Tax effect under CBDT circulars excludes prior-year finalised losses unless directly in dispute, keeping low-value appeals out.

For CBDT monetary-limit circulars, tax effect is to be computed only on the disputed additions or reductions relevant to the year under appeal. Where the returned loss is wiped out and assessed income becomes positive, the tax effect is calculated on that year's assessed figures. Brought forward losses from earlier assessment years, if those assessments have attained finality, are not added to the tax effect unless they are themselves directly in dispute. Applying this approach, the appeal fell below the prescribed monetary limit and was not entertainable on the ground of low tax effect.

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Issues: Whether the appeal was barred by low tax effect under the CBDT circulars, and whether losses of earlier assessment years could be added to the tax effect computation.

Analysis: The monetary threshold prescribed by Circular No. 5 of 2024, as modified by Circular No. 9 of 2024, was Rs. 2 crores. The assessment order showed that the returned loss had been wiped out and income had been assessed at a positive figure, so the tax effect was to be computed on the reduced loss and the assessed income for the year under appeal. The further contention that disallowance of brought forward losses from earlier years should also be included was rejected, because the circular's mechanism for tax effect does not require addition of losses assessed in prior years whose assessments have attained finality.

Conclusion: The appeal was held to fall below the prescribed monetary limit and the revenue's objection based on earlier-year losses was rejected.

Final Conclusion: The appeal could not be entertained under the monetary-limit regime and stood dismissed on account of low tax effect.

Ratio Decidendi: For the purpose of CBDT monetary-limit circulars, tax effect is computed only on the disputed additions or reductions relevant to the year under appeal, and brought forward losses from prior finalised assessments are not to be included unless they are themselves directly in dispute.

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