INCOME TAX OFFICER, WARD 41(3)(3), MUMBAI, MUMBAI vs. R P DEVELPOERS, MUMBAI

At the very outset, the Ld. AR appearing on behalf of the assessee raised a legal as well as factual objection to the effect that the present appeal filed by the Revenue is not maintainable on account of low tax effect. Since this objection goes to the root of the case, we have decided to adjudicate this issue first.

In this regard, we have heard the counsel for both the parties and perused the material placed on record. After having considered the facts of the case, we find that the present appeal has been filed by the Revenue against the order of the Ld. CIT(A) dated 08.10.2025. The respondent in the present case is RK Developers, Mumbai. We noticed that the AO completed the assessment under section 143(3) read with section 147 of the Act for the year under consideration, thereby making an addition of Rs.1,40,00,000 by treating the same as unexplained credit in the form of unsecured loans. Thereafter, a tax demand of Rs.85,65,480 was raised vide notice dated 21.12.2018. However, the Ld. CIT(A), vide order dated 08.10.2025, deleted the said addition on the merits of the case, against which the Revenue has preferred the present appeal.

In these circumstances, it is necessary to evaluate the total tax effect involved in the present case. We have already noticed that the total tax demand of Rs.85,65,480 is reflected in the Income-tax Computation Form mentioned in Form No. 36 filed by the Revenue, but the said figure does not represent the actual tax effect as contemplated under CBDT Circular No. 5/2024 dated 15.03.2024.

A perusal of the Income-tax Computation Form (ITNS) for the relevant year clearly reveals that the total demand is Rs.85,65,480. However, out of the total demand, a sum of Rs.42,39,480, i.e., Rs.2,16,300 under section 234B and Rs.40,23,180 under section 234C of the Act, represents interest charged under sections 234B and 234C of the Act. In our view, the levy of this interest is consequential to the tax demand arising from the disputed addition and is not independently in dispute in the present appeal.

Therefore, as per the definition of "tax effect" under CBDT Circular No. 5/2024, the interest amount cannot be included while computing the tax effect. In our considered view, the actual tax effect in the present case, as defined in para 5.1 of the aforesaid CBDT Circular, is 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 the disputed addition. The computation is as under:

From the above computation, we find that the actual tax effect in the present case is Rs.43,68,000, which is below the monetary limit of Rs.60,00,000 prescribed for filing appeals before the ITAT under CBDT Circular No. 9/2024 dated 17.09.2024.

Since the actual tax effect in the present case is Rs.43,68,000, which does not exceed the monetary limit of Rs.60,00,000 for filing an appeal before the ITAT, in our view, the present appeal is not maintainable.

Thus, in view of the facts and circumstances discussed above, we dismiss the appeal filed by the Revenue as not maintainable on account of low tax effect in accordance with CBDT Circular Nos. 5/2024 and 9/2024 issued under section 268A of the Act.

Since we have already dismissed the appeal filed by the Revenue on account of low tax effect, the other issues raised on merits need no adjudication.

In the result, appeal filed by the Department stands dismissed.