2008 (7) TMI 543 - HC - Income Tax

Penalty- Whether the Income-tax Appellate Tribunal is right in dismissing the appeal preferred by the Revenue without going into the merits of the case on the ground that the tax effect is less than Rs. 1,00,000 ? Held that- the tax amount of Rs. 5,850 involved in the case was less than the limit of Rs. 1 lakh fixed by the circular, the department failed to make out a case that the appeal could be covered under the four exceptions provided in the circular of the Central Board of Direct Tax.

Summary

Issues:
1. Correctness of the order of the Income-tax Appellate Tribunal dismissing the appeal due to tax effect less than Rs. 1,00,000.

Analysis:
The High Court considered the issue of the correctness of the order of the Income-tax Appellate Tribunal dated May 19, 2006, which dismissed the appeal by the Revenue without going into the merits of the case due to the tax effect being less than Rs. 1,00,000. The relevant assessment year was 2002-03, where the assessee did not file the annual return on time, resulting in a delay of 585 days. The Assessing Officer imposed a penalty invoking section 272A(2)(c) of the Income-tax Act, which was later reduced by 50% to Rs. 5,850 by the Commissioner of Income-tax (Appeals). The Department then appealed before the Income-tax Appellate Tribunal, which dismissed the appeal citing the tax effect being less than the specified amount and not falling within the exceptions provided for filing appeals before the Tribunal.

The High Court referred to a similar issue considered by a Division Bench in a previous case, where it was highlighted that the Central Board of Direct Taxes had revised monetary limits to reduce litigation for filing appeals. The Circular issued by the Board specified exceptions where appeals should be contested irrespective of the revenue effect. These exceptions included cases where Revenue audit objections were accepted, adverse orders on Board's orders or circulars, contemplation of prosecution proceedings against the assessee, and constitutional validity challenges. In the current case, the tax amount involved was Rs. 5,850, and the Revenue failed to demonstrate that the case fell within the exceptions provided in the Circular. Therefore, the High Court upheld the Tribunal's order, stating that the appeal deserved to be dismissed with no costs involved.

In conclusion, the High Court affirmed the Income-tax Appellate Tribunal's decision to dismiss the Revenue's appeal due to the tax effect being less than Rs. 1,00,000 and not falling within the specified exceptions outlined by the Central Board of Direct Taxes. The judgment emphasized the importance of adhering to the monetary limits set to streamline the appeal process and reduce unnecessary litigation, ultimately leading to the dismissal of the appeal by the Revenue in this case.