Instruction No. 3/2011 (F. No. 279/MISC. 142/2007-ITJ) dated 9-2-2011 — Appeals and Revision of monetary limits for filing of appeals by the Department before Income-tax Appellate Tribunal, High Courts and Supreme Court — Section 268A of the Income-tax Ac

Reference is Invited to Board’s instruction No. 5/2008, dated
15-5-2008 wherein monetary limits and other conditions for filing Departmental
appeals (in income-tax matters) before the Appellate Tribunal, High Courts and
Supreme Court were specified.

2. In supersession of the above instruction, it has been
decided by the Board that Departmental appeals may be filed on merits before the
Appellate Tribunal, High Courts and Supreme Court keeping in view the monetary
limits and conditions specified below.

3. Henceforth appeals shall not be filed in cases where the
tax effect does not exceed the monetary limits given hereunder :

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
between 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’). 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 paragraph 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 paragraph 3. In other words, henceforth,
appeals can be filed only with reference to the tax effect in the relevant
assessment year. However, 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, appeal 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/judgment involves more than one
assessee, each assessee shall be dealt with separately.

6. In a case where an 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 Commissioner of the 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 instruction”. 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.

7. 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 drawn 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. As the evidence of not filing appeal due to this instruction
may have to be produced in Courts, the judicial folders in the office of CsIT
must be maintained in a systemic manner for easy retrieval.

8. 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 paragraph 3 above or there is no tax effect: