Revenue's Claim of Exceptional Case Rejected: Delhi HC Dismisses Appeal Over Monetary Threshold [Read Order]

The Delhi High Court has dismissed an appeal filed by the income tax department on the ground that the tax effect involved was below the prescribed monetary threshold of ₹2 crore, and no exceptional circumstances were demonstrated to justify the appeal.

The Revenue had invoked the exception clause under the CBDT Circular dated 17.09.2024, contending that the case involved accommodation entries. However, the Court found this argument to be unsubstantiated.

The appeal arises from a series of repeated assessment proceedings concerning Garg Acrylic Ltd. for Assessment Year 2011-12. Initially, the assessee’s income was scrutinized and assessed, and the resultant additions were set aside by the CIT(A), which was affirmed by the Income Tax Appellate Tribunal ( ITAT ).

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However, based on subsequent inputs from the Income Tax Investigation Wing, the Assessing Officer (AO) reopened the assessment multiple times, alleging bogus purchases from certain parties.

Despite the assessee furnishing extensive documentary evidence to establish the genuineness of the transactions, including invoices, VAT forms, test reports, and payment records through banking channels, the AO proceeded to disallow 20% of the purchases, treating them as partly unverifiable.

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The CIT(A), in a more severe approach, disregarded the assessee’s documentation entirely and treated the entire purchase value as unexplained expenditure under Section 69C of the Income Tax Act, based on unrelated assessments of the vendors. This was later reversed by the ITAT, which found that there was no cogent evidence linking the vendors' alleged financial irregularities with the assessee’s transactions.

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On further appeal, the High Court upheld the ITAT’s decision, noting that the findings were based on a proper appreciation of facts and evidence.

The bench of Justices Vibhu Bakhru and Tejas Karia held that there was no indication of the assessee having received any cash back or indulging in accommodation entries, an essential ingredient to qualify for the exception under the CBDT circular. Therefore, the Revenue’s claim that the case involved exceptional circumstances warranting an appeal, despite the low tax effect, was found to be without merit.

The Court ruled that no substantial question of law arose from the ITAT’s order and dismissed the appeal. It reiterated that the Revenue must adhere to its own guidelines on monetary limits for appeals, barring genuine exceptions, which were clearly absent in this case.

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To Read the full text of the Order CLICK HERE

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