Facts of the Case

The Revenue, through the Deputy Commissioner of Income Tax, Range-I, Gorakhpur, filed an appeal before the Income Tax Appellate Tribunal, Varanasi Bench against the order passed in favour of the assessee, Sri Manish Kumar Baranwal of Gorakhpur. The dispute arose from relief granted at the appellate stage. However, the tax effect involved in 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 challenged the order of the appellate authority and sought adjudication of the disputed issues on merits, contending that the relief granted to the assessee was not justified and required interference by the Tribunal.

 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 contrary to such instructions cannot be entertained.

Accordingly, the Tribunal dismissed the Revenue’s appeal in limine without adjudicating the issues on merits.

Important Clarification

  • Dismissal due to low tax effect does not amount to adjudication on the merits of the case.
  • The Revenue may raise similar issues in future years where the tax effect exceeds the prescribed limit or where exceptions to the CBDT circular apply.
  • The order does not constitute a precedent on the substantive legal issues involved in the dispute.

 Link to download the order – https://itat.gov.in/public/files/upload/1568713810-TAX%20EFFECT%20(VARANASI).pdf

 Disclaimer

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