What did the Tribunal hold?

The Tribunal dismissed the Revenue's appeal, finding it not maintainable due to the low tax effect, which was below the threshold prescribed by the CBDT circular. The case did not fall under any of the stated exemptions.

The Revenue appealed the CIT(A)'s order deleting additions related to commission, scrap value, installation expenses, interest expenditure, and diversion of profits. The assessee argued for dismissal based on low tax effect as per CBDT Circular No. 3 of 2018.

What were the issues?

The primary issue was the maintainability of the Revenue's appeal before the ITAT based on the tax effect and the applicability of CBDT Circular No. 3 of 2018.

ITO vs M/S. Anar Chemicals Pvt. Ltd. | ITAT Ahmedabad 2018

Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH, AHMEDABAD

By way of this appeal, the Assessing Officer has challenged correctness of the order dated 20th January, 2015, passed by the learned CIT(A)-1, Ahmedabad for the assessment year 2005-05, on the following grounds:

“(1) The Ld. CIT(A) erred in law and on facts in directing the AO to allow the commission payment of Rs.2,10,015/- made to Mrs. Priti Desai despite the fact that the assessee failed to establish that she has rendered the service to earn such income.

(2) The Ld. CIT(A) erred in law and on facts in deleting the addition of Rs.4,27,000/- being value of scrap on adhoc and estimated basis.

(3) The Ld. CIT(A) erred in law and on facts in deleting the addition of Rs.3,00,078/- on account of capitalisation of installation/erection expenses of Plant & Machineries on estimate basis.

(4) The Ld. CIT(A) has failed to appreciate the observation of the AO that such Plant & Machinery could not be erected/commissioned without any labour or service charges, etc.

(5) The Ld. CIT(A) erred in law and on facts in deleting the disallowance of interest expenditure of Rs.2,06,500/- on estimate basis despite the fact

ITA No.1126/Ahd/2015 Assessment Year: 2004-05 Page 2 of 2

that the assessee has failed to prove that no interest bearing fund has been utilised.

(6) The Ld. CIT(A) erred in law and on facts in deleting the disallowance of loss of Rs.44,23,861/- despite the fact that assessee has diverted profit to its sister concern M/s Anar International.”

At the outset, learned counsel for the assessee submitted that the present appeal of the Revenue needs to be dismissed on account of low tax effect in view of the recent CBDT Circular No.3 of 2018 dated 11.07.2018. The learned Departmental Representative fairly admitted that the tax effect involved in this appeal is less than the limit prescribed by the aforesaid CBDT Circular.

I have heard the learned Departmental Representative and perused the material available on record. I find that prima-facie this appeal of the Revenue is not maintainable in view of the recent CBDT Circular No.3/2018 in F.No.279/Misc.142/2007-ITJ (Pt) dated 11th July, 2018, vide which it has been decided by the Board that no departmental appeals should be filed before the Tribunal if the tax effect by virtue of the Commissioner of Income-tax (Appeals)’s order is below Rs. 20 Lacs. The Board has provided exemptions at clause (10) of the Instructions wherein it has been provided that these instructions will not be applicable, where the Constitutional validity of the provisions of an Act/Rule is under challenge or where Board’s order, notification, instruction or circular has been held to be illegal or where Revenue Audit objection in the case has been accepted by the Department or where the addition relates to undisclosed foreign assets/bank accounts etc. I find that the present case does not fall within the exemption clause and the tax effect is less than Rs.20 Lacs. Therefore, the present appeal is not maintainable and hence dismissed.

In the result, the appeal of the Revenue is dismissed. Pronounced in the open court today on the 20th September, 2018.

Sd/- Pramod Kumar (Accountant Member) Dated: Ahmedabad, the 20 th day of September, 2018. PBN/*

Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File

By order

Assistant Registrar Income Tax Appellate Tribunal Ahmedabad Benches, Ahmedabad

THE ITO, WARD-1(1), AHMEDABAD vs. M/S. ANAR CHEMICALS PVT. LTD., AHMEDABAD

What did the Tribunal hold?

What were the facts?

What were the issues?

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