MONETARY LIMIT FOR INCOME TAX DEPARTMENT TO FILE APPEAL BEFORE APPELLATE TRIBUNAL, HIGH COURT AND SUPREME COURT

[Mr. M. GOVINDARAJAN]

Appeal by Department

Section 268A of the Income Tax Act (‘Act’ for short) provides that the Board may, from time to time, issue orders, instructions or directions to other income-tax authorities, fixing such monetary limits as it may deem fit, for the purpose of regulating filing of appeal or application for reference by any income-tax authority under the provisions of this Chapter XX.  The Appellate Tribunal or Court, hearing such appeal or reference, shall have regard to the orders, instructions or directions issued under this section and the circumstances under which such appeal or application for reference was filed or not filed in respect of any case.

Monetary limits

The Department issued various instructions regarding to the monetary limit of filing appeal before Income Tax Appellate Tribunal, High Court and Supreme Court.  The following Table will give the idea of various rates of monetary limit prevailing now and then-

Circular/Instruction No.	ITAT	High Court	Supreme Court
5/2018, dt. 15.05.2008	Rs.2 lakhs	Rs.4 lakhs	Rs.10 lakhs
3/2011,dated  09.02.2011	Rs.3 lakhs	Rs.10 lakhs	Rs.25 lakhs
5/2014, dated 10.07.2014	Rs.4 lakhs	Rs.10 lakhs	Rs. 25 lakhs
21/2015, darted 10.12.2015	Rs.10 lakhs	Rs.20 lakhs	Rs.25 lakhs
3/2018, dated 11.07.2018	Rs.20 lakhs	Rs.50 lakhs	Rs. 1 crore
17/2019, dated 08.08.2019	Rs.50 lakhs	Rs. 1 crore	Rs.2 crore

Recent circular

In supersession of about monetary limits the Board has now issued a circular No. 05/2024, dated 15.03.2024.  The monetary limit for filing appeal before the Authorities has no change in the circular.  But the monetary limit will also include TDS/TCS under the Act.

Exceptions

The adoption of above said monetary limit is subject to the following exceptions, where the decision to appeal/file SLP shall be taken on merits, without regard to the tax effect and the monetary limits-

• Where any provision of the Act or the Rules or notification issued there under has been held to be constitutionally invalid;
• Where any order, notification, instruction or circular of the Board or the Government has been held to be illegal or ultra vires the Act or otherwise constitutionally invalid,
• Where the assessment is based on information in respect of any offence alleged to have been committed under any other law received from any of the law enforcement or intelligence agencies such as-

• Central Bureau of Investigation;
• Enforcement Directorate;
• Directorate of Revenue Intelligence;
• Serious Fraud Investigation Office;
• National Investigation Agency;
• Narcotics Control Bureau;
• Directorate General of GST Investigation;
• State Law Enforcement Agencies such as State Police, State Vigilance Bureau, State Anti-Corruption Bureau, State Excise Department, State Sales/Commercial Taxes or GST Department,

• If  the case is one in which prosecution has been filed by the Department in the relevant case and the trial is pending in any Court or conviction order has been passed and the same has not been compounded;
• Where strictures/adverse comments have been passed and/or cost has been levied against the Department of Revenue, Central Board of Direct Taxes or their officers,
• Where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under sections 10(23C), 12A/12AA/12AB of the Act, order passed under Section 263 of the Act etc.
• Where addition relates to undisclosed foreign income/undisclosed foreign assets (including financial assets)/undisclosed foreign bank account;
• Cases involving organized tax evasion including cases of bogus capital gain/loss through penny stocks and cases of accommodation entries;
• Where mandated by a Court's directions,
• Writ matters;
• Matters related to-

• wealth tax,
• fringe benefit tax,
• equalization levy and
• any matter other than the Income Tax Act;

• In litigation arising out of disputes related to TDS/TCS matters in both domestic and International taxation charges-

• Where dispute relates to the determination of the nature of transaction such that the liability to deduct TDS/TCS thereon or otherwise is under question, or
• Appeals of International taxation charges where the dispute relates to the applicability of the provisions of a Double Taxation Avoidance Agreement or otherwise

• Any other case or class of cases where in the opinion of the Board it is necessary to contest in the interest of justice or revenue and specified so by a circular issued by Board in this regard.

In respect of deferral of appeals under section 158AB of the Act, the exceptions in such cases operate as follows:

• When judicial finality is achieved in favor of Revenue in the 'other case', appeal in the 'relevant case' is contested on merits subsequent to the decision in the 'other case' irrespective of the extant monetary limits.
• If the judicial outcome in the 'other case' is not in favor of Revenue and is not accepted by the Department, appeal against the same may be contested on merits in the 'other case' irrespective of the extant monetary limits, to arrive at judicial finality.

Tax effect

The said circular also clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case. The officers concerned shall keep in mind the overall objective of reducing unnecessary litigation and providing certainty to taxpayers on their Income-tax assessments while taking a decision regarding filing an appeal.

The circular defines the expression ‘tax effect’ as the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed.  The 'tax effect' shall include applicable surcharge and cess.  The tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect.   Where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against.

Determination of tax effect

Where the income is computed under the provisions of section 115JB or section 115JC , for the purposes of determination of tax effect', tax on the total income assessed shall be computed as per the following formula-

(A-B) + (C-D)

Where

A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC 

B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of the disputed issues

C = the total income assessed as per the provisions contained in section 115JB or section 115JC;

D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC was reduced by the amount of disputed issues under the said provisions.

If the amount of disputed issues is considered both under the provisions contained in section 115JB or section 115JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D.

The tax effect shall be calculated separately for every assessment year in respect of the disputed issues in the case of every assessee  by the Assessing Officer.  If the disputed issues arise in more than one assessment year, appeal can be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit.   No appeal shall be filed by the Department in respect of an assessment year or years in which the tax effect is less than the monetary limit.

Composite order

In the case of composite order of any High Court or appellate authority which involves more than one assessment year and common issues in more than one assessment year, no appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit.  In case where a composite order/judgment involves more than one assessee each assessee shall be dealt with separately.

TDS/TCS

For calculating the tax effect of cases involving TDS/TCS, the cumulative effect, of all orders passed for an assessment year of a deductor, shall be taken into account and shall include interest under section  201(1A) of the Act.

Obligations of the Department

If appeal before a Tribunal or a Court is not filed only on account of the tax effect being less than the monetary limit specified above, the Principal Commissioner of Income-tax/ Commissioner of Income-tax shall specifically record that  - Even though the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in the CBDT Circular dated <>.  In such cases there will be no presumption that the Income Tax Department has acquiesced in the decision on the disputed issues. The Income Tax Department shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other assessment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits.

In cases where the assessee claimed relief from the appellate authorities that the Department did not file appeal the Department must make every effort to bring to the notice of the Tribunal or the Court that the appeal in such cases was not filed or not admitted only for the reason of the tax effect being less than the specified monetary limit and, therefore, no inference should be drawn that the decisions rendered therein were acceptable to the Department.   For this purpose the relevant this Circular may have to be produced before courts.  Such cases do not have any precedent value.