Exceptions to monetary limits in CBDT Letter dated 20-8-2018

Exceptions to monetary limits in CBDT Letter dated 20-8-2018 do not apply retrospectively to pending appeals

Issue

Whether the exceptions introduced by the CBDT letter dated 20-8-2018 modifying Circular No. 3/2018 dated 11-7-2018 apply retrospectively to pending Revenue appeals filed under section 260A before 20-8-2018.
Whether a Revenue appeal filed prior to 20-8-2018 with a tax effect below the monetary limit set by Circular dated 11-7-2018 is liable to be dismissed as non-maintainable.

Facts

The Revenue filed an appeal before the High Court under section 260A of the Income-tax Act, 1961.
The appeal was instituted prior to 20-8-2018.
The tax effect involved in the Revenue’s appeal was below the mandatory monetary threshold specified in CBDT Circular dated 11-7-2018.
On 20-8-2018, the CBDT issued a letter modifying the earlier Circular dated 11-7-2018 by introducing certain exceptions where appeals could be filed regardless of monetary limits.
The Revenue sought to apply the exceptions introduced by the letter dated 20-8-2018 to save its previously instituted pending appeal.

Decision

Non-Retrospective Operation: The exceptions introduced by the CBDT letter dated 20-8-2018 operate prospectively and do not apply retrospectively to appeals filed prior to that date.
Dismissal for Low Tax Effect: Since the appeal was instituted before 20-8-2018 and the tax effect was below the monetary limit prescribed in the Circular dated 11-7-2018, the appeal could not be saved by subsequent exceptions.
Outcome: The Revenue’s appeal was dismissed as non-maintainable due to low tax effect, deciding the issue in favor of the assessee.

Key Takeaways

Prospective Application of CBDT Exceptions: Modifications or exceptions introduced to CBDT circulars regarding monetary limits do not retrospectively validate pending appeals filed before the date of modification.
Binding Nature of Monetary Limits: CBDT circulars issued under section 268A fixing monetary limits for filing appeals are strictly binding on the Revenue authorities.
Dismissal of Low-Tax Effect Appeals: Revenue appeals instituted prior to a beneficial circular’s prospective modification must be disposed of if the tax effect falls below the threshold applicable on the date of filing or specified application.

HIGH COURT OF BOMBAY

Principal Commissioner of Income-tax

Arvind Dwarkadas Purohit

Suman Shyam and Advait M. Sethna, JJ.

IT Appeal (IT) No. 2354 OF 2019

JUNE 25, 2026

Akhileshwar Sharma for the Appellant.

ORDER

1. This Appeal is filed under Section 260-A of the Income Tax Act, 1961 (‘IT Act’ for short). It assails the Judgment and Order of the Income Tax Appellate Tribunal (‘ITAT’ for short) dated 2nd August 2018 (‘Impugned Order’ for short).

2. The Appeal is preferred on the following formulated substantial questions of law :-

(i)

Whether on the facts and circumstances of the case, the ITAT has erred in law by not appreciating the fact that the assessee could not establish the genuineness of the purchases from the non-existent vendor as per information received from Law Enforcement agency of State of Government of Maharasthra i.e. Sales Tax Department and established by the Assessing Officers.

(ii)

Whether on the facts and circumstances of the case, the Hon’ble ITAT has erred in law by not appreciating the fact that the onus to justify the claim of expenses is on the assessee and the same has failed to discharge it in relation to the purchases made from the non-existent vendor ?

(iii)

Whether on the facts and circumstances of the case, the Hon’ble ITAT was justified in not appreciating the law correctly that once the purchases are unverifiable/non genuine/bogus, the same should have been disallowed in entirety, particularly in view of the ratio of the decision of the Hon’ble Gujarat High Court in Tax Appeal No.242 of 2003 dated 20.6.2016 in the case of N.K. Proteins Ltd against which the SLP was dismissed by the Hon’ble Apex Court.

3. Mr. Sharma, learned Counsel for the Appellant/Revenue has contended that though the tax effect in the said Appeal is valued at Rs.10,21,276/-, it would fall within the exceptions stipulated in the letter issued by the Central Board of Direct Tax (‘CBDT’ for short) dated 20th August 2018 vide which, the earlier Circular dated 11th July 2018 was modified.

4. On perusal of the letter dated 20th August 2018, it appears that the modification introduced therein to the CBDT Circular dated 11th July 2018 shall come into effect on the date of issuance of the same. In view thereof, no retrospective effect can be given to the exceptions stipulated in letter dated 20th August 2018. This means that insofar as the mandatory limits are concerned, they would equally apply to pending appeals. However, when it comes to applying exceptions, the same would be applicable from 20th August 2018 and not earlier.

5. Similar issue arose before the Co-ordinate Bench of this Court in CIT v. V. M. Salgaonkar and Brothers (P.) Ltd. [2024] 169 taxmann.com 597 (Bombay). On analysing Circulars i.e. 5 of 2024 and 9 of 2024 issued by CBDT, the Co-ordinate Bench held that the enhanced monetary limits would apply to pending Appeals but when it comes to exceptions specifically introduced, such exceptions cannot be construed retrospectively. The above decision has been followed by the Coordinate Bench of this Court in Pr. CIT v. IPL Loan Trust [2025] 171 taxmann.com 725 (Bombay) and in Pr. CIT v. Axis AD Print Media (India) Ltd. [2025] 172 taxmann.com 114 (Bombay).

6. Applying the principles (supra) to the letter dated 20th August 2018 and Circular dated 11th July 2018, involved in the present Appeals, we are satisfied that the Appeals were instituted before 20th August 2018 and would have to be disposed of as the tax effect involved in these Appeals is below mandatory prescribed limit.

7. For the above reasons, we dispose of the Appeal, leaving the question of law open to be appropriately decided as and when the occasion so arises.