Facts of the Case

The Assistant Commissioner of Income Tax, Central Circle, Varanasi, filed an appeal before the Income Tax Appellate Tribunal against the order passed in favour of the assessee, M/s G.N. Exports, Varanasi.

Upon examination of the appeal records, the Tribunal observed that the tax effect arising from the disputed issues was below the monetary limit prescribed by the Central Board of Direct Taxes (CBDT) for filing appeals before the ITAT.

CBDT has issued instructions under statutory authority directing that departmental appeals should not be filed or pursued where the tax effect does not exceed the specified threshold.

Issues Involved

Whether the Revenue’s appeal before the ITAT is maintainable when the tax effect involved is below the monetary limit prescribed by CBDT under Section 268A of the Income-tax Act.

Petitioner’s Arguments (Revenue)

The Revenue challenged the relief granted to the assessee by the lower appellate authority and sought adjudication of the disputed issues on merits.

Respondent’s Arguments (Assessee)

The assessee contended that the appeal filed by the Revenue was not maintainable since the tax effect involved was below the prescribed monetary limit fixed by CBDT, and therefore the appeal should be dismissed at the threshold.

Court Order / Findings (ITAT)

  • CBDT circulars prescribing monetary limits for filing departmental appeals are binding on the Revenue authorities.
  • The tax effect involved in the present appeal was below the threshold specified for filing appeals before the ITAT.
  • In view of Section 268A and the applicable CBDT Circular, the appeal filed by the Revenue was not maintainable.

Important Clarification

  • Dismissal due to low tax effect does not amount to confirmation of the merits of the order passed by the lower authority.
  • The Revenue may contest similar issues in other cases where the tax effect exceeds the prescribed monetary limit.
  • Such dismissal is procedural in nature and reflects the Government’s litigation management policy aimed at reducing unnecessary tax disputes.

Link to download the order –

https://itat.gov.in/public/files/upload/1568713033-TAX%20EFFECT%20(VARANASI).pdf

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