Revenue cannot pursue appeals where the tax effect is less than Rs. 2 crores.

By | March 15, 2025
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 Appeals Below Monetary Limits Withdrawn; Circular 5/2024 Applied to Pending Appeals

Issue: Whether pending appeals filed by the revenue, where the tax effect is less than Rs. 2 crores, should be withdrawn in view of CBDT Circular No. 5/2024 dated March 15, 2024, and Circular No. 9/2024 dated September 17, 2024, despite the revenue claiming exceptions under paragraph 3.1(h) of Circular No. 5/2024.

Facts:

  • Appeals framed against assessees were sought for withdrawal on the ground that the tax effect involved was less than Rs. 2 crores, in accordance with CBDT Circular Nos. 5/2024 and 9/2024.
  • The revenue claimed it was not barred from pursuing the appeals as they fell within the exceptions provided in paragraph 3.1(h) of Circular No. 5/2024.

Decision:

  • The court held that when it comes to the withdrawal of pending appeals below the prescribed monetary limits, Circular No. 5/2022 dated March 1, 2022, and Circular No. 9/2022 dated September 17, 2022, were specifically made applicable to pending appeals.
  • The court also noted that paragraph 10 of Circular No. 5/2024 states that the circular shall come into force from the date of its issue and will apply to Special Leave Petitions (SLPs) and appeals filed henceforth.
  • Based on both circulars, the court directed the appeals to be disposed of.

Key Takeaways:

  • Monetary Limits for Appeals: CBDT circulars prescribe monetary limits for filing and pursuing appeals by the revenue, aiming to reduce frivolous litigation.
  • Withdrawal of Pending Appeals: Circulars are also applicable to pending appeals that fall below the prescribed monetary thresholds.
  • Circular 5/2024 Applicability: Circular 5/2024 applies to SLPs and appeals filed henceforth, and when considered with the previously issued circulars, applies to pending appeals as well.
  • Exceptions to Monetary Limits: While exceptions exist (e.g., paragraph 3.1(h)), the general rule is that appeals below the monetary limits should be withdrawn.
  • CBDT Circulars: CBDT circulars are binding on revenue authorities and provide guidance on the administration of the Income-tax Act.
  • Section 268A: This section empowers the CBDT to issue instructions regarding the filing of appeals by income tax authorities.
  • Rule 44: This rule pertains to the filing of appeals and applications for reference by income tax authorities.
  • The court is enforcing the implementation of the CBDT circulars, and reinforcing that the circulars are applicable to pending appeals.
HIGH COURT OF BOMBAY
Principal Commissioner of Income-tax-23
v.
IPL Loan Trust
M.S. Sonak and Jitendra Jain, JJ.
INCOME TAX APPEAL NO. 643 OF 2018 and others
FEBRUARY  5, 2025
P.C. Chhotaray, Suresh Kumar, Ms. Mohinee Chougule, Akhileshwar Sharma, Ms. Mamta Omle, Ms. Sushama Nagaraj, Vipul A. Bajpayee, Ms. Swapna Gokhale, Subir Kumar, Ms. Shilpa Goel, S.V. Bharucha, Devvrat Singh, P.A. Narayanan, Vikas Khanchandani, N.C. Mohanty, A.K. Saxena, Ms. Samiksha Kanani, Abhishek Mishra, Dinesh Gulabani, Ashok Kotangale and Ms. Samita Thakur for the Appellant. P.J. Pardiwalla, Sr. Adv., Madhur Agrawal and Atul Jasani for the Respondent.
ORDER
1. We have heard Mr. Chhotaray, learned counsel for the Appellants and Mr. Pardiwalla, learned Senior Counsel for the Respondents.
2. All these appeals were posted today for withdrawal, in light of CBDT Circulars Nos. 05/2024, dated 15 March 2024, and 09/2024, dated 17 September 2024, as the tax effect in these appeals is less than Rs.2 crores.
3. However, Mr. Chhotaray, relying on the exceptions in Circular Nos.05/2024, submitted that the revenue was not barred from prosecuting these Appeals. He submitted that these Appeals fell within the exceptions in paragraph 3.1 (h) of Circular No. 5/2024, dated 15 March 2024. He therefore submitted that though the monetary limits in these Appeals were less than Rs.2 crores, the revenue was not obliged to withdraw them or refrain from pursuing these appeals.
4. Mr. Pardiwalla, learned Senior Counsel for the Respondents, submitted that the CBDT circulars comprise two parts. The first part, which relates to the withdrawal or non-pursuit of Appeals where the tax effect is less than Rs.2 crores, was specifically made applicable to pending matters. However, the second part, which addresses the exceptions, was explicitly given only a prospective effect. Therefore, he submitted that the revenue, relying on the exceptions delineated by the two circulars, could not insist on pursuing the pending Appeals.
5. Mr. Pardiwalla supported his contentions by citing the decision of the Coordinate Bench in Commissioner of Income Tax v. V. M. Salgaonkar and Brothers (P.) Ltd.  (Rajasthan).
6. Mr. Chhotaray submitted that throughout, the CBDT circulars have been regarded as having retrospective effect by the revenue. He contended that treating one aspect of the circular as retrospective and the other as prospective is not permissible. He argued that the circulars must be interpreted in their entirety and in a holistic manner. On this basis, Mr. Chhotaray asserted that the revenue was justified in relying upon the exceptions and not withdrawing the pending Appeals encompassed by the exceptions.
7. We have considered the rival contentions and are satisfied that the issue that has now arisen is covered by the two decisions Mr. Pardiwalla relied on.
8. The Circular No.05/2024 dated 15 March 2024 inter alia provides that Appeals/SLPs, not falling in the exceptions as detailed in paragraph 3, shall not be filed in cases where the tax effect does not exceed the monetary limits given hereinunder:
Sr. No.Appeals/SLPs in Income-tax mattersMonetary Limit (T)
1.Before Appellate Tribunal50,00,000
2.Before High Court1,00,00,000
3.Before Supreme Court2,00,00,000

 

9. Clause 3.1 of Circular No. 05/2024 dated 15 March 2024 provides that the monetary limits in paragraph 4 concerning filing Appeals/SLPs shall apply to all cases including those relating to TDS/TCS under the Act with the following exceptions where the decision to file Appeals/ SLPs shall be taken on merits, without regard to the tax effect and the monetary limits. One of the exceptions in clause (h) concerns cases involving organized tax evasion, including cases of bogus capital gain/loss through penny stocks and cases of accommodation entries.
10. Circular No. 09/2024, dated 17 September 2024, increased the monetary limits. Paragraph 5 of this circular dated 17 September 2024 provided the modifications shall come into effect from the date of issue of this circular. Further, it was stated in this circular that it will apply to SLPs/Appeals to be filed henceforth in SC/HCs/Tribunals. It shall also apply to the SLPs/Appeals pending before the Supreme Court/ High Courts/ Tribunals, which may accordingly be withdrawn.
11. Thus, when it comes to withdrawal of pending Appeals below the monetary limits prescribed, the circulars were specifically made applicable to pending Appeals. However, when it comes to exceptions, the circulars provided that the decision could be taken by the revenue to institute Appeals below the monetary limits prescribed, where the Appeals were covered by the exceptions set out in paragraph 3.1 of the circular dated 15 March 2024. Furthermore, paragraph 10 of the circular dated 15 March 2024 states that this circular shall come into force from the date of its issue. This circular will apply to SLPs and appeals filed henceforth before the Supreme Court, High Courts, and Tribunals. On the holistic reading of the two circulars, Mr. Pardiwalla’s contention will have to be upheld.
12. The Co-ordinate Bench of this Court in the case of V. M. Salgaonkar and Brothers (supra) has expressly upheld such contention by expressly rejecting the argument identical to that which is advanced today by Mr. Chhotaray before us. Even in V. M. Salgaonkar and Brothers (supra) the learned counsel for the revenue had argued that the circulars must be read holistically and there was no scope for reading or construing one part retrospectively and the other prospectively.
13. Paragraph 30 of V. M. Salgaonkar and Brothers (supra) is pertinent and is transcribed below for ease of reference:
“30. In our opinion, the exceptions in terms of which the revenue seeks to prosecute the present appeals would have no application for two reasons. First of all, the exception which the revenue seeks to rely upon was created for the first time in the Circular dated 15.03.2024 and para 10 of the said Circular makes it abundantly clear that the Circulars would apply to appeals that would be filed henceforth which also stands to reason as a Circular which carves out additional exceptions can only have prospective effect because it is only on the issuance of such a circular that the various exceptions detailed in para 3.1 were enunciated. As noted earlier, initially the exceptions were only of three categories but subsequently increased to five and, thereafter, the present Circular increased the same to thirteen. The decision whether an appeal should be filed irrespective of the monetary limits involved has to be made when the appeal is filed and it is only the exceptions that are then prevalent that would be applicable. Any exception introduced thereafter would have no application whatsoever in determining whether an appeal should be filed. This would be a normal way of construing the circular and, in any event, the language of Para 10 makes it abundantly clear that such was the intention. In fact whenever the Board has enhanced the scope of the exception, it has always made it prospective. However, when it comes to increasing the monetary limits, the Board, having regard to the avowed objects of reducing litigation, has made it explicitly clear both in Circular No. 9 of 2024 as well as in Circular No. 3 of 2018 that the enhanced monetary limits will apply even in respect of all pending appeals. We are therefore of the view that having regard to the Circulars, the present appeals must be dismissed as withdrawn and the Revenue cannot prosecute the appeals by relying upon any exception created in para 3.1(l) of the Circular dated 15.03.2024 which by virtue of para 10 is to be applied only to appeals to be filed henceforth. The argument of the Revenue that both the Circulars dated 15.03.2024 and 17.09.2024 have to be read in a holistic manner and both must be given retrospective effect is contrary to the plain terms of the said Circulars.”
14. The coordinate bench relied on the decision in Satish Kumar Agarwal (supra), in which the Division Bench of the Rajasthan High Court also took the same view.
15. Thus, based on the above two CBDT circulars and the decision of the Co-ordinate Bench in V. M. Salgaonkar and Brothers (supra), we dispose of these Appeals since Mr. Chhotaray maintains that he has no instructions to withdraw the same. This was the course of action adopted by the Coordinate Bench in V. M. Salgaonkar and Brothers (supra) and by the Rajasthan High Court in the case of Satish Kumar Agarwal (supra).
16. All these appeals are thus disposed of. No costs orders. Any interim orders are vacated. Any interim applications do not survive and are likewise disposed of.
17. If the appellants discover that the tax effect in any of these appeals was more than Rs 2 crores, they are free to seek revival or restoration by filing appropriate applications. However, we expect that such liberty will be exercised by 31 December 2025.
18. The appellants will be entitled to a refund of court fees as per the rules.