ITAT dismisses Revenue Appeal on Ground of CBDT Circular on Low Tax Effect [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) dismissed the appeal filed by the Revenue as the case is non-maintainable at the court of law, as mandated by CBDT Circular on low tax effect.

The Revenue-Appellant had filed an appeal against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] in the case of Nanalayja Power Company Ltd. The order deleted an addition made by the Assessment Officer( A.O) under section 56 of the act in the assessment order passed by the AO under section 143(3) dated 27/11/2019 for the assessment year 2014-15.

Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here

The AO had reopened the assessment under Section 147 of the Act, stating that an interest earned by the assessee on temporarily parked project funds had escaped the initial assessment. The AO in the reassessment held that this interest income was liable to tax under the head of ‘Income from Other Sources’ and relied on the case of Tuticorin Alkali Chemicals & Fertilizers Ltd v. CIT to confirm this.

In the appeal to the CIT(A), the commissioner held that the interest income here was capital and directly related to the funds used for the project, making it adjustable to the Capital work-in-progress (CWIP). The commissioner relied on the issues discussed in the case of Adani Power Ltd, which gave a new perspective from that shown in the case of Tuticorin Alkali Chemicals and Fertilizers case and ordered the deletion of such interest income.

In the appeal to the ITAT, the revenue held that the CIT(A) had caused an error in deleting the addition made by the AO and that the interest income should be treated as “Income under Other Sources’. During the hearing, however, none appeared on behalf of the assessee. The Departmental Representative for the revenue further confirmed that the tax effective in the instant appeal is below the limit prescribed in Circular No. 09/2024, which was issued by the Central Board of Direct Taxes (CBDT) on 17th September 2024.

Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here

The Circular revised the monetary limits for filing appeals before various appellate authorities, and the revised minimum limit for appeals of the ITAT was revised to be 60 Lakhs.

The Departmental representative also held that the AO has verified and confirmed that this appeal falls within the scope of the CBDT circular No. 09/2023 on low tax effect. The representative argued that since the threshold for the ITAT has a tax effect of 60 Lakhs and as the tax effect, in this case, is below 60 Lakhs, the revenue's appeal is not maintainable at the ITAT.

Based on submissions made by the Departmental Representative of Revenue and confirmation from the AO, the division bench consisting of Ms Suchitra Kamble( Judicial Member) and Mr Makarand V. Mahadeokar( Accountant Member) pronounced the appeal to be dismissed in the light of non-maintainability.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates