COMMISSIONER OF INCOME TAX vs. S.VENKATESH

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TCA/193/2018HC Madras28 November 2019Bench: Hon`ble Mr Justice N. KIRUBAKARAN6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the Tax Case Appeal filed by the Revenue. The dismissal was based on the submission by the Revenue's counsel and Circular No. 17/2019 dated August 8, 2019, which sets the monetary limit for filing appeals before the High Court at Rs. 1 Crore. The Court noted that the tax effect in this case was less than Rs. 1 Crore. Consequently, the appeal was dismissed on account of tax effect. However, the Court explicitly stated that the substantial questions of law framed were left open. Liberty was granted to the Revenue to seek restoration of the appeal if the tax effect is found to be above the stipulated limit, allowing it to be heard and decided on merits. No costs were awarded.

What were the facts?

This Tax Case Appeal was filed by the Commissioner of Income Tax, Chennai (the appellant/Revenue) against an order dated July 15, 2016, passed by the Income Tax Appellate Tribunal (ITAT), Madras 'C' Bench. The ITAT's order had dismissed the Department's appeal against an order of the Commissioner of Income Tax (Appeals), which had partly allowed the appeal filed by the assessee, Dr. S. Venkatesh. The assessment year in question is 2007-08. The appeal was admitted on substantial questions of law. The Revenue's counsel argued that the tax effect in this case was less than Rs. 1 Crore, which is the monetary limit for filing an appeal before the High Court as per Circular No. 17/2019 dated August 8, 2019.

What were the issues?

The Tribunal had to decide five substantial questions of law: 1. Whether the Tribunal was correct in deleting the addition made on account of bad debt by relying on Section 36(1)(vii) and the Apex Court's decision in TRF Ltd., accepting the assessee's contention that bad debts were written off. 2. Whether the Tribunal was correct in not considering the issue relating to unexplained credit entries under the heads 'transfer of loans and advances', 'transfer of advance from customer', and 'others'. 3. Whether the Tribunal was correct in holding that there was no concession of liability and Section 41(1) could not be invoked, even though the time limit for creditors to reclaim amounts had lapsed under the Limitation Act. 4. Whether the Tribunal was correct in holding that there was a cessation of liability and Section 41(1) could not be invoked, despite the assessee crediting unclaimed amounts to the capital account and unilaterally writing off the liability. 5. Whether the Tribunal was correct in deleting the addition of unexplained credit concerning a gift from the assessee's father, despite the assessee failing to prove the donor's creditworthiness and the genuineness of the gift. The Revenue contended that the appeal should be dismissed based on Circular No. 17/2019 due to the tax effect being below Rs. 1 Crore. The assessee's contentions are not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 260A,Section 36(1)(vii),Section 41(1)

AI-generated summary — verify with the full judgment below

TCA NO.193 OF 2018 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 28.11.2019 CORAM : THE HONOURABLE MR.JUSTICE N.KIRUBAKARAN AND THE HONOURABLE MR.JUSTICE P.VELMURUGAN T.C.A.NO.193 OF 2018 Commissioner of Income Tax Chennai.

... Appellant Vs. Dr.S.Venkatesh

... Respondent PRAYER: Tax Case Appeal filed under Section 260A of Income Tax Act, 1961, against the order dated 15.07.2016 in I.T.A.No.1805/Mds/2014 on the file of the Income Tax Appellate Tribunal Madras 'C' Bench for the assessment year 2007-08. For Appellant : Mr.T.Ravikumar J U D G M E N T (Judgment of the Court was made by N.KIRUBAKARAN, J.) This Tax Case Appeal has been filed against the order of the Income Tax Appellate Tribunal dated 15.07.2016 passed in 1/6 http://www.judis.nic.in TCA NO.193 OF 2018 I.T.A.No.1805/Mds/2014 dismissing the appeal filed by the Department of Revenue against the order of the Commissioner of Income Tax (Appeals) by which the appeal filed by the assessee was partly allowed. 2. Heard Mr.T.Ravikumar, learned counsel for the appellant. 3. This Tax Case Appeal is admitted on the following substantial questions of law: "1.Whether on the facts and in the circumstances of the case the tribunal was right in holding that deleting the addition made of on account of bad debt by merely relying on the provisions of Section 36(i) (vii) read with the decision of the Apex Court in the case of TRF Ltd. by wrongly accepting the assessee's contention that the bad debts were written off. 2.Whether on the facts and in the circumstances of the case the tribunal was right in not considering the issue relating to unexplained credit with respect to the credit entries under the head transfer of loans and 2/6 http://www.judis.nic.in TCA NO.193 OF 2018 advances, transfer of advance from customer and others. 3.Whether on the facts and in the circumstances of the case the tribunal was right in holding that there is no concession of liability and provisions of section 41(1) cannot be invoked even though the time limit to reclaim the amounts by the creditors had lapsed under the Limitation Act. 4.Whether on the facts and in the circumstances of the case the tribunal was right in holding that there is cessation of liability and provisions of section 41(1) cannot be invoked even though the assessee had credited the unclaimed amounts to capital account and had made a unilateral write off of the liability. 5.Whether on the facts and in the circumstances of the case the tribunal was right in deleting the addition of unexplained credit with respect to the gift received from the assessees father even though the assessee had failed to prove the credit worthiness of the donor and genuineness of the gift." 3/6 http://www.judis.nic.in TCA NO.193 OF 2018 4. Mr.T.Ravikumar, learned counsel appearing on behalf of the appellant would submit that the tax effect in this case is less than Rs.1 Crore and is covered by Circular No.17/2019 dated 08.08.2019 issued by the Director, Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, Delhi. As per the said circular, the monetary limit to file an appeal before the High Court is fixed at Rs.1 Crore. In this case, tax effect is less than Rs.1 Crore and therefore, the appeal has to be dismissed. 5. This Court perused the circular dated 08.08.2019 and Paragraph No.2 of the Circular, which prescribes monetary limit for filing appeal. Paragraph No.2 is usefully extracted as follows: "2. As a step towards further management of litigation, it has been decided by the Board that monetary limits for filing of appeals in income-tax cases be enhanced further through amendment in Para 3 of the Circular mentioned above and accordingly, the table for monetary limits specified in Para 3 of the Circular shall read as follows: 4/6 http://www.judis.nic.in TCA NO.193 OF 2018 S.No. Appeals / SLPs in Income-tax matters Monetary Limit (Rs.) 1. Before Appeallate Tribunal 50,00,000 2. Before High Court 1,00,00,000 3. Before Supreme Court 2,00,00,000 6.In view of the submissions made by the learned Senior Standing Counsel appearing on behalf of the appellant and also in view of the Circular No.17/2019 dated 08.08.2019 issued by the Director, Central Board of Direct Taxes, Delhi, this Tax Case Appeal is dismissed on account of tax effect. However, the substantial questions of law framed are left open. In the event the tax effect is above the limit fixed in the said circular, liberty is granted to the Revenue to make a mention to this Court to restore the appeal to be heard and decided on merits. No costs. [N.K.K., J.] [P.V., J.]

28.11.2019 Index : Yes/No Internet : Yes/No Speaking / Non-speaking order TK N.KIRUBAKARAN, J. 5/6 http://www.judis.nic.in TCA NO.193 OF 2018 AND P.VELMURUGAN, J. TK To The Commissioner of Income Tax Chennai. T.C.A.NO.193 OF 2018 28.11.2019 6/6 http://www.judis.nic.in

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