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ACIT, Circle-61(1), New Delhi vs Urbane The Design Workshop, 5, South Appts MIS Flats, 1st Floor, Sri Aurobindo Marg,
August, 14th 2018

Subject:- Revision of monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Courtmeasures for reducing litigation-Reg.

Referred Section:
Section 268A
section 268 of the Act
section 115JB
section 115JC
section (4)
section 268A of the Income-tax Act,
section 12A/ 12AA of the IT Act
section 253(4) of the Act.

 

          IN THE INCOME TAX APPELLATE TRIBUNAL
                DELHI BENCH `G', NEW DELHI
     Before Sh. N. K. Saini, AM and Sh. Sudhanshu Srivastava, JM
                ITA No. 4330/Del/2016 : Asstt. Year : 2012-13
ACIT,                            Vs     Urbane The Design Workshop,
Circle-61(1),                           5, South Appts MIS Flats, 1st Floor,
New Delhi                               Sri Aurobindo Marg,
                                        New Delhi-110016
(APPELLANT)                             (RESPONDENT)
PAN No. AABFU7451L

             CO No. 303/Del/2016 : Asstt. Year : 2012-13
Urbane The Design Workshop,      Vs     ACIT,
5, South Appts MIS Flats, 1st           Circle-61(1),
Floor, Sri Aurobindo Marg,              New Delhi
New Delhi-110016
(APPELLANT)                             (RESPONDENT)
PAN No. AABFU7451L
                   Assessee by : None
                   Revenue by : Sh. S. S. Rana, CIT DR
Date of Hearing : 31.07.2018          Date of Pronouncement : 13.08.2018

                                    ORDER
Per N. K. Saini, AM:
       The appeal by the department and the Cross Objection of the assessee are
directed against the order dated 17.05.2016 of ld. CIT(A)-20, New Delhi.

2.     Nobody was present on behalf of the assessee nor a n
adjournment was sought. We, therefore, proceeded ex-parte qua the
assessee and the appeal alongwith the Cross Objection are decided
after hearing the ld. CIT DR on merit. It is noticed that the tax
effect in the appeal of the department is less than Rs.20,00,000/-.
                                    2                        ITA No. 4330/Del/2016
                                                               CO No. 303/Del/2016
                                                        Urbane The Design Workshop
The ld. D.R., although supported the order of the Assessing
Officer, but could not controvert this fact that tax effect in this
appeal is less than Rs.20,00,000/-.

3.    After considering the submissions of the ld. D.R. and the
material on record, it is noticed that Section 268A has bee n
inserted by the Finance Act, 2008 with retrospective effect fro m
01/04/99. The said section 268 of the Act provides that the Board
may issue    instruction   or   directions   to   the   other     income-tax
authorities fixing monetary limits for not filing the appeals before
the Appellate Tribunal or the Courts, said instructions/directions
are binding on the income tax authorities.

4.    It is noticed that the CBDT has issued Circular No. 3 of 2018
dated 11.07.2018, vide which it has revised the monetary limit to
Rs.20,00,000/-    for not filing the appeal before the Tribunal, the
said circular reads as under:
     " Subject: Revision of monetary limits for filing of appeals
     by the Department before Income Tax Appellate Tribunal,
     High Courts and SLPs/appeals before Supreme Court-
     measures for reducing litigation-Reg.

     Reference is invited to Board ' s Circular No. 21 of 2015 dated
     10.12.2015 wherein monetary limits and other conditions for
     filing departmental appeals (in Income-tax matters) before
     Income Tax Appellate Tribunal, High Courts and SLPs/
     appeals before Supreme Court were specified.

     2. In supersession of the above Circular, it has been decided
     by the Board that departmental appeals may be filed on
     merits before Income Tax Appellate Tribunal and High
     Courts and SLPs/ appeals before Supreme Court keeping in
     view the monetary limits and conditions specified below.
                                3                     ITA No. 4330/Del/2016
                                                        CO No. 303/Del/2016
                                                 Urbane The Design Workshop
3. Henceforth, appeals/ SLPs shall not be filed in cases where
the tax effect does not exceed the monetary limits given
hereunder:

         Appeals/SLPs in Income-tax            Monetary
S No
         matters                               Limit (in Rs)
 1       Before Appellate Tribunal             20,00,000/-
 2       Before High Court                     50,00,000/-
 3       Before Supreme Court                  1,00,00,000/-

It is clarified that an appeal should not be filed merely
because the tax effect in a case exceeds the monetary limits
prescribed above. Filing of appeal in such cases is to be
decided on merits of the case.






4. For this purpose, ` tax effect ' means the difference bet ween
the tax on the total income assessed and the tax that would
have been chargeable had such total income been reduced by
the amount of income in respect of the issues against which
appeal is intended to be filed (hereinafter referred to as
` disputed issues). Further, ` tax effect ' shall be tax including
applicable surcharge and cess. However, the tax will not
include any interest thereon, except where chargeability of
interest itself is in dispute. In case the chargeability of
interest is the issue under dispute, the amount of interest
shall be the tax effect. In cases where returned loss is
reduced or assessed as income, the tax effect would include
notional tax on disputed additions. In case of penalty orders,
the tax effect will mean quantum of penalty deleted or
reduced in the order to be appealed against.

5. The Assessing Officer shall calculate the tax effect
separately for every assessment year in respect of the
disputed issues in the case of every assessee. If, in the case of
an assessee, the disputed issues arise in more than one
assessment year, appeal can be filed in respect of such
assessment year or years in which the tax effect in respect of
the disputed issues exceeds the monetary limit specified in
para 3. No appeal shall be filed in respect of an assessment
year or years in which the tax effect is less than the monetary
limit specified in para 3. In other words, henceforth, appeals
                                4                     ITA No. 4330/Del/2016
                                                        CO No. 303/Del/2016
                                                 Urbane The Design Workshop
can be filed only with reference to the tax effect in the
relevant assessment year. Ho wever, in case of a composite
order of any High Court or appellate authority, which
involves more than one assessment year and common issues
in more than one assessment year, appeals shall be filed in
respect of all such assessment years even if the tax effect is
less than the prescribed monetary limits in any of the year(s),
if it is decided to file appeal in respect of the year(s) in
which tax effect exceeds the monetary limit prescribed. In
case where a composite order/judgement involves more than
one assessee, each assessee shall be dealt with separately.

6. Further, where income is computed under the provisions of
section 115JB or section 115JC, for the purposes of
determination of ` tax effect ' , tax on the total income assessed
shall be computed as per the follo wing formula-

  (A -- B) + (C -- D)
  where,

  A = the total income assessed as per the provisions other
  than the provisions contained in section 115JB or section
  115JC (herein called general provisions);

  B = the total income that would have been chargeable had
  the total income assessed as per the general provisions
  been reduced by the amount of the disputed issues under
  general provisions;

  C = the total income assessed as per the provisions
  contained in section 115JB or section 115JC;
  D = the total income that would have been chargeable had
  the total income assessed as per the provisions contained
  in section 115JB or section 1I5JCwas reduced by the
  amount of disputed issues under the said provisions:

Ho wever, where the amount of disputed issues is considered
both under the provisions contained in section 115JB or
section 115JC and under general provisions, such amount
shall not be reduced from total income assessed while
determining the amount under item D.
                              5                    ITA No. 4330/Del/2016
                                                     CO No. 303/Del/2016
                                              Urbane The Design Workshop


7. In a case where appeal before a Tribunal or a Court is not
filed only on account of the tax effect being less than the
monetary limit specified above, the Pr. Commissioner of
Income-tax/ Commissioner of Income Tax shall specifically
record that " even though the decision is not acceptable,
appeal is not being filed only on the consideration that the
tax effect is less than the monetary limit specified in this
Circular " . Further, in such cases, there will be no
presumption that the Income-tax Department has acquiesced
in the decision on the disputed issues. The Income-tax
Department shall not be precluded from filing an appeal
against the disputed issues in the case of the same assessee
for any other assessment year, or in the case of any other
assessee for the same or any other assessment year, if the tax
effect exceeds the specified monetary limits.

8. In the past, a number of instances have come to the notice
of the Board, whereby an assessee has claimed relief from the
Tribunal or the Court only on the ground that the Department
has implicitly accepted the decision of the Tribunal or Court
in the case of the assessee for any other assessment year or
in the case of any other assessee for the same or any other
assessment year, by not filing an appeal on the same disputed
issues. The Departmental representatives/counsels must make
every effort to bring to the notice of the Tribunal or the
Court that the appeal in such cases was not filed or not
admitted only for the reason of the tax effect being less than
the specified monetary limit and, therefore, no inference
should be dra wn that the decisions rendered therein were
acceptable to the Department. Accordingly, they should
impress upon the Tribunal or the Court that such cases do not
have any precedent value and also bring to the notice of the
Tribunal/ Court the provisions of sub section (4) of section
268A of the Income-tax Act, 1961 which read as under :

  " (4) The Appellate Tribunal or Court, hearing such appeal
  or reference, shall have regard to the orders, instructions
  or directions issued under sub-section (1) and the
  circumstances under which such appeal or application for
  reference was filed or not filed in respect of any case. "
                               6                     ITA No. 4330/Del/2016
                                                       CO No. 303/Del/2016
                                                Urbane The Design Workshop


9. As the evidence of not filing appeal due to this Circular
may have to be produced in courts, the judicial folders in the
office of Pr. CsIT/CsIT must be maintained in a systemic
manner for easy retrieval.

10. Adverse judgments relating to the following issues should
be contested on merits notwithstanding that the tax effect
entailed is less than the monetary limits specified in para 3
above or there is no tax effect:

  (a) Where the Constitutional validity of the provisions of
  an Act or Rule is under challenge, or

  (b) Where Board ' s order, Notification, Instruction or
  Circular has been held to be illegal or ultra fires, or

  (c) Where Revenue Audit objection in the case has been
  accepted by the Department, or

  (d) Where the addition relates to undisclosed foreign
  assets/ bank accounts.

11. The monetary limits specified in para 3 above shall not
apply to writ matters and Direct tax matters other than
Income tax. Filing of appeals in other Direct tax matters
shall continue to be governed by relevant provisions of
statute and rules. Further, in cases where the tax effect is not
quantifiable or not involved, such as the case of registration
of trusts or institutions under section 12A/ 12AA of the IT
Act, 1961 etc., filing of appeal shall not be governed by the
limits specified in para 3 above and decision to file appeals
in such cases may be taken on merits of a particular case.






12. It is clarified that the monetary limit of Rs. 20 lakhs for
filing appeals before the ITAT would apply equally to cross
objections under section 253(4) of the Act. Cross objections
below this monetary limit, already filed, should be pursued
for dismissal as withdra wn/ not pressed. Filing of cross
objections below the monetary limit may not be considered
henceforth. Similarly, references to High Courts and SLPs/
                                   7                     ITA No. 4330/Del/2016
                                                           CO No. 303/Del/2016
                                                    Urbane The Design Workshop
     appeals before Supreme Court below the monetary limit of
     Rs. 50 lakhs and Rs. 1 Crore respectively should be pursued
     for dismissal as withdra wn/ not pressed. References before
     High Court and SLPs/ appeals below these limits may not be
     considered henceforth.

     13.    This Circular will apply to SLPs/ appeals/ cross
     objections/   references    to    be    filed   henceforth  in
     SC/HCs/Tribunal and it shall also apply retrospectively to
     pending SLPs/ appeals/ cross objections/references. Pending
     appeals belo w the specified tax limits in pare 3 above may be
     withdra wn/ not pressed.

     14. The above may be brought to the notice of all concerned.

     15. This issues under Section 268A of the Income-tax Act
     1961. "

5.    From Clause 12 & 13 of the above said circular it is clear that
these instructions are applicable to the pending appeals also and as
per clause 13, there is clear cut instruction to the depart ment to
withdraw or not to press the appeals filed before the ITAT wherein
tax effect is less than Rs.20,00,000/-. These instructions are
operative retrospectively to the pending appeals.

6.    Keeping in view the CBDT Circular No. 3 of 2018 dated
11.07.2018 and also the provisions of Section 268A of Inco me Ta x
Act, 1961, we are of the view that the Revenue should not have
filed the instant appeal before the Tribunal.

7.    In the Cross Objection, the only grievance of the assessee
relates to the confirmation of addition of Rs.43,376/- made by the
AO by disallowing the 10% car running and other expenses, o n
estimate basis.
                                  8                      ITA No. 4330/Del/2016
                                                           CO No. 303/Del/2016
                                                    Urbane The Design Workshop


8.    The facts related to this issue in brief are that the AO during
the course of assessment proceedings noticed that the assessee had
debited Rs.1,62,414/- under the head " car running & maintenance "
expenses, Rs.1,71,153/- under the head " depreciation on car " ,
Rs.71,062/- under the head " interest on car loan " and Rs.29,110/-
under the head " car insurance " totaling to Rs.4,33,739/-. The AO
disallowed 10% of the above expenses by observing that the
personal ele ments of these expenses cannot be ruled out.

9.    Being aggrieved the assessee carried the matter to the ld.
CIT(A) and sub mitted that the ad-hoc disallowance had been made
without appreciating the nature& volume of the business. It was
further stated that the assessee had achieved a combined turnover
of Rs.5.60 crores.

10.   The ld. CIT(A) after considering the submissions of the
assessee sustained the addition by observing that the personal
ele ments of expenditure on the usage of cars & telephones and fa x
cannot be ruled out as no details of expenses like log books and
call registers were maintained.

11.   Now the assessee has filed the Cross Objection. The ld. CIT
DR supported the orders of the authorities below.

12.   We have considered the sub missions of the ld. CIT DR and
perused the material available on the record. In the present case,
the ld. CIT(A) categorically stated that the assessee had not
                                        9                  ITA No. 4330/Del/2016
                                                             CO No. 303/Del/2016
                                                      Urbane The Design Workshop
furnished details, log books and car register wherein the details o f
the expenses were maintained. Therefore, the personal ele ments o f
expenditure cannot be ruled out. In our opinion, the personal use in
depreciation, insurance and interest on car loan, cannot be
established and it is not the case of the AO that the car was not
used for the business purpose. However, in car running and
maintenance expenses, personal elements cannot be ruled out.
Therefore, we modify the order of the ld. CIT(A) and direct the AO
not to make any disallowance out of interest on car loan, car
insurance and depreciation on car. The re maining disallowance
made by the AO and sustained by the ld. CIT(A) on account o f
personal ele ment of expenditure are confirmed.

13.     In the result, the appeal of the department is dismissed and Cross
Objection of the assessee is partly allowed.
 (Order Pronounced in the Court on 13/08/2018)


         Sd/-                                            Sd/-
(Sudhanshu Srivastava)                              (N. K. Saini)
 JUDICIAL MEMBER                               ACCOUNTANT MEMBER
Dated: 13/08/2018
*Subodh*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5.DR: ITAT
                                                 ASSISTANT REGISTRAR

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