Facts of the Case

The Revenue (Principal Commissioner of Income Tax-7) filed an appeal before the Delhi High Court against PSB Industrial (India) Pvt. Ltd. under the Income Tax Act. During the hearing, it was admitted by the Revenue’s counsel that the tax effect involved in the appeal was below ₹50 lakhs.

Further, the Revenue’s counsel stated that he had no instructions regarding initiation of prosecution proceedings, while the respondent confirmed that no prosecution proceedings were pending.

Issues Involved

  1. Whether the appeal filed by the Revenue is maintainable when the tax effect is below ₹50 lakhs.
  2. Applicability of CBDT Circular No. 3/2018 dated 11 July 2018 governing monetary limits for filing appeals.
  3. Whether the case falls under any exception to the CBDT circular, allowing continuation of appeal.

Petitioner’s (Revenue’s) Arguments

  • The Revenue acknowledged that the tax effect was below the prescribed threshold.
  • However, it sought consideration due to lack of clarity regarding possible prosecution proceedings.
  • Implicitly relied on the possibility of exceptions under CBDT circular.

Respondent’s Arguments

  • The respondent clearly stated that no prosecution proceedings were pending.
  • Therefore, no exception to the CBDT circular was applicable.
  • The appeal should not be entertained due to low tax effect.

Court’s Order / Findings

  • The Hon’ble Delhi High Court noted that:
    • The tax effect is below ₹50 lakhs, falling within the monetary limit prescribed under CBDT Circular No. 3/2018.
    • No prosecution proceedings were pending.
  • Accordingly, the Court held:
    • The appeal is not maintainable in view of the CBDT circular.
    • The appeal was disposed of as not pressed.

However, the Court granted liberty to the Revenue:

  • To seek revival of the appeal if the case falls under any exception as per the CBDT circular.

Important Clarification

  • Even if an appeal is dismissed due to low tax effect, the Revenue retains the right to:
    • Revive the appeal if it later establishes that the case falls within exceptions specified in CBDT Circular No. 3/2018.
  • The judgment reinforces that:
    • Monetary limit circulars are binding on the Revenue authorities.
    • Appeals should not be pursued mechanically when tax effect is below threshold.

Sections Involved

  • Section 260A of the Income Tax Act, 1961 (Appeal to High Court)
  • CBDT Circular No. 3/2018 dated 11.07.2018 (Monetary limits for filing appeals)

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2019:DHC:7394-DB/SKN09012019ITA4192018_153519.pdf

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