The Income Tax Appellate Tribunal, Jodhpur, has dismissed a revenue appeal on the grounds of non-maintainability due to the tax effect falling below the mandatory threshold prescribed by the Central Board of Direct Taxes. This ruling reinforces the procedural rigour required for departmental appeals and clarifies the binding effect of CBDT circulars on appellate jurisdiction.
Background & Facts
The Dispute
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals), Udaipur, dated 28.05.2025, which had allowed the assessee’s claim and set aside an order passed under Section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax (PCIT), Udaipur, dated 24.03.2023. The PCIT’s order had reopened the assessment on the ground of alleged error prejudicial to revenue. The CIT(A) reversed this order, relying on a prior judgment of the ITAT Jodhpur Bench dated 05.04.2024, which had quashed a similar Section 263 order.
Key Facts
- The assessment year under dispute is 2018-19.
- The tax effect of the disputed demand, as admitted by the Revenue, is Rs. 12,90,000.
- The Principal Commissioner of Income Tax (PCIT), Udaipur, passed the order under Section 263 on 24.03.2023.
- The CIT(A) passed the impugned order on 28.05.2025, allowing the assessee’s appeal.
- The Revenue filed the present appeal before the ITAT Jodhpur on ITA No. 640/Jodh/2025.
- The Revenue’s appeal before the High Court of Rajasthan against the ITAT’s 05.04.2024 judgment was pending at the time of hearing.
Procedural History
- 24.03.2023: PCIT, Udaipur, passed order under Section 263 to revise the assessment.
- 05.04.2024: ITAT Jodhpur Bench quashed the Section 263 order in a related case, setting a precedent.
- 28.05.2025: CIT(A), Udaipur, followed the 05.04.2024 ITAT judgment and allowed the assessee’s appeal.
- 07.05.2026: Hearing held before ITAT Jodhpur Bench.
- 13.05.2026: Judgment pronounced.
The Parties' Positions
For the Revenue: Argued that the CIT(A) erred in following the ITAT Jodhpur’s 05.04.2024 judgment, as the Revenue’s appeal against that judgment was pending before the Rajasthan High Court. It contended that the CIT(A) should have stayed the order pending the High Court’s decision.
For the Assessee: Contended that the Revenue’s appeal before the ITAT was not maintainable under the CBDT’s threshold limits for filing appeals, irrespective of the merits of the case.
Relief Sought
The Revenue sought to set aside the CIT(A)’s order and restore the PCIT’s Section 263 order. The assessee sought dismissal of the appeal on grounds of non-maintainability.
The Legal Issue
Whether a revenue appeal before the Income Tax Appellate Tribunal is maintainable when the tax effect is below the threshold of Rs. 60 lakhs prescribed by CBDT Circular No. 09/2024, and no exception under Circular No. 5/2024 applies.
Arguments Presented
For the Appellant (Revenue)
The Revenue contended that the CIT(A) acted contrary to judicial propriety by relying on a judgment that was under challenge before the Rajasthan High Court. It argued that the pendency of the High Court appeal rendered the ITAT’s 05.04.2024 judgment non-binding and that the CIT(A) should have awaited the High Court’s decision. The Revenue further submitted that the issue involved a substantial question of law regarding the scope of Section 263, warranting appellate review.
For the Respondent (Assessee)
The assessee’s counsel emphasized that the tax effect of Rs. 12,90,000 is well below the Rs. 60 lakh threshold prescribed by CBDT Circular No. 09/2024 dated 17.09.2024 for filing appeals before the ITAT. The counsel pointed out that the Revenue did not invoke any exception under Circular No. 5/2024 dated 15.03.2024, which lists cases exempt from the threshold. The Revenue’s counsel candidly admitted this during the hearing.
The Court's Analysis
The Tribunal observed that the maintainability of a revenue appeal before the ITAT is governed by the procedural guidelines issued by the CBDT. The circulars are not mere administrative instructions but have the force of law in determining jurisdictional thresholds. The Tribunal noted that the Revenue itself conceded that the tax effect of Rs. 12,90,000 falls below the prescribed limit and that no exception under Circular No. 5/2024 applies.
"The Revenue has not shown that the case falls within any of the exceptions enumerated in Circular No. 5/2024, nor has it demonstrated that the matter involves a substantial question of law warranting deviation from the threshold."
The Tribunal further held that the pendency of an appeal before the High Court against a precedent does not automatically invalidate the application of that precedent by lower forums, especially when the threshold for appeal is not met. The CIT(A) was entitled to follow the binding precedent of the same ITAT Bench unless stayed by a higher authority, which had not occurred.
The Tribunal emphasized that the CBDT circulars are designed to reduce litigation burden and ensure efficient use of appellate resources. Ignoring these thresholds undermines the policy objective of the circulars and opens the door to frivolous appeals.
The Verdict
The appeal filed by the Revenue is dismissed as not maintainable. The tax effect of Rs. 12,90,000 is below the Rs. 60 lakh threshold under CBDT Circular No. 09/2024, and no exception applies. The order of the CIT(A) dated 28.05.2025 is upheld. The Revenue is directed to bear the costs of the appeal.
What This Means For Similar Cases
Threshold Compliance Is Mandatory
- Practitioners must calculate tax effect accurately before filing any revenue appeal before the ITAT.
- Appeals with tax effect below Rs. 60 lakh are liable to be dismissed summarily, regardless of legal merit.
- The burden lies on the Revenue to prove applicability of an exception under Circular No. 5/2024.
Precedents Remain Binding Unless Stayed
- Lower forums may rely on ITAT judgments even if an appeal is pending before the High Court, unless a stay is expressly granted.
- The pendency of a higher court appeal does not render a precedent non-binding for lower tribunals.
- Counsel should not argue procedural irregularity based on pending appeals unless a stay order is produced.
Strategic Implications for Tax Litigation
- Assessees may now raise non-maintainability as a preliminary objection in revenue appeals with low tax effect.
- Revenue authorities should prioritize appeals only where tax effect exceeds Rs. 60 lakh or qualifies under Circular No. 5/2024 exceptions.
- Tax practitioners must maintain a checklist of CBDT circulars before initiating or defending any appeal.
