Facts of the Case

The Revenue filed appeals before the Income Tax Appellate Tribunal (ITAT), Allahabad Bench, challenging the orders of the Commissioner of Income Tax (Appeals), Allahabad for Assessment Years 2007-08, 2008-09, and 2009-10. The appeals arose from disputes relating to additions made during assessment proceedings.

Upon examination of the records, the Tribunal observed that the tax effect involved in each of the appeals was below ₹20 lakh.

Issues Involved

  1. Whether the departmental appeals were maintainable when the tax effect was below the monetary threshold prescribed by CBDT.
  2. Whether the Revenue could pursue appeals contrary to the binding CBDT circular issued under statutory authority.

 Petitioner’s Arguments (Revenue)

The Revenue challenged the relief granted by the CIT(A) and sought restoration of the assessment orders passed by the Assessing Officer. The Department contended that the issues involved were substantial and warranted adjudication by the Tribunal.

 Respondent’s Arguments (Assessee)

The assessee submitted that the appeals were not maintainable since the tax effect was below the monetary limit prescribed by the CBDT for filing departmental appeals before the Tribunal. Accordingly, the appeals deserved dismissal in limine.

Court Order / Findings

The Tribunal noted that the CBDT had issued binding instructions prescribing monetary limits for filing appeals before the ITAT to reduce litigation. As per the applicable circular, departmental appeals with tax effect below ₹20 lakh were not to be pursued.

The Tribunal clarified that “tax effect” means the difference between the tax on the total income assessed and the tax that would have been chargeable if the disputed additions were excluded. Interest is not to be included unless the chargeability of interest itself is under dispute.

Since the tax effect in all three appeals was below the prescribed limit, the Tribunal held that the appeals were not maintainable.

Accordingly, all the appeals filed by the Revenue were dismissed.

 Important Clarification

The dismissal of appeals on account of low tax effect does not constitute adjudication on merits of the issues involved. Such dismissal is strictly in accordance with CBDT’s litigation-management policy and does not preclude the Department from raising similar issues in other cases where the tax effect exceeds the prescribed threshold.

Link to download the order -https://itat.gov.in/public/files/upload/1545128504-KESARWANI-426%20TO%20428%20(TAX).pdf

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