Bombay High Court Disposes Of Income Tax Appeal Due To Low Tax Effect In View Of CBDT Circular No. 5 Of 2024
Introduction
The Bombay High Court has disposed of an income tax appeal, holding that despite being properly instituted, the appeal is liable to be withdrawn due to the low tax effect involved, in light of the Circular No. 5 of 2024. This decision depicts the importance of considering the monetary limits and exceptions prescribed by the CBDT Circulars while filing appeals.
Factual Background
The appeal was filed by the Revenue against the order of the lower authority. The tax effect involved in the appeal was only Rs. 12,11,053/-. The Revenue had accepted the revenue audit objection, which led to the filing of the appeal.
Procedural Background
The appeal was instituted on 26.09.2018, under the Circular No. 3 of 2018 read with Communication dated 20.08.2018, which prescribed monetary limits for filing appeals. At the time of institution, the appeal fell within an exception to the monetary limit, as the revenue audit objection had been accepted by the Department. However, the Circular No. 3 of 2018 was subsequently superseded by the Circular No. 5 of 2024 dated 15.03.2024, which raised the tax effect ceiling to Rs. 2 crores and did not contain the exception relied upon by the Revenue.
Issues
- Withdrawal of Appeal: Whether the appeal, which was properly instituted, is liable to be withdrawn due to the low tax effect involved, in light of the Circular No. 5 of 2024.
Contentions of Parties
Appellant’s Contentions: The Revenue submitted that the appeal was properly instituted under the 2018 Circular, which had an exception for cases where revenue audit objections had been accepted. The Revenue relied on the Communication dated 20.08.2018, which provided that appeals where the Department had accepted revenue audit objections would not be withdrawn based on the tax effect involved.
Respondent’s Contentions: The Assessee pointed out that the 2018 Circular had been superseded by the Circular No. 5 of 2024, which raised the tax effect ceiling to Rs. 2 crores and did not contain the exception relied upon by the Revenue. The Assessee submitted that the appeal should be disposed of in light of the new Circular, given the low tax effect involved.
Reasoning & Analysis
The Court observed that the exception in the 2018 Circular was not reflected in the Circular No. 5 of 2024. Given the tax effect involved in the appeal was only Rs. 12,11,053/-, which is less than Rs. 2 crores, the Court held that the appeal is liable to be disposed of on account of the low tax effect. The Court relied on the Circular No. 5 of 2024 and disposed of the appeal, keeping the questions of law open. The Court’s decision was based on a careful consideration of the rival contentions and the applicable Circulars.
Final Outcome
The appeal was disposed of by the Court, and the questions of law were kept open. The Court’s order portrays the importance of considering the monetary limits and exceptions prescribed by the CBDT Circulars while filing appeals.
Implications
The Court’s order has significant implications for pending appeals and future filings. The decision showcases the retrospective application of the Circulars, which can impact the outcome of pending appeals. Moreover, the order highlights the need for the Revenue to carefully consider the monetary limits and exceptions prescribed by the CBDT Circulars before filing appeals.
In this case the appellant was represented by Mr. Suresh Kumar, Advocate. Meanwhile the respondent was represented by Ms. Apurva Chaudhary from Lakshmikumaran & Sridharan Attorneys.