Facts of the Case

The Income Tax Officer, Varanasi, preferred an appeal before the Income Tax Appellate Tribunal against the order passed in favour of the assessees, namely M/s Ambrish Kumar Gupta, Arun Kumar Gupta, and Ambuj Kumar Gupta, Varanasi.

Upon scrutiny of the appeal records, it was found 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 Tribunal.

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 assessees by the lower appellate authority and sought adjudication of the disputed additions on merits.

 Respondent’s Arguments (Assessees)

The assessees submitted that the appeal filed by the Revenue was not maintainable as the tax effect involved was below the prescribed monetary limit fixed by CBDT, and therefore the appeal deserved to 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 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.

Accordingly, the Tribunal dismissed the Revenue’s appeal without adjudicating the issues on merits, solely on account of low tax effect.

Important Clarification

  • Dismissal of the appeal due to low tax effect does not constitute affirmation of the merits of the order passed by the lower authority.
  • The Revenue is at liberty to pursue similar issues in other cases where the tax effect exceeds the prescribed limit.
  • Such dismissal is based on litigation policy to reduce unnecessary tax disputes and judicial burden.

Link to download the order –https://itat.gov.in/public/files/upload/1568712446-TAX%20EFFECT%20(VARANASI).pdf

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