2019 (4) TMI 1663 - AT - Income Tax

Monetary limit - maintainability of appeal - tax effect - HELD THAT - The amended circular is not applicable to the facts of the present case rather it is covered by the original circular No.3/18 dated 11.07.2018, vide which the CBDT has revised the monetary limit to ₹ 20,00,000/- for not filing the appeal before the Tribunal. From Clause 12 13 of the above said circular it is clear that these instructions are applicable to the pending appeals also and as per clause 13, there is clear cut instruction to the department to withdraw or not to press the appeals filed before the ITAT wherein tax effect is less than ₹ 20,00,000/-. These instructions are operative retrospectively to the pending appeals. Keeping in view the CBDT Circular No. 3 of 2018 dated 11.07.2018, we are of the view that the Revenue should not have filed the instant appeals before the Tribunal. - Appeals of the department are dismissed

Issues:
- Maintainability of department's appeals based on Circular No.3/2018
- Interpretation of the amended circular and its applicability
- Calculation of tax effect for determining appeal filing
- Instructions on filing appeals based on tax effect limits
- Applicability of circular to pending appeals

Detailed Analysis:
1. The first issue revolves around the maintainability of the department's appeals based on Circular No.3/2018. The assessee contended that the appeals were not maintainable due to the increased monetary limit for filing appeals before the ITAT as per the circular. The circular raised the limit to ?20 lakhs for tax effect. The department argued that the circular did not impose a blanket ban on appeals and listed exceptions where the monetary limit would not apply.

2. The second issue involves the interpretation of the amended circular and its applicability to the case at hand. The amended circular specified exceptions where the monetary limit would not be applicable, including cases related to undisclosed foreign income/assets and certain law enforcement agency information. The tribunal analyzed the submissions and concluded that the amended circular did not apply to the present case, as it fell under the original circular setting the ?20 lakhs limit for appeal filing.

3. The third issue pertains to the calculation of the tax effect for determining whether to file an appeal. The circular defined tax effect as the variance between the tax assessed and the hypothetical tax if income were adjusted for disputed issues. It detailed how to calculate tax effect for different scenarios, such as interest disputes and penalty orders. The circular mandated that the assessing officer calculate tax effect separately for each assessment year and file appeals based on the tax effect exceeding the specified monetary limit.

4. The fourth issue concerns the instructions provided in the circular regarding filing appeals based on tax effect limits. The circular emphasized that appeals should not be filed solely based on exceeding monetary limits but on the merits of the case. It outlined scenarios where adverse judgments should be contested despite the tax effect being below the limits. The circular also addressed the applicability of the limits to writ matters and other direct tax issues, excluding income tax.

5. The final issue addresses the applicability of the circular to pending appeals. The circular explicitly instructed the department to withdraw or not press appeals before the ITAT where the tax effect was less than ?20,00,000, even for pending appeals. The tribunal, considering the circular's retrospective application, dismissed the department's appeals, citing the circular's clear instructions on appeal filing based on tax effect limits.

In conclusion, the tribunal dismissed the department's appeals based on the interpretation and applicability of Circular No.3/2018, which set monetary limits for filing appeals before the ITAT. The detailed analysis covered the calculation of tax effect, instructions on appeal filing, and the circular's retrospective application to pending appeals.

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