PCIT Vs Abhishek Engineering and Chemical Ltd. (Bombay High Court)
Summary: The Bombay High Court, Nagpur Bench, in Pr. Commissioner of Income Tax-1, Nagpur Vs M/s Abhishek Engineering and Chemical Ltd., Amravati, dismissed the Revenue’s income tax appeal and imposed costs of ₹25,000 on the Deputy Commissioner of Income Tax (DCIT), Amravati Circle, for pursuing litigation contrary to an earlier binding judgment of the same High Court. The Division Bench comprising Justice Anil L. Pansare and Justice Nivedita P. Mehta passed the order on 2 November 2026 in Income Tax Appeal No. 45 of 2025. The Court directed that the costs be deducted from the salary of Mr. Suresh G. Kamble, DCIT, Amravati Circle, and deposited with the High Court Legal Services Sub-Committee, Nagpur, within four weeks.
The dispute concerned the maintainability of a departmental appeal involving a tax effect of ₹7,11,920, substantially below the applicable monetary threshold of ₹2 crore. The Revenue sought to justify pursuing the appeal by relying on an exception contained in clause 10(e) of the CBDT circular dated 20 August 2018. That exception permitted departmental appeals involving additions based on information received from specified categories of external law enforcement agencies, notwithstanding the prescribed monetary limits. The controversy arose because the information forming the basis of the addition had been received from the Sales Tax Department.
The High Court observed that the issue had already been decided in Pr. Commissioner of Income Tax-1, Nagpur Vs Siddhesh Mahendra Khara, Income Tax Appeal No. 23 of 2023, decided on 27 March 2026. In that case, the tax effect was ₹2,32,129, also below the ₹2 crore threshold. The Revenue had argued that clause 10(e) permitted the appeal because the addition was based on information received from the Sales Tax Department. Rejecting the argument, the Court had held that the Sales Tax Department was not a law enforcement agency within the meaning of the applicable circular and that the Revenue could not invoke the exception to overcome the monetary limit.
In the earlier decision, the Bombay High Court had also considered the judgment of the Chhattisgarh High Court in Deputy Commissioner of Income Tax 1, Bhilai Vs Bhojraj Lal Chand Nawani, MCC No. 621 of 2019, decided on 16 September 2019. The Chhattisgarh High Court had similarly held that information received from the Maharashtra Sales Tax Department did not attract clause 10(e), which referred to information from external law enforcement agencies such as CBI, ED, DRI, SFIO and DGGI. Consequently, the Bombay High Court had concluded that the Tribunal was justified in holding that the Revenue ought not to have filed the appeal.
In the present proceedings, the Bombay High Court called upon the Revenue to explain why it continued pursuing an appeal despite the earlier decision covering the issue. In response, the Deputy Commissioner of Income Tax, Amravati Circle, filed an additional affidavit acknowledging that the present case was covered by the judgment in Siddhesh Mahendra Khara. The affidavit further disclosed that the Revenue had proposed challenging that judgment before the Supreme Court, but the Central Board of Direct Taxes had declined approval on the ground that the case was weak on merits.
Notwithstanding that position, the Revenue relied on CBDT Circular No. 5 of 2024 and contended that its provisions indicated that the Sales Tax Department was a law enforcement agency. The High Court rejected this reliance because the subsequent circular was admittedly inapplicable to the present dispute. The relevant ITAT order had been delivered on 4 October 2022, before the issuance of Circular No. 5 of 2024. The circular applicable at the relevant time was dated 20 August 2018, which did not include the Sales Tax Department among the law enforcement agencies contemplated by the exception.
The Court further recorded that the Revenue accepted that the earlier judgment covered the present case but nevertheless maintained that the appeal could not be withdrawn because it had a right to challenge the judgment that the High Court would pass. The Bench expressed surprise at this stand. It emphasised that once the High Court had rendered a finding on identical facts, based on the applicable CBDT circular, and the Revenue had accepted that finding, the earlier decision was binding upon the departmental authorities.
The High Court held that reliance on Circular No. 5 of 2024 was unwarranted because the Deputy Commissioner was aware that the circular was inapplicable. The Bench expressly deprecated the conduct of the officer in advancing a position contrary to the law already laid down by the Court. Accordingly, it dismissed the appeal with costs of ₹25,000, directed recovery from the salary of Mr. Suresh G. Kamble, Deputy Commissioner of Income Tax, Amravati Circle, and ordered deposit of the amount with the High Court Legal Services Sub-Committee, Nagpur, within four weeks.
Cases Discussed
1. Deputy Commissioner of Income Tax 1, Bhilai Vs Bhojraj Lal Chand Nawani (Chhattisgarh High Court), MCC No. 621/2019, decided on 16 September 2019 — The Court held that information received from the Maharashtra Sales Tax Department did not attract the exception for information from external law enforcement agencies under clause 10(e) of the applicable CBDT circular.
2. Pr. Commissioner of Income Tax-1, Nagpur Vs Siddhesh Mahendra Khara (Bombay High Court, Nagpur Bench), Income Tax Appeal No. 23/2023, decided on 27 March 2026 — The Court held that the Sales Tax Department was not a law enforcement agency within the meaning of clause 10(e) of the applicable circular and dismissed the Revenue’s appeal involving a tax effect below the monetary threshold.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Heard.
2. The issue involved is covered by the order dated 27.03.2026 passed by this Court in Income Tax Appeal No. 23/2023 (The Pr. Commissioner of Income Tax-1, Nagpur v. Siddhesh Mahendra Khara), which reads thus ;
“The question that falls for consideration is whether the Income Tax Appellate Tribunal was correct in holding that tax effect under question is below permissible limit and, therefore, the appeal ought not to have been filed by the Revenue.
2. Undisputedly, tax effect in issue is Rs.2,32,129/-, which is below permissible limit of Rs.2,00,00,000/-. The argument, however, is that the appeal is maintainable in terms of clause 10(e) of the Circular dated 20.08.2018. Clause 10(e) of circular provides that adverse judgments relating to the issues enumerated in the said clause should be contested on merits notwithstanding the tax effect entailed is less than the monetary limits. Clause 10(c) was inserted by way of amendment. It reads thus:
“10. 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 para 3 above or there is no tax effect:
(a) Where the Constitutional validity of the provisions of an Act or Rule is under challenge, or
(b) Where Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or
(c) Where Revenue Audit objection in the case has been accepted by the Department, or
(d) Where addition relates to undisclosed foreign income/undisclosed foreign assets (including financial assets)/undisclosed foreign bank account.
(e) Where addition is based on information received from external sources in the nature of law enforcement agencies such as CBI/ED/DRI/SFIO/Directorate General of GST Intelligence (DGGI).
(f) Cases where prosecution has been filed by the Department and is pending in the Court.”
3. Learned counsel for the revenue submits that the present case falls under clause (e), which provides that where information is received from external source in the nature of law enforcement agencies such as CBI/ED/DRI/SFIO/Directorate General of GST Intelligence (DGGI), the Revenue should file appeal.
4. Thus, additional information should be received from the external sources in the nature of law enforcement agency.
5. In the present matter, additional information is received from Sales Tax Department, which admittedly is not law enforcement agency and, therefore, in our view, it will be impermissible to the Revenue to rely on the said clause to contend that the appeal could have been filed.
6. We also find that the issue involved has been considered by the High Court of Chhattisgarh, Bilaspur in the case of Deputy Commissioner of Income Tax 1, Bhilai, Dist. Durg, Chhattisgarh .Vs. Bhojraj Lal Chand Nawani [MCC No. 621/2019 decided on 16.09.2019], wherein in identical situation the petition was dismissed assessing following reasons.
“3. Having heard learned counsel for revenue and having seen the subject clause 10(e), it appears the same would apply where addition is based on information received from external sources in the nature of law enforcement agencies such as CBI/ED/DRI/SFIO/Directorate General of GST Intelligence (DGGI). In the case at hand the information on the basis of which this MCC has been filed was received from the Department of Sales Tax of the State of Maharashtra. Thus, the said information having not emanated from the CBI/ED/DRI/SFIO/DGGI, clause 10(e) would have no application.”
7. As could be seen, in the said appeal also information was received from Department of Sales Tax of the State of Maharashtra. Similar is the situation here and, therefore, information is not covered by clause 10(e) of the Circular dated 20.08.2018. The Income Tax Appellate Tribunal was thus right in holding that the revenue ought not to have filed the appeal.
8. That being so, we do not find any substantial question of law is involved. The issue is already settled. The appeal is accordingly dismissed.”
3. The tax effect in the said case was Rs. 2,32,129/-, whereas in the present case, it is Rs. 7,11,920/-, which is below permissible limit of Rs. 2,00,00,000/-. This aspect, however, is not important inasmuch as the case of the Revenue in Siddhesh Khara’s case (supra) was that notwithstanding the tax effect is less than the monetary limits, clause 10(e) of the circular dated 20.08.2018 would support the Revenue’s stand to file an appeal.
4. In context with the said argument, we had referred to the said clause of circular dated 20.08.2018 and held that the Sales Tax Department is not a law enforcement agency and, therefore, the Income Tax Appellate Tribunal (“ITAT”) was right in holding that the Revenue ought not to have filed the appeal. Accordingly, we held that there is no substantial question of law involved.
5. Having said so, we called upon the Revenue to justify pursuing the present appeal. In response, the Deputy Commissioner of Income Tax, Amravati Circle, filed an additional affidavit saying that the instant matter is covered by the aforesaid judgment. He then states that the appellant therein, who is the appellant herein as well, had proposed to challenge the order passed by this Court before the Supreme Court. However, the CBDT did not approve, saying that the case on merit is weak. The appellant then refers to the circular issued by the CBDT, being Circular Number 5 of 2024. According to the appellant, the clauses in the said circular indicate that the Sales Tax Department is a law enforcement agency.
6. There is no dispute that the subsequent circular is not applicable to the present case. It was not applicable to the earlier case as well. The reason being, the ITAT had delivered its verdict on 04.10.2022, i.e., much prior to the issuance of the said circular. The circular then prevailing was dated 20.08.2018, which did not include in the list of law enforcement agency, the Sales Tax Department. It is for this reason that the appellant admits that the instant matter is covered by the order passed by this Court in Siddhesh Khara’s case (supra). Despite, the appellant submits that the appeal cannot be withdrawn as it has right to challenge the judgment that will be passed by this Court.
7. We are surprised by the stand taken by the appellant. Once a finding has been rendered by this Court, in an identical set of facts, that too based on the circular issued by the CBDT, that the Sales Tax Department is not a law enforcement agency, and since the appellant has accepted the said finding, the order so passed will be binding upon the respondents. Further, the reliance placed on Circular No. 5 of 2024 was known to the Deputy Commissioner of Income Tax, to be not applicable and therefore, was uncalled for. We deprecate the said conduct.
8. The appeal is accordingly dismissed with costs of Rs. 25,000/-, to be deducted from the salary of Mr. Suresh G. Kamble, Deputy Commissioner of Income Tax, Amravati Circle, who has taken a stand contrary to law laid down by this Court. The cost shall be deposited with the ‘High Court Legal Services Sub-Committee, Nagpur’, within four weeks from today.
