2020 (9) TMI 246 - HC - Income Tax

Revenue appeals dismissed for not meeting CBDT Circular No. 17/2019 limits. Circulars apply to all appeals, reducing litigation.

The appeals filed by the Revenue were dismissed as they did not meet the monetary limits prescribed by CBDT Circular No. 17 of 2019. The Court emphasized ... Maintainability of appeal - low tax effect - monetary limits prescribed under Act - Revision u/s 263 - HELD THAT:- Referring to Circulars issued by the Central Board of Direct Taxes from time-to-time, the underlying policy of the Department is to reduce the litigation. So far as the matters arising out of the order under Section 263 is concerned, the same pertain to invocation of the revisional powers of the Commissioner of Income-tax for revising the assessment orders, which are erroneous or prejudicial to the interest of the Revenue. Therefore, when any order is passed under Section263 of the Act, the same would also be the order under the Income Tax Act, 1961. The Circular referred to above do not distinguish the order passed under Section263 or any other Section of the Act,1961, but it refers the monetary limits prescribed in the circulars itself and if any appeal is filed, which is not a writ-matter, then the monetary limits prescribed under the circular would apply and the Department is bound by such monetary limits and accordingly, the Department cannot pursue the matter, if the monetary limit prescribed in the circular is adhered-to. If, we take consolidated tax effect in all these appeals, it would not exceed the monetary limits prescribed in the Circular No.17 of 2019, dated 8th August, 2019. Therefore, these appeals are dismissed due to low tax effect. Issues Involved:1. Maintainability of appeals based on monetary limits prescribed by CBDT Circulars.2. Applicability of CBDT Circulars to orders under Section 263 of the Income Tax Act, 1961.Detailed Analysis:1. Maintainability of Appeals Based on Monetary Limits Prescribed by CBDT Circulars:The primary issue raised by the learned Senior Counsel Mr. Tushar Hemani was regarding the maintainability of the appeals filed by the Revenue. He argued that the tax effect in each of the appeals was less than the limit prescribed by the Central Board of Direct Taxes (CBDT) Circular No. 17 of 2019 dated 8th August 2019. This circular, along with Circular No. 3 of 2018 and Circular No. 5 of 2019, sets monetary limits for filing tax appeals to reduce litigation.The Court examined the relevant circulars, noting that Circular No. 3 of 2018 specified monetary limits for filing appeals and was later modified by Circular No. 5 of 2019 and Circular No. 17 of 2019. Circular No. 17 of 2019 further enhanced the monetary limits for filing appeals as follows:- Before Appellate Tribunal: Rs. 50,00,000- Before High Court: Rs. 1,00,00,000- Before Supreme Court: Rs. 2,00,00,000The Court also referred to Paragraph 5 of Circular No. 17 of 2019, which mandates that the Assessing Officer calculate the tax effect separately for each assessment year and file appeals only if the tax effect exceeds the prescribed monetary limit for that year.The Court concluded that the appeals in question did not meet the monetary threshold prescribed by the circulars, and thus, the appeals were dismissed due to low tax effect.2. Applicability of CBDT Circulars to Orders Under Section 263 of the Income Tax Act, 1961:The learned Senior Standing Counsel Ms. Kalpana Raval contended that the circulars in question did not apply to appeals arising from orders under Section 263 of the Income Tax Act, 1961. Section 263 pertains to the revisional powers of the Commissioner of Income-tax for revising erroneous or prejudicial assessment orders.The Court analyzed the circulars and found no distinction between orders passed under Section 263 and other sections of the Income Tax Act, 1961. The circulars uniformly prescribe monetary limits for filing appeals and do not exclude Section 263 orders from their purview.The Court emphasized that the underlying policy of the CBDT circulars is to reduce litigation. Consequently, the monetary limits specified in the circulars apply to all appeals, including those arising from Section 263 orders, unless they are writ matters.The Court also referred to a precedent set by the Division Bench in the case of Commissioner of Income Tax Vs. Pravinchandra S. Shah, which held that appeals involving low tax effect should be dismissed in line with the monetary limits prescribed by the CBDT circulars.Conclusion:In light of the above analysis, the Court concluded that the appeals filed by the Revenue did not meet the monetary limits prescribed by the CBDT Circular No. 17 of 2019. Therefore, the appeals were dismissed due to low tax effect, reaffirming the applicability of the circulars to orders under Section 263 of the Income Tax Act, 1961.