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of <h1>High Court rules reference under Income Tax Act not competent for tax liability under Rs.2 lakh.</h1> <h3>CIT Versus Kewalchand Pratapchand </h3> CIT Versus Kewalchand Pratapchand - TMI Issues:- Competency of the reference under section 256(2) of the Income Tax Act 1961 due to the tax liability being less than Rs.2 lakhAnalysis:The High Court of Madhya Pradesh addressed a reference from the Income Tax Appellate Tribunal regarding the justification of confirming the deletion of Rs.1,38,000 based on a previous Tribunal order. The respondent's counsel raised a preliminary objection, citing a judgment regarding tax liability below Rs.2 lakh. The court noted the factual agreement on the tax liability's amount and the insistence on answering the reference question by the revenue's counsel. The court referred to a previous case and a circular by the Central Board of Direct Taxes (CBDT) regarding monetary limits for filing appeals based on tax effect.The CBDT's circular dated 15.5.2008 specifies monetary limits for filing appeals before different appellate bodies based on tax effect. The circular defines 'tax effect' and outlines the calculation process for different scenarios, emphasizing the need to file appeals only when the tax effect exceeds the specified monetary limits. It also provides guidelines for recording decisions not to file appeals due to the tax effect being below the limits and clarifies that such decisions do not imply acceptance of the disputed issues.The court highlighted the relevance of the CBDT circular from 27.3.2000, which set a financial limit of Rs.2 lakh for tax liability, even for old pending references. Considering the settled legal position and the guidance provided by the CBDT circulars, the court concluded that the reference need not be answered in light of the circular and previous judgments. Consequently, the court disposed of the reference, aligning with the principles outlined in the CBDT circulars and relevant legal precedents.In conclusion, the judgment emphasizes adherence to the monetary limits set by the CBDT for filing appeals based on tax effect, ensuring efficient handling of cases and reducing unnecessary litigation. The court's decision reflects the importance of following established guidelines and legal principles to streamline the appellate process and address matters effectively within the specified financial thresholds.
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