2016 (5) TMI 1410 - HC - Income Tax

Maintainability of appeal - monetary limit - Held that - Taking note of the CBDT Circular dt. 10/12/2015 and the tax effect which indisputably in the instant case is less than Rs. 20 lac much less than what has been prescribed for filing appeal before the High Courts deserves to be dismissed as not pressed. However it is made clear that the substantial questions of law raised in the instant appeals if any are left open to be examined in an appropriate proceeding if arises in future. At the same time we consider it appropriate to observe that if the appeal falls in any of the exceptions as referred to in the Circular dt. 10/12/2015 the Revenue will be at liberty to move an application for recalling of the order if so advised.

Summary

Issues:
- Appeal against order of Income Tax Appellate Tribunal with tax effect less than Rs. 20 lac
- Interpretation of Circular No.21/2015 by Central Board of Direct Taxes regarding monetary limits for filing appeals
- Exceptions specified in the Circular for filing appeals despite tax effect being below prescribed limits
- Applicability of Circular retrospectively to pending and future appeals in High Courts/Tribunals

Interpretation of Circular No.21/2015:
The High Court analyzed Circular No.21/2015 issued by the Central Board of Direct Taxes, which prescribed monetary limits for filing appeals to reduce litigation. The Circular specified limits for filing appeals before Appellate Tribunal, High Courts, and Supreme Court based on the tax effect. It emphasized that appeals should not be filed solely based on exceeding monetary limits, and decisions should consider the merits of each case. Additionally, the Circular outlined exceptions where adverse judgments on specific issues should be contested despite the tax effect being below the prescribed limits.

Exceptions for Filing Appeals:
The Circular highlighted exceptions where adverse judgments on certain issues should be contested on merits even if the tax effect is below the monetary limits specified. These exceptions included cases challenging the constitutional validity of provisions, illegal Board orders, accepted Revenue Audit objections, and undisclosed foreign assets. It clarified that the monetary limits did not apply to writ matters and certain direct tax issues other than income tax, emphasizing that decisions to file appeals should be based on the merits of individual cases.

Retrospective Applicability of the Circular:
The High Court noted that the Circular was to apply retrospectively to pending and future appeals in High Courts and Tribunals. In a specific case with a tax effect below Rs. 20 lac, falling below the prescribed limit for High Court appeals, the Court dismissed the appeal as not pressed. However, it left open the examination of substantial legal questions raised for future proceedings. The Court also allowed the Revenue to seek a recall of the order if the appeal fell within the exceptions specified in the Circular.

In conclusion, the High Court upheld the principles outlined in Circular No.21/2015 by the CBDT, emphasizing the need to consider merits beyond monetary limits for filing appeals. The judgment highlighted the exceptions where appeals should be pursued despite lower tax effects and clarified the retrospective application of the Circular to both pending and future appeals in High Courts and Tribunals.