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Facts
The Revenue filed an appeal challenging an addition made by the NFAC for AY 2010-11, related to the disallowance of interest on a loan treated as bogus. The tax effect was below the prescribed monetary limit, but the Revenue contended it fell under an exception clause of a CBDT circular.
Held
The Tribunal held that the addition was on account of disallowance of interest on a loan from an earlier year. It further observed that the exception clause cited by the Revenue was not applicable as the addition was not based on any information or enquiry by an external agency. Consequently, the Revenue's appeal was dismissed due to low tax effect.
Key Issues
Whether the Revenue's appeal, filed on account of low tax effect, is maintainable when the exception clause invoked is not applicable.
Sections Cited
143(3), 147
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Income Tax Appellate Tribunal, ‘D’ BENCH
Before: SHRI AMIT SHUKLA & MS. PADMAVATHY S
& CO No.20/Mum/2025 Meridian Chem Bond Pvt. Ltd. आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the Revenue and Cross Objection by the assessee against order dated 26/11/2024 passed by NFAC for the quantum of assessment passed u/s.143(3) r.w.s. 147 for the A.Y.2010-11.
In the appeal filed by the Revenue, the quantum addition challenged is of Rs.16,40,316/- which is on account of disallowance of interest paid on loan which earlier was treated as bogus loan. The tax effect on the disputed amount is only Rs.5,06,858/-. The Revenue in the grounds have stated that even though the tax effect involved is much below the prescribed limited but the case of the assessee falls under the exception clause of para 3(h) of CBDT Circular No. 5 of 2024 dated 15/03/2024. From the perusal of the facts it is stated that here the addition is on account of disallowance of interest on a loan taken in the earlier year. Moreover, earlier the addition on account of loan was made on the basis of some search conducted by the Income Tax department in Bhanwarlal Jain. Even in those years addition was not made on the basis of any information or enquiry by any external agency as stated in clause ‘h’ para 3 of CBDT Circular. Hence, it is not covered by any exceptional clause. Thus, appeal of the Revenue is dismissed on account of low tax effect being below prescribed monetary limit of Rs.60,00,000/-.
& CO No.20/Mum/2025 Meridian Chem Bond Pvt. Ltd. 3. Ld. Counsel submitted that if Revenue’s appeal is dismissed on account of low tax then, the validity of reopening as challenged in cross objection will become academic. Accordingly, Cross Objection is dismissed as infructuous.
In the result, appeal of the Revenue and cross objection filed by the assessee are dismissed.
Order pronounced on 24th February, 2025.