TaxTMI 
TaxTMI 
2019 (8) TMI 1402
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.... the assessee has placed on record computation of tax effect in these appeals which in these there appeals comes to less than Rs. 20 lacs each of the appeal. The Ld. DR rebutted the contentions of the assessee's counsel and submitted that these three appeals filed by Revenue relates to additions made in the hand of the assessee based on information received from Investigation Wing, Mumbai in pursuance of searches conducted by Revenue u/s 132 on Mr Bhanwarlal Jain group and it is claimed that DGIT(Inv.), Mumbai is an 'external source' who is an 'law enforcement agency' who has forwarded information to learned Assessing Officer( "AO") based on which additions were made to the income of the assessee and hence these appeals are covered by exception in para 10(e) of CBDT circular No. 3/2018 dated 11.07.2018 which was later modified vide F.No.279/Misc 142/2007-ITJ-(Pt) dated 20.08.2018, wherein scope of exceptions were widened by amending circular dated 11.07.2018 and hence these three appeals cannot be disposed of as low tax effect appeals . The learned DR requested that apart from oral arguments as advanced before the Bench, the Revenue may be granted liberty to file written submission....
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....vernment of India Ministry of Finance Department of Revenue Central Board Direct Taxes New Delhi the 11th July, 2018 Subject: Revision of monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court- measures for reducing litigation-Reg. Reference is invited to Board's Circular No. 21 of 2015 dated 10.12.2015 wherein monetary limits and other conditions for filing departmental appeals (in Income-tax matters) before Income Tax Appellate Tribunal, High Courts and SLPs/ appeals before Supreme Court were specified. 2. In supersession of the above Circular, it has been decided by the Board that departmental appeals may be filed on merits before Income Tax Appellate Tribunal and High Courts and SLPs/ appeals before Supreme Court keeping in view the monetary limits and conditions specified below. 3. Henceforth, appeals/ SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder: S. No. Appeals/ SLPs in Income-tax matters Monetary Limit (Rs.) 1. Before Appellate Tribunal 20,00,000 2. Before High Court 50,00,000 3. Before Supreme Court....
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....income is computed under the provisions of section 115JB or section 115JC, for the purposes of determination of 'tax effect', tax on the total income assessed shall be computed as per the following formula- (A - B) + (C - D) where, A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions); B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of the disputed issues under general provisions; C = the total income assessed as per the provisions contained in section 115JB or section 115JC; D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC was reduced by the amount of disputed issues under the said provisions: However, where the amount of disputed issues is considered both under the provisions contained in section 115JB or section 115JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D. 7. In a case wher....
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....ner for easy retrieval. 10. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect: (a) Where the Constitutional validity of the provisions of an Act or Rule is under challenge, or (b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or (c) Where Revenue Audit objection in the case has been accepted by the Department, or (d) Where the addition relates to undisclosed foreign assets/ bank accounts. 11. The monetary limits specified in para 3 above shall not apply to writ matters and Direct tax matters other than Income tax. Filing of appeals in other Direct tax matters shall continue to be governed by relevant provisions of statute and rules. Further, in cases where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12A/12AA of the IT Act, 1961 etc., filing of appeal shall not be governed by the limits specified in para 3 above and decision to file appeals in such cases may be taken on mer....
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....ernment of India as further modified on 20.08.2018, no appeal shall be filed by the Revenue in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3 of the circular . Para 3 of the Circular No. 3/2018 S No. Appeals in Income tax matters Monetary Limit (in Rs) 1 Before Appellate Tribunal 20,00,000/- 2 Before High Court 50,00,000/- 3 Before Supreme Court 10,000,000/- 2.5 In the said circular vide para 13, it is stipulated that this instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in Hon'ble High Courts/Tribunals. Thus, it is stipulated in said circular that pending appeals below the specified tax limits may be withdrawn/not pressed. The learned counsel for assessee also stated before the Bench that even these three appeals are not covered by exceptions as provided in circular dated 11.07.2018 which exceptions were later enlarged vide communication dated 20.08.2018 as the additions were not made based on any information received from 'external sources' in the nature of 'law enforcement agencies' such as CBI/ED/DRI/SFIO/Directorate General of GST Intelligence(DGGI). It....
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....secondly these external sources should be in the nature of 'law enforcement agencies' . These two conditions are necessarily and mandatorily required to be fulfilled to be covered under exception. Since, these exceptions take away the benefit granted by Revenue to the tax-payers by way of withdrawal of pending appeals with low tax effect, the onus is on the Revenue to show that taxpayer's case is covered by these exceptions and the taxpayer is not entitled to seek protection granted by CBDT circular. Further, these exceptions are penal in nature as it seeks to withdraw the benefit granted by Revenue to tax-payers , it is to be strictly construed. Thus, it is for Revenue to demonstrate that additions were made based on information received from external sources being law enforcement agencies. It can be further seen that para 10(e) further listed certain agencies as illustrations which are not exhaustive . Thus, agencies as listed in para 10(e) vide illustrations can be expanded provided these are 'external sources' and secondly they are in the nature of 'law enforcement agencies' . Thus, fulfillment of these two conditions of being 'external source' and being 'law enforcement agency....
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.... as we have seen above that in para 10(e) , none of the agencies listed therein work under the aegis of Income-Tax Department, while Directorate of Income-tax(investigation) works under the aegis of Investigation Division of CBDT who is its controlling authority and hence could not be called as an 'external source'. The policy of non filing of appeal by Revenue in low tax effect matter is part of litigation policy followed by Revenue wherein keeping in view low tax effect in its appeal , the Revenue choose not to persue its appeal further with higher forums keeping in view cost benefit analysis. The Revenue has chosen to free its resources by not persuing un-important and routine low tax effect appeals and instead direct its limited resources to bigger and important matters to generate higher resources more effectively and efficiently. This is purport of litigation policy wherein appeals filed by Revenue below threshold limits of tax effects are withdrawn by Revenue before Hon'ble Courts/tribunal. Thus keeping in view CBDT circular no. 3/2018 dated 11-07-2018 and as modified vide communication dated 20.08.2018, we are inclined to dismiss these three appeal filed by Revenue due to l....