Facts of the Case

The Revenue filed appeals before the Delhi High Court against the respondent/assessee, Adarsh Kumar, challenging issues arising under the Income-tax Act, 1961. During the hearing, counsel appearing for the Revenue submitted that the total tax effect involved in the appeals was below ₹50,00,000/- and therefore, in light of CBDT Circular No. 3/2018 dated 11 July 2018, the appeals were liable to be disposed of without adjudication on the substantial question of law.

Issues Involved

  1. Whether the Revenue’s appeals are maintainable where the tax effect is below the monetary limit prescribed under CBDT Circular No. 3/2018?
  2. Whether the substantial question of law can be kept open while disposing of such appeals on account of low tax effect?

Petitioner’s Arguments (Revenue)

  • The Revenue acknowledged that the tax effect in the present appeals was below ₹50 lakhs.
  • In view of CBDT Circular No. 3/2018, the Revenue submitted that the appeals may be disposed of without adjudication on merits.
  • It was further prayed that the substantial question of law should remain open for consideration in future cases involving higher tax effect.

Respondent’s Arguments (Assessee)

  • The respondent/assessee did not advance substantive arguments as the Revenue itself sought disposal of the appeals on account of low tax effect.

 

Court Findings / Order

The Delhi High Court recorded the statement made by the Revenue and held that since the tax effect involved in the appeals was below ₹50,00,000/-, the appeals were liable to be disposed of in terms of CBDT Circular No. 3/2018.

The Court accordingly disposed of the appeals without answering the substantial question of law and expressly kept the question of law open.

 

Important Clarification

  • CBDT monetary limit circulars are binding on the Department for litigation management.
  • Disposal of appeal on low tax effect does not amount to affirmation of the lower authority’s reasoning on merits.
  • The substantial question of law remains open and may be examined in an appropriate case with higher tax implications.

Sections Involved

  • Section 260A of the Income-tax Act, 1961 (Appeal to High Court)
  • CBDT Circular No. 3/2018 dated 11 July 2018 (Monetary Limits for Filing Appeals) 

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:8321-DB/SKN17082018ITA7562018_154540.pdf

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