Facts of the Case

The Revenue, through the Income Tax Officer, Sonebhadra, filed an appeal before the Income Tax Appellate Tribunal, Varanasi Bench challenging the order passed in favour of the assessee, M/s Suman Engineering Works, Sonebhadra. The dispute pertained to relief granted by the appellate authority. However, the tax effect arising from the issues contested by the Department was below the monetary limit prescribed by the Central Board of Direct Taxes (CBDT) for filing appeals before the Tribunal.

 Issues Involved

Whether the Revenue’s appeal before the ITAT is maintainable when the tax effect involved is lower than the monetary threshold prescribed under CBDT circulars issued pursuant to Section 268A of the Income-tax Act, 1961.

 Petitioner’s Arguments (Revenue)

The Revenue contested the relief granted to the assessee by the appellate authority and sought adjudication of the disputed issues on merits. It requested the Tribunal to interfere with the impugned order.

 Respondent’s Arguments (Assessee)

The assessee submitted that the departmental appeal was not maintainable since the tax effect involved was below the monetary limit specified by the CBDT. It was argued that the circular issued under Section 268A is binding on the Department, and therefore the appeal should be dismissed at the threshold without examination on merits.

 Court Order / Findings

The Tribunal observed that the tax effect involved in the appeal did not exceed the monetary limit prescribed by the CBDT for filing appeals before the ITAT. Circulars issued under Section 268A are binding on the income-tax authorities, and appeals filed in violation of such instructions cannot be entertained.

Accordingly, the Tribunal dismissed the Revenue’s appeal in limine without going into the merits of the case.

 Important Clarification

  • Dismissal on account of low tax effect does not constitute adjudication on the merits of the dispute.
  • The Revenue may pursue the issue in other assessment years where the tax effect exceeds the prescribed limit or where exceptions to the CBDT circular apply.
  • Such dismissal does not create a binding precedent on the substantive legal issues involved.

 Link to download the order – https://itat.gov.in/public/files/upload/1568713167-TAX%20EFFECT%20(VARANASI).pdf

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