2023 (2) TMI 1124 - HC - Income Tax

Revenue's Appeal Dismissed for Low Tax Effect; Audit Objection Unrelated

The court dismissed the Revenue's appeal as not maintainable due to the tax effect being below the monetary limit set by the CBDT Circular No. 3/2018. The ... Maintainability of appeal before HC on low tax effect - whether the appeal filed by the revenue comes under the exception clause as enumerated in circular no. 3/2018 dated 11.07.2018”? - Disallowance of “Retention Money Deposit & Security Deposit - ITAT Allowed the appeal of the Assessee and the aforesaid disallowance of Expenditure of Rs. 1,07,35,595/- on account of Security Deposit, Retention Money deposit etc. was deleted - HELD THAT:- Having heard learned counsel for the parties and after going through the documents available on record and the different circulars whereby monetary limit for filing appeal under 260A of the Income Tax Act, 1961 has been fixed; it appears that in exercise of powers conferred under section 268A of the Income Tax Act, 1961, the Central Board of Direct Taxes (CBDT), vide its Circular No.3/2018 dated 11.07.2018 read with Circular No. 17/2019 [F. No.279/MISC. 142/2007- ITJ (PT.)], dated 08.08.2019 has fixed a monetary limit of tax effect of Rs.1,00,00,000/- for filing appeal u/s 260A of the Act by the Income tax department before the High Courts. Thus it is crystal clear that on the one hand the tax effect in the instant case is much below the monetary limit as enumerated in Circular No. 3/2018 read with Circular No. 17 of 2019 and on the other hand none of the exception clause much less the audit objection is involved in this case and as such, we are having no hesitation in dismissing this appeal on the question of maintainability itself. Instant appeal is dismissed at the admission stage itself. Issues Involved:1. Maintainability of the appeal based on the monetary limit set by CBDT Circular No. 3/2018.2. Relevance and acceptance of the audit objection by the Revenue Department.3. Disallowance of expenses under the head 'Retention Money Deposit and Security Deposit.'Detailed Analysis:1. Maintainability of the Appeal:The primary issue in this appeal is whether it is maintainable under the monetary limit set by the Central Board of Direct Taxes (CBDT) Circular No. 3/2018 dated 11.07.2018, which fixes a monetary limit of Rs. 1,00,00,000/- for filing appeals under Section 260A of the Income Tax Act, 1961. The appeal was filed by the Revenue against the ITAT's order dated 20.01.2020. The disputed amount in this case is Rs. 1,07,35,595/-, and the tax effect on this amount is Rs. 34,83,281/-, which is below the prescribed limit. Therefore, the appeal is prima facie not maintainable.2. Relevance and Acceptance of the Audit Objection:The respondent-assessee raised a preliminary objection regarding the maintainability of the appeal based on the tax effect, arguing that it does not meet the monetary threshold set by the CBDT Circular. The Revenue Department countered this by claiming that the case falls under the exception clause of the circular, specifically Clause 10(C), which pertains to cases where a revenue audit objection has been accepted by the department. However, the respondent-assessee argued that the audit objection mentioned by the Revenue was related to a different issue (Excess allowance of business loss of Rs. 59,41,801/-) and not the disallowance of 'Retention Money Deposit and Security Deposit.'The court examined the supplementary affidavits and found that the audit objection was not accepted by the CIT, Ranchi, and was instead related to a different issue. The court noted that the audit objection raised by the revenue audit was not accepted by the department, and the CIT had initiated proceedings under Section 263 of the Income Tax Act on other grounds, not because of the audit objection.3. Disallowance of Expenses:The case revolves around the disallowance of expenses under the head 'Retention Money Deposit and Security Deposit' amounting to Rs. 1,07,35,595/-. The CIT(A) had dismissed the appeal on this disallowance, but the ITAT reversed the CIT(A)'s order and allowed the appeal of the assessee, deleting the disallowance. The Revenue Department's appeal against this deletion was found to be not maintainable based on the monetary limit and the lack of relevance of the audit objection.Conclusion:The court, after hearing the learned counsel for the parties and examining the documents, concluded that the appeal filed by the Revenue is not maintainable due to the tax effect being below the monetary limit prescribed by the CBDT Circular No. 3/2018. Additionally, the audit objection cited by the Revenue was not relevant to the issue in dispute. Consequently, the appeal was dismissed at the admission stage itself, with no order as to costs.