‘Tax Effect’ to be considered for filing appeal: SC

Case Details: Late Shri Gyan Chand Jain v. Commissioner of Income-tax - [2022] 137 taxmann.com 323 (SC)

Judiciary and Counsel Details

• • B.V. Nagarathna and M.R. Shah, JJ.

Facts of the Case

The instant appeal was filed by the assessee, challenging the order of the High Court. The High Court has allowed the Revenue’s appeal and set aside the order of the Tribunal wherein the penalty was deleted.

The assessee submitted that the appeal preferred by the Revenue against the order of Tribunal wasn’t maintainable in view of CBDT’s circular No. 21 of 2015 dated 10.12.2015. Said circular provides that the Department cannot file an appeal in High Court if the tax effect in such appeal is less than Rs. 20 lakh.

In the assessee’s case, the penalty levied by the Assessing Officer was Rs. 29,02,743. However, in view of the order passed by the CIT(A) and subsequent demand, the penalty amount was reduced to Rs. 6,00,000/- (approximately). Thus, the tax effect was less than Rs. 20 lakh and appeal preferred by the Revenue before the High Court wasn’t maintainable.

Supreme Court Held

The Supreme Court of India held that before the Tribunal, both the Revenue and the assessee preferred the appeals and the entire penalty amounting to Rs. 29,02,743 was an issue before the Tribunal and before the High Court.

The subsequent reduction in penalty in view of the subsequent order cannot oust the jurisdiction. What is required to be considered is what was under challenge before the Tribunal and the High Court. At the cost of repetition, it is observed that what was challenged by the Revenue was the penalty amounting to Rs. 29,02,743 and not the subsequent reduction of penalty by the CIT(A).

Therefore, it cannot be said that the appeal before the High Court at the instance of the Revenue challenging the order passed by the ITAT was not maintainable given the CBDT circular dated 10-12-2015.