2019 (4) TMI 828 - AT - Income Tax

Monetary limit - Low tax effect - disallowance u/s 40A(3) - HELD THAT - As per Circular No.21/2015 dated 10.12.2015 no appeal required to be filed before the ITAT if the tax effect is below Rs. 10 lakhs. In the instant case both the parties had agreed that the tax effect was less than Rs. 10 lakhs. Accordingly the appeal was disposed off as not maintainable. Against the order of this Tribunal the AO filed Miscellaneous Application u/s 254(2) of the Income Tax Act 1961 requesting to decide the case on merits on the issue of disallowance u/s 40A(3) of the Act. The department did not make out a case of exception as provided in the Circular 21/2015 dated 10.12.2015. Therefore we hold that there is no mistake in the order of the ITAT which needs modification or rectification. Hence the miscellaneous Application filed by the revenue is dismissed.

Summary

Issues:
1. Maintainability of appeal based on tax effect below Rs. 10 lakhs.
2. Miscellaneous Application filed by the AO under section 254(2) of the Income Tax Act, 1961.

Issue 1: Maintainability of appeal based on tax effect below Rs. 10 lakhs:
The appeal was filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-1, Guntur. However, this Tribunal dismissed the appeal as not maintainable since both parties agreed that the tax effect was less than Rs. 10 lakhs. The decision was in accordance with Circular No.21/2015 dated 10.12.2015, which states that no appeal is required to be filed before the ITAT if the tax effect is below Rs. 10 lakhs. Therefore, the appeal was disposed of as not maintainable based on the agreed tax effect.

Issue 2: Miscellaneous Application under section 254(2) of the Income Tax Act, 1961:
Following the dismissal of the appeal, the Assessing Officer (AO) filed a Miscellaneous Application under section 254(2) of the Income Tax Act, 1961, requesting to decide the case on merits regarding the issue of disallowance under section 40A(3) of the Act. The department failed to establish any exception as provided in Circular 21/2015 dated 10.12.2015. The Tribunal held that there was no mistake in its original order that required modification or rectification. Consequently, the Miscellaneous Application filed by the revenue was dismissed. The Tribunal pronounced the order in the open court on 10th April 2019, thereby concluding the matter.

In summary, the ITAT Visakhapatnam upheld the decision to dismiss the appeal due to the tax effect being below Rs. 10 lakhs, in line with Circular No.21/2015. The Tribunal also rejected the Miscellaneous Application filed by the AO under section 254(2) of the Income Tax Act, 1961, as it failed to demonstrate any grounds for modification or rectification of the original order.