Tax Department's Appeal Dismissed Due to Violation of Monetary Limits & Circular

The department's appeal against the order of ld. CIT(A)-10, New Delhi, with a tax effect less than Rs. 20,00,000 was dismissed by the Tribunal. The appeal was found to be in violation of Circular No. 3/2018 issued by the CBDT and Section 268A of the Income Tax Act, 1961, which set monetary limits for filing appeals. The Tribunal emphasized that appeals should not be filed solely based on exceeding monetary limits and should be decided on the case's merits. The Tribunal's decision was pronounced on 27/08/2018.

---

---

Issues:
Appeal filed by the department against the order of ld. CIT(A)-10, New Delhi with a tax effect less than Rs. 20,00,000.

Analysis:
The appeal was filed by the department against the order of ld. CIT(A)-10, New Delhi. The counsel for the assessee pointed out that the tax effect in this appeal is less than Rs. 20,00,000, citing Circular No. 3/2018 issued by the CBDT and Section 268A of the Income Tax Act, 1961. The ld. Sr. D.R. supported the Assessing Officer's order but acknowledged that the tax effect is indeed less than Rs. 20,00,000. Section 268A, inserted by the Finance Act, 2008, allows the Board to issue instructions fixing monetary limits for not filing appeals before the Appellate Tribunal or Courts, which are binding on income tax authorities.

The CBDT's Circular No. 3 of 2018 revised the monetary limit to Rs. 20,00,000 for not filing appeals before the Tribunal. The circular specifies that appeals should not be filed based solely on exceeding the monetary limits and should be decided on the merits of the case. The tax effect is defined as the difference in tax on the total income assessed and the tax if the total income were reduced by the amount in dispute. The Assessing Officer must calculate the tax effect for each assessment year separately, and appeals can only be filed for years where the tax effect exceeds the monetary limit.

The Circular also addresses cases involving composite orders, penalties, and computation of tax effect under specific provisions. It emphasizes that not filing an appeal due to the Circular should be explicitly recorded by the Pr. Commissioner of Income-tax/ Commissioner of Income Tax. Adverse judgments on specific issues should be contested regardless of tax effect. The Circular's provisions do not apply to writ matters and certain direct tax issues, which are governed by relevant statutes and rules.

The Circular applies to pending appeals as well, directing the withdrawal or non-pursuance of appeals where the tax effect is below Rs. 20,00,000. Considering the Circular and Section 268A, the Tribunal concluded that the Revenue should not have filed the instant appeal, leading to the dismissal of the department's appeal. The judgment was pronounced on 27/08/2018.

---