Tribunal dismisses Revenue appeals citing low tax effect and non-qualification under CBDT Circular.

The Tribunal dismissed three appeals filed by the Revenue due to the low tax effect, in accordance with CBDT Circular No. 3/2018 and its modification. It was held that the Directorate of Income-tax (Investigation) does not qualify as an "external source" under the Circular's exceptions. The Revenue was given the opportunity to provide compelling reasons or evidence for a recall if the appeals meet the exceptions outlined in the Circular.

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Issues Involved:
1. Applicability of CBDT Circular No. 3/2018 regarding low tax effect.
2. Definition and scope of "external sources" under para 10(e) of the CBDT Circular.
3. Whether Directorate of Income-tax (Investigation) qualifies as an "external source."

Detailed Analysis:

1. Applicability of CBDT Circular No. 3/2018 regarding low tax effect:
The Revenue filed three appeals, each with a tax effect less than Rs. 20 lakhs. The assessee's counsel argued that these should be dismissed based on the CBDT Circular No. 3/2018, which stipulates that appeals with a tax effect below Rs. 20 lakhs should not be filed or pursued. The Revenue contended that these appeals fall under exceptions provided in para 10(e) of the Circular, which allows for appeals based on information from "external sources" in the nature of law enforcement agencies.

2. Definition and scope of "external sources" under para 10(e) of the CBDT Circular:
Para 10(e) of the Circular specifies that exceptions to the low tax effect rule include cases where additions are based on information from external sources such as CBI, ED, DRI, SFIO, or Directorate General of GST Intelligence. The Revenue argued that the Directorate of Income-tax (Investigation) should be considered an external source.

3. Whether Directorate of Income-tax (Investigation) qualifies as an "external source":
The Tribunal examined whether the Directorate of Income-tax (Investigation) qualifies as an "external source" under para 10(e). It was concluded that the Directorate of Income-tax (Investigation) is an internal agency under the Ministry of Finance and the CBDT, and not an external source. The Tribunal emphasized that the term "external sources" refers to agencies outside the Income-tax Department, as illustrated by the examples in para 10(e). Therefore, information from the Directorate of Income-tax (Investigation) does not meet the criteria for the exception.

Conclusion:
The Tribunal dismissed the three appeals due to the low tax effect, as per the CBDT Circular No. 3/2018 and its modification dated 20.08.2018. The Tribunal clarified that the Directorate of Income-tax (Investigation) is not considered an "external source" under para 10(e) of the Circular. The Tribunal granted liberty to the Revenue to file for recall if they can provide cogent reasons or evidence that these appeals fall under the exceptions in the Circular.

Order:
All three appeals filed by the Revenue in ITA No. 818-820/Mum/2017 are dismissed due to the low tax effect. The Tribunal pronounced the order in the open court on 08.07.2019.

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