2010 (8) TMI 282 - HC - Income Tax

Court dismisses appeal for tax liability exceeding limits set by Central Board of Direct Taxes Instruction.

The court held that the appeal was not maintainable based on the tax liability of the respondent-assessee and the monetary limits set by the Central Board ... Appeal to High court – Maintainability – Provision empowering CBDT to prescribe monetary limits for litigation by Revenue – Instruction of CBDT binding on Revenue – Tax effect less than prescribed in instruction – Appeal barred Issues:1. Whether the income-tax authorities should await the verdict of the criminal court in a case of reassessment under section 147 of the Income-tax Act, 1961Rs.2. Whether the appeal under section 260A is maintainable based on the monetary limit prescribed by the Central Board of Direct Taxes Instruction No. 5/2008Rs.Issue 1 - Verdict of Criminal Court in Reassessment:The case involved a reassessment under section 147 of the Income-tax Act, 1961, where the belief that income chargeable to tax had escaped assessment was based on a charge-sheet filed against the assessee in a criminal court. The respondent-assessee was named in the charge-sheet for alleged involvement in defalcation of public money. The assessment was completed, determining the total assessable income and tax liability. The Tribunal remitted the matter to the Assessing Officer for reassessment in light of the criminal court's decision, allowing the appeal. The Revenue contended that tax assessment should not be deferred pending the criminal trial outcome, as tax and criminal proceedings are separate.Issue 2 - Maintainability of Appeal under Section 260A:The respondent-assessee argued that the appeal was not maintainable based on the monetary limit set by the Central Board of Direct Taxes Instruction No. 5/2008. The instruction specified a tax effect threshold for appeals under section 260A. The respondent's counsel contended that the tax liability was below the prescribed limit, making the appeal incompetent. The Revenue argued that the instruction should be construed as procedural and not override the scope of section 260A. The court analyzed the legislative intent behind section 268A and its insertion to regulate appeals and reduce litigation in small cases.Judgment:The court held that the appeal was not maintainable based on the tax liability of the respondent-assessee and the monetary limits set by the Central Board of Direct Taxes Instruction. Section 268A empowered the Board to regulate filing of appeals, and the court found that the instruction was binding on the Revenue. The court emphasized that the instruction was in line with the objective of reducing litigation in small cases. The court concluded that the appeal was incompetent and ordered its dismissal, citing the statutory provisions and legislative intent behind the relevant sections.