Case Law Details
ITO Vs R P Develpoers (ITAT Mumbai)
Mumbai ITAT: Interest Under Sections 234B & 234C Excluded While Computing Tax Effect; Revenue’s Appeal Dismissed as Below Monetary Limit
The Mumbai ITAT dismissed the Revenue’s appeal as not maintainable on account of low tax effect, holding that interest levied under sections 234B and 234C cannot be included while computing the “tax effect” for the purpose of CBDT monetary limit circulars. Although the total demand reflected in the assessment was ₹85.65 lakh, the Tribunal noted that ₹42.39 lakh represented consequential interest under sections 234B and 234C, which was not independently in dispute and therefore had to be excluded in terms of CBDT Circular No. 5/2024. After excluding the interest component, the actual tax effect worked out to ₹43.68 lakh, which was below the ₹60 lakh monetary threshold prescribed for filing appeals before the ITAT under CBDT Circular No. 9/2024 issued under section 268A. Accordingly, without examining the merits of the Revenue’s challenge to the deletion of the addition under section 68 relating to alleged accommodation loan entries, the Tribunal dismissed the appeal as not maintainable due to low tax effect.
Cases Discussed
- Ghata Mehandipur Balaji Griding Works (P.) Ltd. Vs. PCIT(Central) (SC), [2024] 169 com730 (SC)
- K. Global Vs. ITO (ITAT Mumbai), [2024] 167 com15 (Mumbai-Trib.)
- Siddharth Gupta Vs PCIT (SC), [2023] 150 com399 (SC)
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is filed by the Department against the order of Ld. CIT(A) NFAC vide DIN: ITBA/NFAC/S/250/2025-26/1081568910(1) dated 08-Oct-2025 for the Assessment Year 2011-12. The Department has raised the following grounds of appeal:
1. “Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting addition of Rs. 1.40 Cr as unexplained credit (Accommodation entry in form of Loan) even in absence of creditworthiness of the lender M/s. Delight Diam Pvt. Ltd.”
2. “Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in not considering the fact that the addition was made on the basis of information received from ADIT(Inv)-2, Surat.”
3. “Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in the light of the recent decision of the Hon’ble Supreme Court in the case of “Ghata Mehandipur Balaji Griding Works (P.) Ltd. Vs. PCIT(Central) [2024] 169 com730 (SC) dated 12.12.2024 wherein the Hon’ble Supreme Court confirmed the addition made by the AO on account of accommodation entries in respect of bogus loan.”
4. “Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in the light of the decision of the Hon’ble Supreme Court in the case of “Siddharth Gupta Vs PCIT [2023] 150 com399 (SC) wherein the Hon’ble Supreme Court confirmed the addition made by the AO on account of accommodation entries in respect of bogus loan.”
5. “Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in the light of the recent decision of Hon’ble ITAT, SMC Bench, Mumbai in the case of “J.K. Global Vs. ITO [2024] 167 com15 (Mumbai-Trib.) dated 05.09.2024. wherein the Hon’ble ITAT confirmed the addition made by the Assessing Officer on account of bogus unsecured loan, information of which was provided by the DGIT(Inv.), Mumbai.
6. “The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.
2. At the very outset, the Ld. AR appearing on behalf of the assessee raised a legal as well as factual objection to the effect that the present appeal filed by the Revenue is not maintainable on account of low tax effect. Since this objection goes to the root of the case, we have decided to adjudicate this issue first.
3. In this regard, we have heard the counsel for both the parties and perused the material placed on record. After having considered the facts of the case, we find that the present appeal has been filed by the Revenue against the order of the Ld. CIT(A) dated 08.10.2025. The respondent in the present case is RK Developers, Mumbai. We noticed that the AO completed the assessment under section 143(3) read with section 147 of the Act for the year under consideration, thereby making an addition of Rs. 1,40,00,000 by treating the same as unexplained credit in the form of unsecured loans. Thereafter, a tax demand of Rs.85,65,480 was raised vide notice dated 21.12.2018. However, the Ld. CIT(A), vide order dated 08.10.2025, deleted the said addition on the merits of the case, against which the Revenue has preferred the present appeal.
4. In these circumstances, it is necessary to evaluate the total tax effect involved in the present case. We have already noticed that the total tax demand of Rs.85,65,480 is reflected in the Income-tax Computation Form mentioned in Form No. 36 filed by the Revenue, but the said figure does not represent the actual tax effect as contemplated under CBDT Circular No. 5/2024 dated 15.03.2024.
5. A perusal of the Income-tax Computation Form (ITNS) for the relevant year clearly reveals that the total demand is Rs.85,65,480. However, out of the total demand, a sum of Rs.42,39,480, i.e., Rs.2,16,300 under section 234B and Rs.40,23,180 under section 234C of the Act, represents interest charged under sections 234B and 234C of the Act. In our view, the levy of this interest is consequential to the tax demand arising from the disputed addition and is not independently in dispute in the present appeal.
6. Therefore, as per the definition of “tax effect” under CBDT Circular No. 5/2024, the interest amount cannot be included while computing the tax effect. In our considered view, the actual tax effect in the present case, as defined in para 5.1 of the aforesaid CBDT Circular, is 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 the disputed addition. The computation is as under:
7. From the above computation, we find that the actual tax effect in the present case is Rs.43,68,000, which is below the monetary limit of Rs.60,00,000 prescribed for filing appeals before the ITAT under CBDT Circular No. 9/2024 dated 17.09.2024.
8. Since the actual tax effect in the present case is Rs.43,68,000, which does not exceed the monetary limit of Rs.60,00,000 for filing an appeal before the ITAT, in our view, the present appeal is not maintainable.
9. Thus, in view of the facts and circumstances discussed above, we dismiss the appeal filed by the Revenue as not maintainable on account of low tax effect in accordance with CBDT Circular Nos. 5/2024 and 9/2024 issued under section 268A of the Act.
10. Since we have already dismissed the appeal filed by the Revenue on account of low tax effect, the other issues raised on merits need no adjudication.
11. In the result, appeal filed by the Department stands dismissed.
Order pronounced in the open court on 21.07.2026.
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