ACIT Circle-19(2), New Delhi vs. Phonepe Pvt Ltd – ITA No. 6623/DEL/2019: Appeal Dismissed Due to Monetary Limit in Tax Dispute

ACIT Circle-19(2), New Delhi vs. Phonepe Pvt Ltd

ITA No. 6623/DEL/2019 – Assessment Year 2016-17

Appellant: ACIT Circle-19(2), New Delhi

Respondent: Phonepe Pvt Ltd, New Delhi

Date of Order: 16th September 2021

Pronounced on: 16th September 2021

Order Type: Final Tribunal Order

Background of the Case

This case involves a tax dispute between the Additional Commissioner of Income Tax (ACIT), Circle-19(2), New Delhi, and Phonepe Pvt Ltd, a well-known digital payment service provider. The dispute pertains to the assessment year 2016-17. The case was filed on 8th August 2019 by the Revenue, contesting the order passed by the Commissioner of Income Tax (Appeals)-VII, New Delhi.

The primary issue in this appeal was whether the Revenue’s appeal should be entertained given that the disputed tax amount was below the monetary threshold set by the Central Board of Direct Taxes (CBDT) in its Circular No. 17/2019, dated 8th August 2019.

Grounds of Appeal

The Revenue sought to challenge the order of the CIT(A) on various grounds related to the tax assessment of Phonepe Pvt Ltd for the assessment year 2016-17. However, the appellant’s case was primarily concerned with whether the tax effect exceeded the prescribed monetary limit of Rs. 50 lakhs, as stated in the CBDT’s circular.

The respondent, Phonepe Pvt Ltd, represented by their counsel, argued that the disputed amount was indeed below the monetary threshold, making the appeal non-maintainable. They cited the relevant CBDT circular and subsequent clarifications to support their position.

Proceedings Before the ITAT

During the proceedings before the Income Tax Appellate Tribunal (ITAT), the respondent’s counsel emphasized the monetary limit prescribed by the CBDT Circular No. 17/2019. The counsel argued that the appeal should be dismissed on this basis, as the tax effect was below Rs. 50 lakhs.

The ITAT bench, comprising Judicial Member Shri Amit Shukla and Accountant Member Dr. B.R.R. Kumar, considered the submissions made by both parties. The tribunal reviewed the CBDT Circular No. 17/2019 and the subsequent clarification dated 20th August 2019, which stated that the circular applies to all pending appeals as well.

ITAT’s Findings and Decision

The ITAT found merit in the arguments presented by the respondent, Phonepe Pvt Ltd. The tribunal observed that the disputed tax amount indeed fell below the monetary threshold of Rs. 50 lakhs as prescribed by the CBDT. The tribunal noted that the circular aimed to reduce litigation and focus on cases with significant tax implications.

The tribunal further noted that the CBDT circular explicitly applies to all pending appeals, reinforcing the non-maintainability of the Revenue’s appeal in this case. The ITAT, therefore, held that the appeal filed by the Revenue was not maintainable and dismissed it accordingly.

Conclusion

This case highlights the importance of the CBDT’s monetary limits in tax disputes, aimed at reducing the burden on the judiciary by filtering out cases with low tax effects. The ITAT’s decision to dismiss the appeal due to the tax effect being below the prescribed limit underscores the importance of adhering to these guidelines.

For taxpayers and the Revenue alike, this decision serves as a reminder to consider the monetary thresholds outlined by the CBDT before pursuing appeals, ensuring that judicial resources are allocated to cases with substantial tax implications.

Order Pronounced in the Open Court on 16th September 2021

Per Amit Shukla, Judicial Member and Dr. B.R.R. Kumar, Accountant Member.

ACIT Circle-19(2), New Delhi vs. Phonepe Pvt Ltd – ITA No. 6623/DEL/2019: Appeal Dismissed Due to Monetary Limit in Tax Dispute