Monetary limits for filing of appeal by the income tax department

The CBDT had vide Circular No. 21/2015 dtd. 10th December 2015 prescribed monetary limits for filing of appeal by the income tax department before the Income Tax Appellate Tribunal (ITAT), High Courts (HC) and Special Leave Petition (SLP) before the Supreme Court (SC).

In supersession of the above circular, the CBDT vide Circular No. 3/2018 dtd. 11th July 2018  revised the monetary limits for filing of appeals by the Department before the ITAT, HC and SLP’s/ appeal before SC.  This initiative was brought about as a measure to reduce litigation.

The appeals/ SLP shall not be filed in cases where the “tax effect” does not exceed the monetary limits specified as under :

S.No Appeals/SLP in Income Tax Matters Monetary Limits
1. Before the ITAT INR 20,00,000
2. Before the HC INR 50,00,000
3. Before the SC INR 1,00,00,000

An appeal should not be filed only because the tax effect exceeds the afore specified monetary limits. Filing of an appeal should be decided on the merits of each case.

Tax Effect”  has been defined as under & includes applicable surcharge & cess.

S.No Circumstance What is “tax effect”
1. When there is an addition

to Returned Income

Tax Effect is the difference between tax on total income assessed & the tax would have been chargeable had the total income be reduced by the amount of income in respect of the issues against which the appeal is intended to be filed.
2. When chargeability of

interest is disputed

The amount of interest
3. When the returned loss

is reduced or assessed as

income

Notional Tax on disputed additions
4. In case of penalty orders Quantam of penalty deleted or reduced in the order to be appealed against.

When the disputed issue arises in more than one assessment year, the appeal can be filed on for such assessment year when the tax effect exceeds the specified monetary limits. In case of composite orders of the HC or ITAT which includes more than one assessment year, the appeals shall be filed in respect of all such assessment years even when the tax effect is less than  the monetary limit specified in the circular.

The following issues could be contested on merits not withstanding that the tax effect is less than the prescribed monetary limits –

–          Where the constitutional validity of the provisions of the Act or Rule is under challenge, or

–          Where Boards order, notification, instruction or circular has been held to be illegal or ultra vires, 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

The prescribed monetary limits shall not apply to writ matters and direct tax matters other than income tax. The filing of appeals in other direct tax matters shall be governed by the relevant provisions of the statute.

In case the tax effect is not quantifiable (such as registration of trusts or institutions u/s 12A/12AA), filing of appeal shall not be covered by the monetary limits specified above and shall be considered on the merits of each case.

The circular will apply to SLP’s / appeals/cross objections/ references to be filed henceforth in SC/HC/ITAT and shall apply retrospectively to pending SLP’s/Appeals/Cross Objections/References. Pending Appeals below the above specified tax limits may be withdrawn/not pressed.

Click here to read the circular

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