2020 (12) TMI 611 - HC - Income Tax

Penalty levied u/s 158BFA - inflated agricultural income, which was not declared by the assessee while filing return in Form 2D and on deficiency of closing stock that came to light on physical verification during the course of search - Tribunal deleted penalty - Whether Tribunal was right in upholding the direction of the CIT(A) not to treat the disclosed income as NIL as per Section 158BB(1)(ca) read with Clause (a) of Section 158B when the assessee's salary income in this case is above exempted level and no TDS was made on the salary ?- HELD THAT - at the above appeals are not pursued by the Revenue on account of the low tax effect in terms of Circular No.17/2019 dated 08.8.2019 issued by the Central Board of Direct Taxes. The above tax case appeals are dismissed on account of the low tax effect. The substantial questions of law raised are left open. In the event the tax effect in the respective cases is above the threshold limit fixed in the said circular, liberty is granted to the Revenue to make a mention to this Court to restore the appeals to be heard and decided on merits.

Summary

Issues:
1. Appeal filed by Revenue under Section 260A of the Income Tax Act, 1961 against orders of the Income Tax Appellate Tribunal.
2. Substantial questions of law raised by Revenue regarding penalty levied on inflated agricultural income and deficiency of closing stock.
3. Applicability of Circular No.17/2019 on low tax effect for pursuing appeals before the High Court.

Analysis:
1. The judgment by the High Court of Madras involved appeals filed by the Revenue under Section 260A of the Income Tax Act, 1961 against orders of the Income Tax Appellate Tribunal for block assessment periods. The appeals were directed against orders dated 09.2.2007 and 10.1.2007 made in IT(SSA) Nos.234/Mds/2003 and 60/Mds/2005 respectively.

2. The Revenue raised substantial questions of law in the appeals, questioning the deletion of penalty under Section 158BFA on inflated agricultural income and deficiency of closing stock. The first question pertained to whether the Tribunal was right in deleting the penalty on unreported agricultural income and closing stock deficiency discovered during a search. The second question queried the correctness of upholding the direction of the CIT(A) not to treat disclosed income as NIL under specific provisions when the assessee's salary income exceeded the exempted level and no TDS was deducted on the salary.

3. The learned Senior Standing Counsel for the appellant informed the Court that the appeals were not being pursued by the Revenue due to the low tax effect, as per Circular No.17/2019 issued by the Central Board of Direct Taxes. The circular increased the monetary limit for filing or pursuing appeals before the High Court to ?1 Crore. It was submitted that the tax effect in the cases at hand was below the threshold limit. Consequently, the tax case appeals were dismissed based on the low tax effect, with the substantial questions of law left open. However, the Revenue was granted liberty to seek restoration of the appeals for hearing on merits if the tax effect exceeded the threshold limit specified in the circular.

This comprehensive analysis of the judgment highlights the key issues, legal arguments, and decisions made by the High Court of Madras in this tax case.