ASST CIT CC 1(3) , MUMBAI vs. M/S POONAM HOME MAKERS , MUMBAI

The ld. Authorized representative (for short „A.R‟) for the assessee at the very outset assailed the maintainability of the aforesaid appeals filed by the revenue. It was submitted by the ld. A.R that as the „tax effect‟ involved in all the said appeals was below the monetary ceiling of Rs. 50 lac provided in the CBDT Circular No. 17/2019, dated 08./08.2019 r.w Circular No. 3.2018, dated 11.07.2018, therefore, the same on the said count itself were not maintainable and liable to be dismissed.

Per contra, the ld. Departmental Representative (for short „D.R‟) rebutted the aforesaid contention of the ld. A.R. It was submitted by the ld. D.R that the aforesaid contention of the assessee‟s counsel was based on misconceived facts. Elaborating on his said contention, it was submitted by the ld. D.R that though the „tax effect‟ involved in the present appeals was admittedly below the monetary ceiling contemplated in the CBDT Circular No. 17 of 2019, dated 08.08.2019, however, the said appeals were saved by the exception carved out in Para (e) of the CBDT Circular No. 3/2018, dated 11.07.2018, and thus, maintainable. In order to buttress his aforesaid claim, it was submitted by the ld. D.R that as the additions in all the aforementioned appeals was based on the information that was received by the A.O from the DDIT(Inv.), Unit IX(2), Mumbai that the assessee as a beneficiary had obtained accommodations loans from certain benami concerns of Shri. Bhanwarlal Jain, an infamous accommodation entry provider, therefore, the same would safely fall within the realm of information that was received from an external source as provided in the exception contemplated in Para (e) of the CBDT Circular No. 3/2018, dated 11.07.2018. In order to drive home his aforesaid claim, it was submitted by the ld. D.R that the authorities listed in the exception carved out in Para (e) of Circular No. 3/2018, dated 11.07.2018 were not exhaustive. Also, the ld. D.R in order to fortify his aforesaid contention had drawn support from the Schedule II of the Right to Information Act, 2005 (No. 22 of 2005).

Rebutting the aforesaid contentions of the revenues counsel, it was submitted by the ld. A.R that as the DDIT(Investigation) of the Income-tax department is an internal wing of the department, therefore, it was absolutely incorrect on the part of the ld. D.R to canvass that the information received by the A.O from the said wing would fall within the scope and gamut of information received from an “external agency”.

We have heard the ld. Authorized representatives for both the parties and perused the orders of the lower authorities. Central Board of Direct Taxes (CBDT) vide Circular No. 17/2019 dated 08.08.2019 has amended Circular No. 3/2018 dated 11.07.2018 for further enhancement of monetary limit for filing of appeals by the department before the ITAT, High Courts and SLPs/Appeals before Supreme Court as measures for reducing litigation.

CBDT vide Circular No. 3/2018 dated 11.07.2018 has specified that appeals shall not be filed before the Income Tax Appellate Tribunal (ITAT) in cases where the tax effect does not exceed the monetary limit of Rs.20,00,000/-. For this purpose, „tax effect‟ means 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 income in respect of issues against which appeal is intended to be filed. Further, „tax effect‟ shall be taxes including applicable surcharge and cess. However, the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty order, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against.

As a step towards further management of litigation, CBDT vide Circular No. 17/2019 has fixed the monetary limit for filing of appeals before ITAT at Rs.50,00,000/-.

In the present appeals filed by the Department the „tax effect‟ involved in all the said appeals is admittedly below the monetary limit of Rs.50,00,000/-. As regards the claim of the ld. D.R, that though the „tax effect‟ involved in all the present appeals is below the monetary ceiling provided for filing of an appeal before the Tribunal as per CBDT Circular No. 17 of 2019, dated 08.08.2019, however, as the ACIT- CC 1(3), Mumbai Vs. M/s P.S Construction & Ors. 4 773 & 781/Mum/2020 additions made in all the said appeals was based on the information received from DDIT(Investigation), Mumbai i.e an external source, therefore, they were covered by the exception carved out in Para (e) of Circular No. 3/2018, dated 11.07.2018, we are afraid that the same does not find favor with us. Admittedly, the CBDT vide its Circular No. 3/2018, dated 11.07.2018 had carved out certain exceptions which override the non-maintainability of an appeal filed by the revenue involving „tax effect‟ below the prescribed monetary ceiling. However, we find that the exception carved out in Para 10(e) of the CBDT Circular No. 3/2018, dated 11.07.2018, as had been relied upon by the ld. D.R, would not come to the rescue of the revenue insofar the appeals in question are concerned. Exception carved out in Para 10(e) envisages such cases where addition is based on information received from certain specified external sources, and the same reads as under:

Resultantly, in the backdrop of our aforesaid observations the present appeals involving a „tax effect‟ of less than Rs.50 lac, in each case, are accordingly dismissed. Order pronounced in the open Court on 03/08/2021.