Income Tax Officer Raipur CG vs Hira Steel Ltd Raipur CG

Satish K. Agnihotri, J.—This instant appeal arises from the order dated 29.04.2005 passed in I.T.A. No. 144/Nag/2004, by the Income Tax Appellate Tribunal (for short `the Tribunal''), Nagpur Bench, Nagpur, order dated 15.04.2004 passed by the Commissioner of Income Tax (Appeal) [for short `the CIT (A)], Raipur, was set aside, allowing the appeal in part.

This appeal u/s 260-A of the Income Tax Act, 1961 (for short `the Act, 1961'') filed by the Department has been admitted on the following substantial questions of law:

Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the sum of Rs. 38 lakhs was a trade advance and not a cash credit attracting provisions of sec. 68 of the Income Tax Act, 1961?

The assessee company is engaged in manufacture of sale of wire, rods, CTD bars etc. Return for the assessment year 1998-1999 was filed by the assessee declaring a total taxable income as nil. The Assessing Officer (for short `the AO'') made an addition of Rs. 38 lacs on account of income surrendered during survey u/s 133A of the Act, 1961. The respondent/assessee filed an appeal before the CIT (A) which was dismissed confirming the order passed by the AO. Thereagainst, the respondent/assessee preferred an appeal before the Tribunal. The Tribunal, vide order dated 29.04.2005, allowed the appeal of the respondent/assessee in part holding that the amount of Rs. 38 lacs deposited is a trade advance and not unexplained cash credit.

The Tribunal, by order dated 29.04.2005, held as under:

As far as the disallowance out of staff welfare expenses is concerned, the Assessing Officer has given a clear finding that includes expenses towards tea, pan, sweets, cold-drinks etc. and hence some disallowance is called for. Considering the totality of the facts and circumstances, I am of the considered view that the disallowance of Rs. 50,000/- out of total expenses of 1,94,398/- towards staff welfare is on higher side A disallowance of Rs. 20,000/- on this account will meet the ends of justice. The disallowance out of staff welfare expenses is reduced to Rs. 20,000/- from Rs. 50,000/- made by the lower authority. The appeal of the assessee on fourth ground is partly allowed.

Shri Shashank Dubey, learned Senior counsel with Shri Neelabh Dubey, learned Advocate for the respondent/assessee raised a preliminary objection with respect to maintainability of the appeal on account of no tax effect. Referring to the instruction No. 1979 dated 27.03.2000 issued by the Central Board of Direct Taxes, it was argued that the minimum monetary limit for filing an appeal before the High Court is Rs. 2,00,000/- whereas in the instant case, the tax effect is much less than the aforestated amount.

On perusal of the document, it is found that the total tax effect is negligible i.e. less than 2 lacs and as such, no appeal is maintainable when the minimum monetary limit is 2 lacs.

Thus, considering instruction No. 1979 dated 27.03.2000, wherein the minimum monetary limit for filing an appeal before the High Court at the relevant time has been fixed at Rs. 2,00,000/- and considering the tax effect in this appeal which is not more than the prescribed limit, we do not deem it necessary to go into the merits of the case. In view of the above, the appeal is dismissed having negligible tax effect.