2022 (12) TMI 1018 - HC - Income Tax

Maintainability of appeal on low tax effect - Whether case falls within purview of circular of Central Board of Direct Taxes No. 3 of 2018 dated 11.7.2018? - HELD THAT - In view of the actual extent of the tax effect, it was submitted, the case did not fall within the purview of circular of Central Board of Direct Taxes No. 3 of 2018 dated 11.7.2018 - further submitted that unless the appeal is permitted to be revived and appellant review applicant is permitted to submit on the proposed substantial questions of law, serious injustice would cause to the appellant. The aspect that the appeal was disposed by the court on the ground of low tax effect, whereas factually there was no low tax effect and the disposal of the appeal did not fall within the ambit of circular of the Central Board of Direct Taxes in that regard, can be said to be constituting an error apparent on the face of record justifying the review of the order. In the above view, order 2018 (7) TMI 2291 - GUJARAT HIGH COURT is revived and recalled.

Summary

Issues:
Review of order dismissing Tax Appeal due to low tax effect.

Analysis:
The High Court of Gujarat considered a Misc. Civil Application seeking a review of an order dated 17.07.2018, which resulted in the dismissal of Tax Appeal No. 879 of 2018 due to the low tax effect involved. The original order was passed based on a circular issued by the Central Board of Direct Taxes, Circular no.3/2018, where the revenue did not press the appeal due to the tax effect being less than Rs. 50 lakhs. The Court noted that the original order was passed without issuing a notice to the respondent, allowing the review application to be considered even in the absence of the respondent. The review applicant argued that the actual tax effect was Rs. 1,12,15,583/-, not Rs. 42,21,312/- as mistakenly shown. It was contended that the case did not fall within the purview of the circular due to the substantial tax effect, and failure to revive the appeal would cause serious injustice to the appellant.

The Court found that the disposal of the appeal based on low tax effect when the actual tax effect was significantly higher constituted an error apparent on the face of the record. Therefore, the Court concluded that the order dated 17.7.2018 should be revived and recalled. As a result, the Misc. Civil Application was disposed of by restoring Tax Appeal No. 879 of 2018 to its file, to be listed before the appropriate Bench according to the prevailing roster. This judgment highlights the importance of accurately assessing the tax effect in appeals and ensuring that decisions are made in accordance with relevant circulars and legal provisions to prevent injustice to the parties involved.