2018 (7) TMI 2247 - HC - Income Tax

Maintainability of appeal - low tax effect - HELD THAT - As tax effect in the present case as stated by the Appellants-Revenue is less than the prescribed limit of Rs. 50.00 lakhs for filing an appeal before High Court. Appellants-Revenue does not press this appeal and seeks leave of the Court to withdraw the present appeal in terms of paragraph-13 of the said Circular. Accordingly in view of the aforesaid Circular issued by the Central Board of Direct Taxes the present appeal is disposed of as withdrawn without answering the purported substantial questions of law.

Summary

Issues:
Revision of monetary limits for filing appeals before the Income Tax Appellate Tribunal, High Courts, and Supreme Court based on Circular No. 3/2018 dated 11th July, 2018.

Analysis:
The judgment pertains to the revision of monetary limits for filing appeals before the Income Tax Appellate Tribunal, High Courts, and Supreme Court as per Circular No. 3/2018 issued by the Central Board of Direct Taxes. The Circular revises the monetary limits for filing appeals, with the limit for High Courts being increased from Rs. 20,00,000 to Rs. 50,00,000 w.e.f. 11th July, 2018. The Circular specifies that appeals should not be filed solely based on exceeding the monetary limits but should be decided on the merits of the case. The concept of 'tax effect' is defined as the difference between the tax on the total income assessed and the tax chargeable if the total income were reduced by the disputed issues. The tax effect includes applicable surcharge and cess but excludes interest unless the chargeability of interest is in dispute.

The Circular mandates that the Assessing Officer calculates the tax effect for each assessment year separately concerning disputed issues. It allows appeals to be filed only for assessment years where the tax effect exceeds the specified monetary limit. In cases of composite orders involving multiple assessment years and common issues, appeals should be filed for all relevant years where the tax effect exceeds the limit. The Circular also provides a formula for computing tax on total income assessed under specific provisions.

Moreover, the judgment emphasizes that not filing an appeal due to the Circular should be explicitly recorded by the Pr. Commissioner of Income-tax/ Commissioner of Income Tax. It highlights that the Department's decision not to appeal based on the monetary limit should not be construed as acceptance of the decision on disputed issues. The Circular also addresses instances where the Department representatives must clarify the reason for not filing an appeal due to the tax effect being below the specified limit.

Additionally, the judgment specifies certain adverse judgments that should be contested on merits irrespective of the tax effect being below the monetary limits. It clarifies that the monetary limits do not apply to writ matters and Direct tax matters other than Income tax. The judgment further provides guidelines on filing appeals in cases where the tax effect is not quantifiable or not involved, such as registration of trusts under the IT Act, 1961.

Furthermore, the Circular applies retrospectively to pending appeals below the specified tax limits, allowing for withdrawal or not pressing such appeals. It directs that the Circular should be brought to the attention of all concerned parties to ensure compliance with the revised monetary limits for filing appeals before the relevant authorities.