The Bombay High Court has disposed of an Income Tax Department appeal involving a tax effect of ₹41.58 lakh, holding that the revised monetary limit of ₹2 crore prescribed by the Central Board of Direct Taxes applies to pending appeals as well.
The Division Bench of Justice B.P. Colabawalla and Justice Firdosh P. Pooniwalla reiterated that while revised monetary limits apply to appeals already pending before the courts, exceptions subsequently introduced by the CBDT for pursuing low-tax-effect cases can operate only prospectively.
The appeal was filed by the Principal Commissioner of Income Tax-12, Mumbai, against Balajee Infratech & Constructions Private Limited. It was placed before the High Court for directions after the Bench noticed that the tax effect was below the ₹2 crore limit specified in CBDT Circular No. 9 of 2024 dated September 17, 2024.
The department submitted that the appeal had been filed on March 28, 2018, when the monetary threshold governing departmental appeals was only ₹20 lakh. Since the disputed tax effect was ₹41.58 lakh, it was argued that there was no infirmity in either filing or prosecuting the appeal.
The department further relied upon the exceptions governing departmental litigation introduced through a CBDT circular dated August 20, 2018. It contended that the appeal fell within one of the excepted categories and could consequently be pursued despite the tax effect being below the revised ₹2 crore threshold.
The High Court rejected the contention by relying on its earlier ruling in Principal Commissioner of Income Tax v. Premier Industrial Corporation Ltd. In that decision, the Court had considered its rulings in CIT v. V.M. Salgaonkar and Brothers (P) Ltd., Principal Commissioner of Income Tax v. IPL Loan Trust and Principal Commissioner of Income Tax v. Axis AD Print Media (India) Ltd.
The Court noted that these decisions had consistently held that monetary limits prescribed through CBDT circulars apply even to pending departmental appeals. Accordingly, the ₹2 crore monetary limit prescribed in the September 17, 2024 circular was applicable to the Revenue’s pending appeal against the assessee.
However, the Bench drew a distinction between revised monetary limits and exceptions permitting the Department to pursue cases falling below those limits. It observed that exceptions introduced by later CBDT circulars apply only prospectively from the date on which they were brought into effect.
The Court recorded that the Department had filed the appeal on March 28, 2018, whereas the exception relied upon by the Revenue was introduced only through the circular dated August 20, 2018. Since the exception did not exist when the appeal was filed, it could not subsequently be invoked to justify the continued prosecution of the appeal.
“The exceptions carved out by the CBDT Circulars would apply only prospectively and would have no application, if they were introduced after the filing of the Appeal,” the Court observed.
The Bench consequently held that the exception contained in the August 20, 2018 circular could not serve as a justification for prosecuting an appeal filed several months earlier.
In view of the disputed tax effect being below the current ₹2 crore monetary threshold, the High Court disposed of the Department’s appeal without any order as to costs.
The Court, however, clarified that the questions of law raised by the Revenue in the appeal were being kept open for consideration in an appropriate case. Thus, the appeal was disposed of solely on account of the CBDT’s monetary-limit policy, without deciding the underlying legal questions on their merits.
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