2013 (11) TMI 1435 - HC - Income Tax

Tax Effect - A notice of demand under section 158BD was issued for total undisclosed income of Rs. 1,86,035 - Held that - The circular dated 27th March, 2000 issued by the Central Board of the Direct Taxes was binding upon the Department and, therefore, the appeal preferred by it against the order of the Commissioner of Income Tax (Appeals) dated 7.2.2003 wherein tax effect was less than rupees two lac ought not to have been filed - Decided against Revenue.

Summary

Issues:
- Appeal against order passed by Income Tax Appellate Tribunal
- Rejection of appeal based on monetary limit prescribed by CBDT
- Rejection of appeal on technical grounds instead of deciding on merits

Analysis:
1. The appeal was filed under Section 260-A of the Income Tax Act against the order passed by the Income Tax Appellate Tribunal. The substantial questions of law raised in the appeal were regarding the rejection of the appeal by the Tribunal based on the monetary limit prescribed by the Central Board of Direct Taxes (CBDT) for filing appeals. The first issue raised was whether the Tribunal was justified in rejecting the appeal of the department on the ground of the monetary limit prescribed by the CBDT, especially considering the timing of the appeal and the applicable instructions. The second issue questioned whether the Tribunal was correct in rejecting the appeal on technical grounds without considering the merits, given its role as the last fact-finding authority under the Act.

2. The facts of the case involved an individual assessee for block assessment years 1989-90 to 1999-2000. The Assessing Officer found undisclosed investments in the return of the assessee, leading to a notice of demand and a penalty notice being issued. The Commissioner of Income Tax (Appeals) later deleted the additions as undisclosed income, prompting the Revenue to appeal before the Tribunal. However, the tax effect in this case was less than two lakh rupees. The Tribunal relied on a circular issued by the CBDT, stating that appeals could only be filed where the tax effect exceeded the prescribed monetary limit. Consequently, the Tribunal dismissed the appeal on the grounds that it did not meet the CBDT's instructions.

3. The arguments presented by the learned counsel for the assessee focused on Section 268A of the Act, which empowered the Board to issue circulars regarding monetary limits for filing appeals. The counsel contended that the circular dated 27th March 2000, setting the limit at two lakh rupees, was binding on all authorities. It was emphasized that since the tax in dispute was below the prescribed limit, the Revenue was not entitled to file an appeal before the Tribunal. The counsel further highlighted that the appeal did not involve significant questions with far-reaching effects or recurring nature, suggesting that a ruling in favor of the assessee on the first question would render the second question unnecessary.

4. Upon careful consideration of the arguments, the Court referred to the circular issued by the CBDT, which clearly outlined the monetary limits for filing appeals in tax matters. The circular specified that appeals before the Appellate Tribunal could be filed when the tax effect exceeded one lakh rupees. Additionally, the circular exempted certain cases from the monetary limit, none of which applied to the present case. Consequently, the Court held that the circular was binding on the Department, and as the tax effect was below the prescribed limit, the appeal filed by the Revenue was not maintainable. Therefore, the Court found no legal infirmity in the Tribunal's order and dismissed the appeal accordingly.