Facts of the Case

The Revenue filed an appeal before the Income Tax Appellate Tribunal challenging the order of the Commissioner (Appeals) granting relief to the assessee. However, at the time of hearing, it was noted that the disputed tax effect involved in the appeal was below the monetary threshold prescribed by the Central Board of Direct Taxes (CBDT) for filing appeals before the Tribunal.

Issues Involved

  1. Whether the Revenue’s appeal was maintainable in view of the prescribed monetary limits for tax effect.
  2. Whether CBDT circulars governing filing of appeals are binding on the Department.
  3. Whether the appeal could proceed despite low tax effect.

Petitioner’s (Revenue’s) Arguments

  • The Department challenged the relief granted to the assessee by the Commissioner (Appeals).
  • It sought adjudication of the issues on merits notwithstanding the monetary limit consideration.

Respondent’s (Assessee’s) Arguments

  • The assessee contended that the appeal was not maintainable as the tax effect was below the threshold prescribed by CBDT instructions.
  • It was argued that such circulars are binding on the Department and intended to reduce unnecessary litigation.

Court Order / Findings (ITAT)

  • CBDT instructions issued under statutory authority are binding on the Department.
  • Appeals involving tax effect below the prescribed monetary limit are not maintainable before the Tribunal.
  • The case did not fall within any exception permitting filing of appeal despite low tax effect.

Important Clarification

The Tribunal clarified that dismissal on account of low tax effect does not amount to affirmation of the Commissioner (Appeals)’s order on merits. The Department retains liberty to pursue the issue in cases where the tax effect exceeds the prescribed limit or where exceptions apply. 

Link to download the order –

https://itat.gov.in/public/files/upload/1627386987-56%20of%202019%20H.%20K.%20Infraventures%20Pvt.%20Ltd.%20(Revenue%20Appeal)%20Tax%20Effect.pdf

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