Filing of Appeal by the Income Tax Department - Latest

Sec 268A of the Income-tax Act (‘IT Act’) empowers Central Board of Direct Taxes (‘CBDT’) to issue instructions, orders/ directions to the income-tax authorities for fixing monetary limits as it deem fit for regulating filing of appeal by any income-tax authority.

These instructions have to be complied with by income-tax authorities in the matters of filing of appeal before ITAT/High Court/Supreme Court.

In this article attempt has been made to compare the instruction issued under Section 268A in last four occasions in the years- 2018/2015/2014/2011.

The appeals/SLP should not be filed by the income-tax authority unless tax effect exceed monetary limits mentioned. These limits are not applicable to writ matters/Section 12A registration and direct tax matters other than income-tax. 

Monetary Limits in Rs: -

Filing of appeals should be filed on the merits of the cases even in case where the tax effect exceeds the monetary limit mentioned above. In other words, the filing appeal should be on issue basis and not just only on the basis of meeting monetary criteria.

“Tax effect” refers to tax payable along with surcharge and cess² on disputed issues. Interest is should not be included unless dispute itself is interest. If the dispute arises on levy of penalty, the amount of penalty is the tax effect.

Tax effect shall be computed even in case assessee is liable to pay tax as per the provisions of Section 115JB/115JC.

The tax effect shall be calculated separately for every assessment year in respect of disputed issues in case of assessee.

In case of composite order of High Court or appellate authority which involves more than one assessment year in case of an assessee on common issues arise in more than one-year appeal shall be filed in respect of all assessment years even if the tax effect is less than monetary limit in any particular assessment year(s) when it is decided to file appeal in respect of the year in which tax effect exceeds the monetary limit.

In the composite order involves more than one assessee each assessee shall be dealt with separately.

Non-filing of appeal by the income-tax authority due to monetary limits will not result in acceptance of the decision by it on the disputed issues.

In case non-filing the Pr. CIT/CIT        ³shall specifically record that fact that though decision is not acceptable, appeal is not being filed for the reason being that the tax effect is less than monetary limit specified. 

The income-tax authority should bring to the notice of Tribunal / Court the instructions, orders issued under Section 268A (1). 

Appeal should be filed on merit basis without regard to monetary limits of tax effect in the following cases:

• Where constitutional validity of provisions of the Act or Rules are challenged;
• Where the CBDT order, notification, instruction, circular has been held to be illegal or ultra vires;
• Where Revenue Audit objection has been accepted by the department;
• Where additions relating to undisclosed foreign assets or bank accounts.

Applicability of Instruction/ Circular: -

If the dispute arises in more than one assessment year, appeal can be filed in respect of such assessment year or years in which tax effect exceeds monetary limit. In other words, tax effect is assessment year specific.