Facts of the Case

The Revenue (Principal Commissioner of Income Tax) filed appeals before the Delhi High Court under Section 260A of the Income Tax Act, 1961 against the respondent, M/s Cliff Scaffoldings Pvt. Ltd.

During the hearing, counsel for the Revenue submitted that the tax effect involved in the appeals was below ₹50 lakhs, which falls below the monetary threshold prescribed under CBDT Circular No. 3/2018 dated 11 July 2018.

In view of this, the Revenue sought disposal of the appeal without adjudication on merits.

Issues Involved

  1. Whether the appeal filed by the Revenue is maintainable when the tax effect is below the prescribed monetary limit under CBDT Circular No. 3/2018.
  2. Whether the High Court should adjudicate the substantial question of law despite the low tax effect.
  3. Whether dismissal of appeal on account of low tax effect would leave the legal issue open for future consideration.

Petitioner’s Arguments (Revenue)

  • The Revenue acknowledged that the tax effect is below ₹50 lakhs, as per the CBDT Circular.
  • It was submitted that as per the circular, the appeal need not be pressed on merits.
  • The Revenue requested that:
    • The appeal be disposed of accordingly, and
    • The question of law be kept open for adjudication in appropriate cases.

 

Respondent’s Arguments

  • The order does not record specific submissions made by the respondent.
  • However, the respondent would benefit from dismissal of the appeal due to the low tax effect threshold.

 

Court Order / Findings

  • The Delhi High Court accepted the submission of the Revenue regarding low tax effect.
  • The Court held that:
    • In terms of CBDT Circular No. 3/2018, the appeal is liable to be disposed of without examining the merits.
    • The questions/issues raised are left open.
  • The Court further granted:
    • Liberty to the Revenue to seek revival of the appeal if it is later found that the case falls within any exception to the circular.

Thus, the appeal was disposed of without adjudication on merits.

Important Clarification

  • The dismissal of the appeal is not on merits, but purely on account of low tax effect.
  • The legal issue remains open, meaning:
    • It can be raised and decided in future cases where the tax effect exceeds the prescribed limit.
  • The Revenue retains the right to revive the appeal if exceptions under the CBDT circular apply.

 

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:8316-DB/SKN16112018ITA5742018_152544.pdf


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