Monetary Limit for Filing of Appeal by the Department
To reduce litigation and focus on complex or high-tax effect matters, the CBDT has prescribed monetary thresholds for the Department’s filing of appeals before appellate forums.
- Prescribed Monetary Limits –The CBDT has specified the latest monetary thresholds [Circular No. 9/2024, dated 17-09-2024] as follows:
|
Appellate Forum |
Monetary Limit |
|
ITAT |
Rs. 60,00,000 |
|
High Court |
Rs. 2,00,00,000 |
|
Supreme Court |
Rs. 5,00,00,000 |
These limits apply to appeals, Special Leave Petitions (SLPs), cross objections, and references and are also applicable retrospectively to pending matters. Where appeals are below the limits, the Department may withdraw or not press them.
The existence of monetary threshold does not mandate the filing of an appeal in every eligible case. The decision must be based on merits and overall objective of reducing unnecessary litigation.
- Exceptions to Monetary Limits –The Department may file appeals irrespective of tax effect in the following cases [Circular No. 5/2024, dated 15-03-2024]:
o Constitutional Issues – Challenge to the constitutional validity of an Act, Rule, Notification, Circular, Instruction or Order.
o TDS/TCS Disputes – Matters involving liability to deduct or collect tax at source, including international taxation.
o DTAA or Foreign Assets/Income:
➢ Applicability of tax treaties;
➢ Cases involving undisclosed foreign assets, income, or bank accounts.
o Deferral of Appeals under Section 158AB – Where the identical issue is pending and a final decision favours Revenue, the deferred appeal may be filed regardless of tax effect.
o Non-Quantifiable Tax Effect – E.g. orders under Section 263, registration of trusts/institutions, etc.
o Prosecution Matters – Where prosecution is initiated and the trial is pending in any court, or a conviction order is passed but not compounded.
o Adverse Judicial Comments – Where courts pass strictures or adverse remarks or impose costs against the Department.
o Organised Tax Evasion – including penny stock transactions and accommodation entries.
o Court-Directed Appeals – Where the court mandates the filing of the appeal.
o Writ Petitions – No monetary limit applies.
o Assessment Based on Law Enforcement Information – Information from CBI, ED, DRI, SFIO, NIA, NCB, DGGI, State Law Enforcement Agencies, or GST Department.
o Matters Related to Other Tax Laws – Cases under Wealth Tax, FBT, Equalisation Levy, or laws other than the Income-tax Act.
o Other Cases Specified by CBDT – Any case or class of cases notified by CBDT in the interest of justice or Revenue.
- Computation of ‘Tax Effect’
The Board has prescribed the following mode for computation of the tax effect [Circular No. 3/2018, dated 11-07-2018].
o General Cases
Tax Effect = Tax on assessed income − Tax on reduced income (assessed income – disputed income)
This includes surcharge and cess but excludes interest. For cases with returned loss assessed as income, the tax effect includes notional tax on the disputed additions.
o Cases Under MAT/AMT (Sections 115JB/115JC) – A combined formula is used, considering both general provisions and MAT/AMT provisions.
o Interest Disputes – Tax effect equals the disputed amount of interest.
o TDS/TCS Cases – Tax effect includes cumulative demand, including interest under Section 201(1A), for a given assessment year.
o Penalty Orders – Tax effect equals the amount of penalty deleted or reduced.
o Composite Orders – In case of a common order involving:
➢ Multiple assessment years: Tax effect to be calculated year-wise;
➢ Multiple assessees: Each assessee is to be considered individually.
Appeal to be filed only for year/assessee where the tax effect exceeds the limit.
- Effect of Non-Filing of Appeal
o Non-filing due to low tax effect does not mean acceptance of the decision by the Department.
o PCIT/CIT must record reasons that the appeal is not filed solely due to the low tax effect as per the CBDT Circular.
o The Department may still file an appeal on the same issue in other years or for other assessees if the tax effect exceeds the prescribed threshold.
- Guidance for Appellate Forums– The Board noted that assessees often claim relief by citing the Department’s non-filing of an appeal in similar cases for any other assessment year or any other assessee, implying acceptance of the Tribunal’s or Court’s decision. The CBDT has directed that:
o Departmental representatives must inform Tribunals and Courts that non-filing in prior years was due to monetary limits.
o Such non-filing should not be treated as precedent.
o Tribunals/Courts must consider the orders, instructions and directions issued by the CBDT and reasons for non-filing in each case.