Revenue appeal dismissed for low tax effect; penalty deleted due to limitation period exceeded

The appeal filed by the Revenue in I.T.A. No.471/Lkw/2017 was dismissed due to low tax effect not exceeding ? 50 lakhs, as per CBDT Circular No.17/2019. Additionally, in I.T.A. No.470/Lkw/2017, the penalty imposed under section 271(1)(c) was deleted as it was issued after the statutory limitation period of six months. Consequently, both appeals were dismissed by the Tribunal.

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Issues Involved:
1. Maintainability of the appeal due to low tax effect.
2. Deletion of penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal Due to Low Tax Effect:

At the outset, the counsel for the assessee submitted that the tax effect involved in appeal No.471/Lkw/2017 does not exceed Rs. 50 lakhs. Hence, this appeal filed by the Department is not maintainable in view of CBDT’s Circular No.17/2019, dated 8th August 2019, and is liable to be dismissed as such.

The Tribunal noted that the Central Board of Direct Taxes (CBDT), vide Circular No.17/2019, dated 8th August 2019, has directed that no appeal should be filed before the Tribunal if the tax effect does not exceed Rs. 50 lakhs. The Tribunal referenced the Ahmedabad Bench's recent order, which dismissed 628 appeals due to the tax effect not exceeding Rs. 50 lakhs, emphasizing the Government's policy to reduce income tax litigation.

The Tribunal held that the concession extended by the CBDT circular applies to pending appeals as well as future appeals. Therefore, the appeal in I.T.A. No.471/Lkw/2017 was dismissed for low tax effect.

2. Deletion of Penalty Imposed Under Section 271(1)(c) of the Income Tax Act, 1961:

In I.T.A. No.470/Lkw/2017, the Revenue contested the deletion of a penalty of Rs. 67,75,940/- imposed under section 271(1)(c) of the Act by the learned CIT(A). The Department argued that the CIT(A) erred in law and on facts by deleting the penalty, invoking the provisions of section 271(1)(a) instead of section 275(1A) of the Act.

The counsel for the assessee argued that the penalty order should have been passed within six months from the date of receipt of the Tribunal's order, which was in September 2014. Therefore, the penalty order should have been issued by 31/03/2015, but it was imposed on 27/01/2016, making it barred by limitation.

The Tribunal examined section 275, which deals with the bar of limitation for imposing penalties. It noted that section 275(1)(a) specifies that the penalty order must be passed within six months from the end of the month in which the order of the appellate authority is received. The Tribunal found that the order giving effect to the Tribunal’s decision was dated 24/09/2014, indicating receipt by the Department in September 2014. Therefore, the penalty should have been imposed by 31/03/2015.

The Tribunal concluded that the penalty order issued on 27/01/2016 was barred by limitation as per section 275(1)(a). Consequently, the Tribunal upheld the CIT(A)'s decision to delete the penalty, finding no error in the impugned order.

Conclusion:

Both appeals filed by the Revenue were dismissed. The appeal in I.T.A. No.471/Lkw/2017 was dismissed due to low tax effect, and the appeal in I.T.A. No.470/Lkw/2017 was dismissed as the penalty order was barred by limitation.

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