appeals with tax effect below Rs. 50 lakhs.
2. Validity of the order recalling and restoring appeals by the Income Tax Appellate Tribunal.
3. Scope of rectification under section 254(2) of the Income Tax Act, 1961.
4. Impact of subsequent circulars on earlier circulars issued by CBDT.

Analysis:

1. The appeal was filed by the appellant under Section 260-A of the Income Tax Act, 1961 challenging the order of the Income Tax Tribunal which had recalled its previous order and restored the appeals for passing orders on merits. The key issue was whether the appeals filed by the Revenue were maintainable under the Circular No. 17/2019, dated 08/08/2019, which directed that appeals with a tax effect below Rs. 50 lakhs may not be pressed before the Tribunal. The Tribunal had recalled its order based on the contention that the appeals were covered under an exceptional clause 10(c) of the Circular, allowing acceptance of audit objections.

2. The appellant, a Gynaecologist, and his wife, a Radiologist, had appealed against assessment orders made by the Assessment Officer for two consecutive years. The Income Tax Appellate Tribunal had dismissed the appeals earlier due to the tax effect being below the specified threshold. However, the Tribunal later recalled its order based on the argument that the appeals fell under an exceptional clause of the Circular. The appellant argued that the Tribunal did not have sufficient evidence to support the acceptance of audit objections and that the scope of rectification under section 254(2) was limited to demonstrable mistakes in the order.

3. The respondent, on the other hand, contested the appellant's arguments and stated that subsequent circulars issued by the CBDT had superseded the earlier circulars, including the one under which the appeals were dismissed. The respondent maintained that the audit objection-related cases were no longer covered under the exceptional clause, rendering the appeals not maintainable.

4. The Court analyzed the circulars issued by the CBDT and concluded that the subsequent circulars had indeed superseded the earlier circulars, including the one under consideration. As the subsequent circulars did not provide an exception clause for appeals with tax effects below the specified limit, the Court allowed the Income Tax Appeal and set aside the order passed by the Tribunal recalling and restoring the appeals.

5. In conclusion, the Court found that the appeals filed by the Revenue were not maintainable under the relevant circulars, and therefore set aside the order of the Tribunal. The judgment highlighted the importance of adhering to the provisions and guidelines set forth in the circulars issued by the CBDT in determining the maintainability of appeals based on tax effects.

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