Facts of the Case

The Assistant Commissioner of Income Tax, Varanasi, filed an appeal before the Income Tax Appellate Tribunal challenging the order passed in favour of the assessee, M/s Suvidha Hi-Tech Diagnostic Centre (P) Ltd., Varanasi.

On examination of the appeal records, the Tribunal observed that the tax effect involved in the disputed issues was below the monetary limit prescribed by the Central Board of Direct Taxes (CBDT) for filing appeals before the ITAT.

CBDT has issued instructions under statutory authority directing that departmental appeals should not be filed or pursued where the tax effect does not exceed the specified threshold.

Issues Involved

Whether the Revenue’s appeal before the ITAT is maintainable when the tax effect involved is below the monetary limit prescribed by CBDT under Section 268A of the Income-tax Act.

Petitioner’s Arguments (Revenue)

The Revenue contested the relief granted to the assessee by the lower appellate authority and requested adjudication of the disputed additions on merits. 

Respondent’s Arguments (Assessee)

The assessee submitted that the appeal filed by the Revenue was not maintainable since the tax effect involved was below the prescribed monetary limit fixed by CBDT, and therefore the appeal should be dismissed at the threshold.

Court Order / Findings (ITAT)

  • CBDT circulars prescribing monetary limits for filing appeals are binding on the Income-tax Department.
  • The tax effect involved in the present case was below the threshold prescribed for filing appeals before the ITAT.
  • In view of Section 268A and the applicable CBDT Circular, the appeal filed by the Revenue was not maintainable.

Important Clarification

  • Dismissal due to low tax effect does not amount to affirmation of the merits of the lower authority’s order.
  • The Revenue retains the right to contest similar issues in other cases where the tax effect exceeds the prescribed limit.
  • Such dismissal is procedural in nature and reflects the Government’s litigation management policy to reduce unnecessary tax disputes.

Link to download the order –

https://itat.gov.in/public/files/upload/1568712507-TAX%20EFFECT%20(VARANASI).pdf

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