Revenue appeals dismissed as not maintainable due to low tax effect under Section 271E penalty proceedings

The ITAT Pune dismissed revenue appeals as not maintainable due to low tax effect. The case involved penalty under section 271E where the assessee contravened section 269T by repaying loans other than through account payee or demand draft. The tribunal applied monetary limits from Circular No. 17/2019 (Rs. 50,00,000) and Circular No. 9/2024 (Rs. 60,00,000) for department appeals. Following Rajasthan HC precedent under similar facts, the tribunal agreed with the assessee's contention that appeals below the prescribed monetary threshold are not maintainable and must be dismissed.

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Issues Involved:

1. Legality of the penalty imposed under Section 271E of the Income Tax Act, 1961.
2. Applicability of CBDT Circulars on the maintainability of the Revenue's appeal due to low tax effect.

Detailed Analysis:

1. Legality of the Penalty under Section 271E:

The primary issue revolves around the penalty of Rs. 48,64,586/- imposed under Section 271E of the Income Tax Act, 1961, for contravening Section 269T by repaying a loan other than through an account payee cheque or demand draft. The assessee contested the penalty, arguing that the penalty proceedings were not initiated during the assessment proceedings and were commenced after a significant delay. The assessee also claimed that the penalty order was barred by limitation, as it was issued after the permissible time frame under Section 275(1)(c). The CIT(A) deleted the penalty, observing that there was no contravention of Section 269T, as no loan was repaid otherwise than by an account payee cheque.

2. Applicability of CBDT Circulars on the Maintainability of the Appeal:

The Revenue's appeal was challenged by the assessee on the grounds of low tax effect, citing the CBDT Circular No. 17/2019, which prescribes a monetary limit of Rs. 50,00,000/- for filing appeals before the Tribunal. The Revenue argued that the penalty was levied based on an audit objection, which falls under the exceptions of the earlier Circular No. 3/2018. However, the assessee contended that the exceptions in Circular No. 3/2018 were superseded by Circular No. 5/2024, which does not include audit objections as an exception, and the enhanced monetary limits in Circular No. 9/2024 apply to pending appeals.

The Tribunal, after considering the arguments and the decisions of the Hon'ble Rajasthan High Court and the Indore Bench of the Tribunal, concluded that the appeal falls below the monetary limit specified in the latest circulars. The Tribunal noted that the exceptions for audit objections were not retained in the latest Circular No. 5/2024, and the monetary limits and exceptions apply to all pending appeals as per Circular No. 9/2024. Consequently, the appeal by the Revenue was dismissed as not maintainable due to the low tax effect.

Conclusion:

The Tribunal dismissed the Revenue's appeal on account of low tax effect, as the penalty amount was below the monetary threshold set by the latest CBDT Circulars. As a result, the cross-objection filed by the assessee was rendered infructuous and was also dismissed. The decision underscores the importance of adhering to the monetary limits and exceptions outlined in the prevailing CBDT Circulars for filing appeals.

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