Revenue Appeal Below Monetary Limit Dismissed, Costs Recovered from DCIT’s Salary: Bombay High Court

The Bombay High Court dismissed a ₹7,11,920 tax-effect appeal, holding that Sales Tax Department inputs fall outside the law-enforcement exception in the 2018 CBDT circular, and ordered ₹25,000 costs against the officer.

The Bombay High Court has dismissed an income tax appeal filed by the Revenue with a tax effect far below the ₹2 crore monetary limit, holding that information received from the Sales Tax Department does not bring the case within clause 10(e) of the CBDT circular dated 20 Aug 2018. That clause permits appeals below the limit only where the addition rests on information from law enforcement agencies such as the CBI, ED, DRI, SFIO or DGGI [Pr. Commissioner of Income Tax-1, Nagpur v. Abhishek Engineering and Chemical Ltd., 2026-juristway.com-3345-HC(Bombay)-Income Tax].

The Bench of Justice Anil L. Pansare and Justice Nivedita P. Mehta noted that the tax effect in the appeal was ₹7,11,920. The issue was covered by the Court’s own order dated 27 Mar 2026 in Pr. Commissioner of Income Tax-1, Nagpur v. Siddhesh Mahendra Khara (Income Tax Appeal No. 23/2023), where it held that the Sales Tax Department is not a law enforcement agency and that the ITAT was right in holding that the Revenue ought not to have appealed. That order had followed the Chhattisgarh High Court in Deputy Commissioner of Income Tax 1, Bhilai v. Bhojraj Lal Chand Nawani (MCC No. 621/2019).

Asked to justify pursuing the appeal, the Deputy Commissioner of Income Tax, Amravati Circle, filed an additional affidavit. He accepted that the matter was covered and stated that the CBDT had not approved a challenge to the earlier ruling before the Supreme Court, saying the case on merit was weak. He nonetheless relied on CBDT Circular No. 5 of 2024 to argue that the Sales Tax Department is a law enforcement agency, and maintained that the appeal could not be withdrawn.

The Court held that the 2024 circular did not apply, since the ITAT had decided the matter on 4 Oct 2022 and the 2018 circular then in force did not list the Sales Tax Department. It observed: “We are surprised by the stand taken by the appellant.” Once the Revenue had accepted the earlier finding on identical facts, the order bound it, and reliance on the 2024 circular, known to be inapplicable, “was uncalled for”. The Court added: “We deprecate the said conduct.”

The appeal was dismissed with costs of ₹25,000, to be deducted from the salary of Mr. Suresh G. Kamble, Deputy Commissioner of Income Tax, Amravati Circle, for taking a stand contrary to the law laid down by the Court. The costs are to be deposited with the High Court Legal Services Sub-Committee, Nagpur, within four weeks of the order.

2026-juristway.com-3345-HC(Bombay)-IT