New Monetary Limit for Filing of Appeals by the Income Tax Department

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New Monetary Limit for Filing of Appeals by the Income Tax Department - August 2019: In order to reduce the income tax litigation on tax appeals and to provide relief to taxpayers CBDT has further enhanced the monetary limit for filing of appeals by the Income Tax Department vide Circular No. 17/2019 dated 08.08.2019. The limit was raised once again in a span of 1 year. The last time CBDT raised the monetary limit for filing of appeals by the Income Tax Department was in July 2018.

The Central Board of Direct Taxes (CBDT) issued Circular No. 17/2019 dated 8th August 2019 and has the effect of increasing the monetary limits for filing appeals before the Income Tax Appellate Tribunal, High Court and Supreme Court by the Income Tax Department.

The monetary limits for filing departmental appeals before various appellate forums including ITAT, High Court & Supreme Court have been revised. The Existing Monetary Limit for appealing before Income Tax Appellate Tribunal has been raised from Rs. 20 lakh to Rs. 50 lakh. The limit for filing an appeal before the High Court has been raised from Rs. 50 lakh to Rs. 1 crore and the limit for filing an appeal before the Supreme Court has been hiked to Rs. 2 crore from Rs. 1 crore.

Monetary limits for filing of appeals by the Income Tax Department further enhanced by CBDT 

There is a substantial pendency of appeals of the Income Tax Department before various appellate fora. The CBDT is aware of the importance of litigation management and has been continuously working towards achieving the same.

To effectively reduce taxpayer grievances/litigation and help the Department focus on litigation involving complex legal issues and high tax effect, the monetary limits for filing of appeals by the Department were last revised on 11th July 2018 vide CBDT Circular No. 3 of 2018. As a step towards further management of litigation by the Government, the monetary limits for filing Departmental appeals before various appellate fora including ITAT, High Court & Supreme Court have been revised as under:

Appellate Forum
Existing Monetary Limit
July 2018
Revised Monetary Limit
August 2019
Before the Income Tax Appellate Tribunal (ITAT)
Rs. 20,00,000
Rs. 50,00,000
Before the High Court
Rs. 50,00,000
Rs. 1,00,00,000
Before the Supreme Court
Rs. 1,00,00,000
Rs. 2,00,00,000

This will further reduce time, effort and resources presently deployed in litigation to focus on issues involving litigation of substantial value.

Though it is a welcome step from the Government to reduce the tax litigation, but it should be remembered that such a step does not bring any certainty to the issues involved in the litigation. Every investor or taxpayer wants certainty in tax policy which should be aimed to reduce the tax litigation on frivolous issues. Increase in the monetary limit disposes a case only on the basis of quantum of tax effect rather than on the merits of the issue. The policy should be designed in such a manner to reduce the origination of tax litigation rather than not pursuing ongoing litigations. 

The main highlights of the Circular are given below-

1. The monetary limits for filing of income tax appeals by the Department before Income Tax Appellate Tribunal (ITAT), High Courts and SLPs/appeals before Supreme Court have been revised to Rs. 50 Lakh, Rs. 1 crore and Rs. 2 crore respectively.

2. The monetary limits for filing of income tax appeals is prescribed for each assessee separately.

3. Where an appeal is disposed of by a common order involving many assessment years, the monetary limits for filing of income tax appeals shall apply to each assessment year. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limits for filing of income tax appeals.

4. In a case where a composite order/judgment involves more than one assessee, each assessee shall be dealt with separately in respect of monetary limits for filing of income tax appeals.

5. The monetary limits for filing of income tax appeals is applicable to each of the disputed issues.

6. Any appeal not filed by the department due to monetary limits for filing of income tax appeals shall not be regarded as acceptance of the order/judgment by the department.

7. Meaning of the term ‘tax effect’ remains the same as specified in Circular No. 3/2018:

Scenario
Tax Effect
Additions to returned income
Difference between ‘tax on total income assessed’ and ‘tax that would have been chargeable had the total income assessed been reduced by the amount of income in respect of issues against which an appeal is intended to be filed’. However, the amount of tax will not include any interest thereon.
The interest amount shall be the tax effect if the chargeability of interest is itself the issue in dispute.
Reduction of returned losses or assessment as income
Notional tax on disputed additions which have the impact of reducing the losses or resulting in assessment of income.
Penalty orders
Quantum of penalty deleted or reduced
Income computed under Minimum Alternate Tax (MAT)/ Alternate Minimum Tax (AMT)

(A – B) + (C – D)
where:
  • A = the total income assessed as per the provisions other than the provisions contained in Section 115JB or Section 115JC (hereinafter called as general provisions);
  • B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of the disputed issues under general provisions;
  • C = the total income assessed as per the provisions contained in section 115JB or section 115JC;
  • D = the total income that would have been chargeable had the total Income assessed as per the provisions contained in section 115JB or section 1I5JC was reduced by the amount of disputed issues under the said provisions.
Where the amount of disputed issues is considered both under the provisions contained in section 115JB or section 115JC and under the general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D.

8. 'Tax effect' shall include the tax amount, applicable surcharge and cess. It will not include any interest thereon, except where chargeability of interest itself is in dispute.

9. There are certain exceptions where the monetary limit will not apply and the department may file an appeal on merits in the following cases:
  • Where the Constitutional validity of the provisions of an Act or Rule is under challenge;
  • Where the Board's order, notification, instruction or circular has been held to be illegal or ultra vires;
  • Where revenue audit objection in the case has been accepted by the department;
  • Where the addition relates to undisclosed foreign income/ undisclosed foreign assets/ undisclosed foreign bank accounts;
  • Where addition is based on information received from external sources in the nature of law enforcement agencies such as CBI! ED! DRI! SFIO! Directorate General of GST Intelligence (DGGI);
  • Cases where prosecution has been filed by the Department and is pending in the Court;
  • In the case of Writ matters; 
  • In the case of direct tax matters other than income tax; 
  • Where the tax effect is not quantifiable or not involved – e.g. Registration of Trusts Under Section 12A/12AA.
10. The monetary limit shall apply to Cross Objections u/s 253(4) before the ITAT.

It may be noted that this circular dated 08.08.2019 was issued only by modifying the para 3 of the circular dated 11.07.2018. Para 3 of the 2018 circular deals with the monetary limit for filing of appeal before the ITAT, High Court and Supreme Court. All other paras of the said circular remain in force. Para 13 of the 2018 circular states that the Circular was retrospective in nature. Thus all the pending appeals below the specified monetary limit shall be withdrawn or not pressed. Para 13 reads as follows-

13. This Circular will apply to SLPs/appeals/ cross objections/ references to be filed henceforth in SC/HCs/Tribunal and it shall also apply retrospectively to pending SLPs/ appeals/cross objections/ references. Pending appeals below the specified tax limits in para 3 above may be withdrawn/ not pressed.

Hence all the pending appeals before the ITAT or High Court or Supreme Court below the new monetary limit as per 2019 Circular will be withdrawn or will not be pressed.

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