ACIT, Central Circle-30 vs. Kuber Grains & Spices Pvt. Ltd.: Dismissal of Appeal Due to Low Tax Effect Under CBDT Circular for Assessment Year 2016-17

ACIT, Central Circle-30 vs. Kuber Grains & Spices Pvt. Ltd.: Dismissal of Appeal Due to Low Tax Effect Under CBDT Circular for Assessment Year 2016-17

The Income Tax Appellate Tribunal (ITAT) of Delhi Bench ‘SMC-I’, comprising Shri H.S. Sidhu, Judicial Member, and Shri Prashant Maharishi, Accountant Member, addressed the appeal filed by the Assistant Commissioner of Income Tax, Central Circle-30, New Delhi against Kuber Grains & Spices Pvt. Ltd. for the assessment year 2016-17. The case was registered as ITA No. 6452/DEL/2019 and was originally filed on 1st August 2019. However, the appeal was dismissed on 9th November 2020 due to the low tax effect, in accordance with the Central Board of Direct Taxes (CBDT) Circular No. 17/2019.

Background of the Case

Kuber Grains & Spices Pvt. Ltd., a company engaged in the business of manufacturing and trading grains and spices, had its income tax return scrutinized for the assessment year 2016-17. During the assessment proceedings, the Assistant Commissioner of Income Tax (ACIT), Central Circle-30, New Delhi, raised certain issues and adjustments, leading to a tax demand against the company.

Dissatisfied with the outcome of the assessment, the ACIT appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], New Delhi. However, the CIT(A) ruled in favor of Kuber Grains & Spices Pvt. Ltd., prompting the Revenue to further escalate the matter to the ITAT by filing an appeal on 1st August 2019. The Revenue’s appeal sought to challenge the CIT(A)’s decision and reinstate the tax demand for the assessment year 2016-17.

Proceedings Before the ITAT

The case was scheduled for a virtual hearing before the ITAT on 9th November 2020. During the hearing, the counsel representing Kuber Grains & Spices Pvt. Ltd. pointed out that the tax effect of the disputed amount in the appeal was below the monetary limit specified in the CBDT Circular No. 17/2019, dated 8th August 2019. According to this circular, the monetary threshold for filing departmental appeals before the ITAT had been raised to Rs. 50 lakhs. The counsel argued that since the tax effect in the present appeal was below this limit, the appeal was not maintainable and should be dismissed.

The Senior Departmental Representative (DR), Sh. R.K. Gupta, representing the Revenue, did not contest the submission made by the counsel for the assessee. The DR acknowledged that the tax effect in the present appeal was indeed below the Rs. 50 lakhs threshold as per the CBDT’s revised guidelines.

Tribunal’s Findings and Judgment

After reviewing the submissions and considering the CBDT Circular No. 17/2019, the ITAT deemed it appropriate to dismiss the appeal filed by the Revenue. The Tribunal noted that the circular explicitly prohibits the filing of departmental appeals before the ITAT where the tax effect is below Rs. 50 lakhs, except in certain specified cases, none of which applied to the present matter.

The ITAT emphasized the importance of adhering to the CBDT’s guidelines, which aim to reduce the burden of litigation on the judiciary and allow the Income Tax Department to focus on cases involving higher tax implications. In light of the circular and the undisputed fact that the tax effect in this case was below the prescribed limit, the Tribunal concluded that the Revenue’s appeal was not maintainable.

Accordingly, the ITAT dismissed the appeal filed by the ACIT, Central Circle-30, New Delhi, as not maintainable due to the low tax effect. The order was pronounced on 9th November 2020, bringing the proceedings to a close.

Conclusion

The case of ACIT, Central Circle-30 vs. Kuber Grains & Spices Pvt. Ltd. serves as an important example of the impact of the CBDT’s revised monetary thresholds on the filing of departmental appeals. The dismissal of this appeal underscores the effectiveness of the CBDT Circular No. 17/2019 in streamlining tax litigation and reducing the caseload of the judiciary by eliminating appeals involving relatively minor tax amounts.

This decision also highlights the importance for the Revenue to carefully assess the tax effect in cases before deciding to file an appeal, ensuring compliance with the CBDT’s guidelines. For taxpayers, the circular provides a measure of relief, as disputes involving smaller tax amounts may be resolved without the need for prolonged litigation.

Order Pronounced in the Open Court on 9th November 2020

Signed by:
Judicial Member: Shri H.S. Sidhu
Accountant Member: Shri Prashant Maharishi

Date of Pronouncement: 9th November 2020

ACIT, Central Circle-30 vs. Kuber Grains & Spices Pvt. Ltd.: Dismissal of Appeal Due to Low Tax Effect Under CBDT Circular for Assessment Year 2016-17