Facts of the Case

The Revenue (ACIT, Varanasi) filed an appeal before the Income Tax Appellate Tribunal against the order passed in favour of the assessee, Shri Lalit Kumar Baranwal, proprietor of M/s Pee Woolen Mills, Bhadohi.

Upon examination, it was observed that the tax effect involved in the disputed issues was below the monetary threshold prescribed by the Central Board of Direct Taxes (CBDT) for filing appeals before the Tribunal.

CBDT, through its circular issued under statutory authority, has directed that appeals should not be pursued where the tax effect does not exceed the prescribed monetary limit.

Issues Involved

Whether the Revenue’s appeal is maintainable before the ITAT when the tax effect is below the monetary limit specified in CBDT circulars issued 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 additions 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 monetary threshold prescribed by CBDT, and therefore the appeal deserved dismissal in limine.

Court Order / Findings (ITAT)

  • CBDT circulars prescribing monetary limits for filing appeals are binding on departmental authorities.
  • The tax effect in the present case was below the specified threshold.
  • As per Section 268A and the relevant CBDT Circular, such appeals should not be pursued.

Important Clarification

  • Dismissal on account of low tax effect does not amount to affirmation of the merits of the lower authority’s order.
  • The Revenue may pursue the issue in other cases where the tax effect exceeds the prescribed limit.
  • Such dismissal is procedural and based on litigation policy.

Link to download the order –

https://itat.gov.in/public/files/upload/1568712387-TAX%20EFFECT%20(VARANASI).pdf

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