CBDT Monetary Limits for Income Tax Appeals: ITAT, High Court & Supreme Court Explained

As per CBDT's Circular No.17/2019, the department cannot file appeals before the ITAT/High Court/ Supreme Court incase the tax impact (except interest and penalty) of disputed issues exceed the following limits -

Now the question is, what lies incase where a separate order is passed by higher appellate authorities for each assessment year vis-à-vis where a composite order for more than one assessment years is passed. In such cases, the AO 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 as above. 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 above.

Even in the 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, 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 the above table. In case where a composite order/ judgement involves more than one assessee, each assessee shall be dealt with separately.

Let's understand by means of an examples -

1. Say incase of an assessee, an issue regarding disallowance of ‘provision for gratuity' arises for 3 AY's 2019-20, 2020-21 and 2021-22 in separate orders as follows -

The department can file an appeal before the ITAT for AY 2019-20 only. However, even for AY 2020-21 and 2021-22 it should not be construed that the Department has accepted the earlier order. The Commissioners 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 instruction ”.

1. Incase for a matter for 3 AY's 2014-15, 2015-16 and 2016-17, w.r.t. an issue regarding disallowance of provision for gratuity for Rs. 60 Lakhs, Rs. 50 Lakhs and Rs. 40 Lakhs respectively, when the CIT(A) passes say a composite Order, even then the department can file an appeal before the ITAT for AY 2014-15 only.

2. Incase the dispute in AY 2019-20 is regarding the applicability of Interest and penalty in a matter where tax has been delayed paid. The amount of the demand of Interest is Rs.55 Lakhs and penalty is Rs.51 Lakhs, then also the department can file an appeal before the ITAT for interest as well as penalty as both the disputed issues are above Rs.50 lakhs threshold and would be regarded as 'tax impact'.

3. Incase Constitutional Validity of say Section 148 is challenged - In such case the Circular would not apply as matters where the Constitutional validity of the provisions of an Act or Rule are under challenge are excluded from the scope of the circular.

4. The other cases which are excluded from the scope of the circular are as follows -

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

(B) Where Revenue Audit objection in the case has been accepted by the Department.

(C) Where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12 A of the IT Act, 1961.

5. Incase of appeal made by the department before August 2019, then also this circular would apply to the effect that incase the thresholds are breached the appeals would have to be withdrawn. The concession extended by the CBDT not only applies to the appeals to be filed in future but it is also equally applicable to the appeals pending for disposal as on the date of issuance of the Circular. The circular dated 8th August 2019 is not a standalone circular. It is to be read in conjunction with the CBDT circular no 3 of 2018 (and subsequent amendment thereto), and all it does is to replace paragraph nos. 3 and 5 of the said circular. The same was decided in the case of THE ITO, WARD-3(1), LUDHIANA Vs M/s A. NAIRSONS INDUSTRIES (INDIA) [2023-VIL-599-ITAT-CHD].