Monetary threshold limits for filing of appeals set by the Central Board of Direct Taxes against the back drop of CBDT circular

The Central Board of Direct Taxes (Board) has set up monetary limits for filing of Income Tax appeals by the Income Tax Department (Department) before Income Tax Appellate Tribunal, High Courts and Special Leave Petitions/appeals before Supreme Court.

As a step towards further management of litigation, the Board decided that monetary limits for filing of appeals in income-tax cases be enhanced further through amendment in Para 3 of the Circular dated 8th August 2018 issued by the Board.

By a circular dated 11th July, 2018 issued by CBDT, the Income Tax Department was directed to not only file appeals before the Tribunal in cases where the tax effect did not exceed the monetary limit of Rs. 20 lakhs; but it was also directed that this instruction shall apply retrospectively to pending appeals.

The Income Tax Appellate Tribunal – Delhi (ITAT) was considering 628 appeals filed by various Assessing Officers calling into question correctness of the relief granted by the Commissioner of Income Tax (Appeals) and, most importantly, the tax effect involved in all these appeals did not exceed Rs. 50,00,000.

The ITAT took note of a very pragmatic and taxpayer friendly policy decision by the Government of India for reducing the income tax litigation vide CBDT circular dated 8th August, 2019, where the Income Tax Department further liberalized its policy for not filing appeals against the decisions of the appellate authorities in favour of the taxpayers, wherein tax involved is below certain threshold limits. The Department announced its policy decision not to file, or press, the appeals, before ITAT against the appellate orders favorable to the assessee in the cases in which overall tax effect, excluding interest- except when interest itself is in dispute, is Rs 50,00,000 or less.
When a Commissioner (Appeals) gives the taxpayer tax relief of upto Rs. 50 lakhs in an appeal in an assessment year, the relief so granted by the Commissioner (Appeals) cannot be challenged before ITAT. Similarly, when the ITAT gives the taxpayer relief of upto Rs. 1 crore in an appeal in an assessment year, the relief so granted by the cannot be challenged before the High Courts, and that when High Court gives relief of upto Rs. 2 crore to the taxpayer in an appeal in an assessment year, that relief cannot be challenged before Hon’ble Supreme Court.

These monetary threshold limits for filing of appeals by the Income Tax authorities however do not take into account interest and other corollaries of the tax demands being confirmed such as penalties, except when a penalty itself is subject matter of litigation, and prosecutions. The ITAT noted that this substantial relaxation can be seen as a huge step which signifies trust reposed by the Government of India in the decisions of the appellate forums, and substantially cuts down time taken in the finality of the appellate process. This step shall lead to withdrawal of thousands of appeals before the ITAT and also before the Hon’ble Courts.

The ITAT on a close perusal of the CBDT Circular dated 8th August 2019 found that minimum threshold limit of tax effect for filing of Special Leave Petition (‘SLP’) in the Supreme Court has also been enhanced to Rs. 2,00,000/-.

In view of the aforesaid clarification issued by CBDT the ITAT held that the revised /enhanced minimum threshold limit of tax effect of Rs. 50,00,000/- vide the recent CBDT Circular No. 17/2019 dated 8th August 2019 was applicable not only for appeals to be filed by Revenue in future; but also for appeals already filed by Revenue in ITAT.