ITAT Chennai Dismisses Revenue Appeal Below ₹60 Lakh Tax Effect in AY 2017-18

ITO Vs Sree Vari Transports (ITAT Chennai)

Summary: The Chennai Bench of the Income Tax Appellate Tribunal considered the Revenue’s appeal against the CIT(A)/NFAC order dated 17 November 2025 for assessment year 2017-18, along with a supporting cross-objection filed by Sree Vari Transports. The dispute concerned additions of ₹12,01,267 under section 44AD and ₹91,61,707 under section 69A that the CIT(A) had deleted. The assessee objected to admission of the departmental appeal on the ground that its tax effect fell below the ₹60 lakh threshold prescribed by CBDT Circular No. 09/2024 dated 17 September 2024. According to the assessee, the Revenue’s grounds challenged only the section 44AD addition of ₹12,01,267, giving rise to a tax effect of ₹3,71,192.

The assessee further submitted that even if both deleted additions, aggregating ₹1,03,62,974, were considered, the tax effect would be ₹35,86,625. This calculation relied on SMILE Microfinance Limited Vs ACIT (Madras High Court), cited for the proposition that the enhanced 60% rate under section 115BBE did not apply to the relevant pre-1 April 2017 transactions. The assessee also cited ACIT v. Sethuraman Gurushankar (ITA No. 818/Chny/2026, dated 22 July 2026), in which the Chennai Tribunal dismissed a departmental appeal on a similar low-tax-effect objection.

The Departmental Representative did not contradict the assessee’s submissions. Accepting that the tax effect was below ₹60 lakh, the Tribunal held that the Revenue’s appeal was not maintainable under the CBDT circular and dismissed it without deciding the substantive grounds or additional grounds, which it left open. Since the assessee’s cross-objection merely supported the CIT(A)’s decision, that too was dismissed. The order dated 28 October 2026 was passed by Judicial Member Aby T. Varkey and Accountant Member S.R. Raghunatha. The source records an inconsistency: the disputed section 44AD addition is stated as ₹12,01,267 in the submission and ₹12,06,267 in paragraph 3 of the Tribunal’s order; both figures have been retained in the full text.

Cases Discussed

• ACIT Vs Sethuraman Gurushankar — ITA No. 818/Chny/2026, 22/07/2026 (ITAT Chennai). Cited by the assessee and reproduced by the Tribunal in support of dismissal of a Revenue appeal below the prescribed tax-effect limit.
• SMILE Microfinance Limited Vs ACIT — 470 ITR 171 [also cited as 470 ITR 172 in the order]; WP (MD) No. 2078 of 2020 & 1742, 19/11/2024 (Madras High Court). Relied on for the rate applicable under section 115BBE to transactions before 1 April 2017, as described in the Tribunal’s order.

Assessee Represented by: Mr. S. R. Srikrishna, CA.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

These are appeal preferred by the Revenue and Cross Objection (CO) preferred by assessee against the order of the Learned Commissioner of Income Tax (Appeal)/NFAC, Delhi, (hereinafter referred to as ‘Ld.CIT(A)’), dated 17.11.2025 for the Assessment Year (hereinafter referred to as ‘AY’) 2017-18.

2. At the outset, the Ld. AR of the assessee opposing the admission of the Revenue appeal submitted that the tax effect in this case is less than Rs.60 lakhs. He pointed out that in this case the Revenue has challenged the action of the Ld. CIT(A) qua the addition made u/s.44AD where the addition was only to the tune of Rs.12,01,267/-. Hence, tax effect qua the same is only Rs.3,71,192/-; and even if the other addition u/s.69A is also considered (though not properly assailed in the grounds of appeal of the Revenue before this Tribunal) the total addition would be only to the tune of Rs.1,03,62,974/-, and the tax rate applied in the light of the Hon’ble Madras High Court decision in the case of M/s SMILE Microfinance Limited Vs. ACIT (470 ITR 171), then it would only be Rs.35,86,625/- (total tax effect) and he also filed the return submission in this regard which is reproduced as under:-

WRITTEN SUBMISSIONS ON MONETARY LIMIT

1. DEPARTMENTAL APPEAL IS NOT MAINTAINABLE DUE TO MONETARY LIMITS: Department is on appeal against the order of CIT(A) dated 17.11.2025. As per Department Circular No-9/2024, dated 17.09.2024, the departmental appeal is hit by monetary limit prescribed of Rs.60 Lakhs and is not maintainable

2. CALCULATION OF TAX EFFECT OF APPEAL: The CIT(A) deleted two additions made, being u/s 44AD of Rs. 12,01,267 & u/s 69A of Rs.91,61,707. However department is on appeal against only one addition u/s 44AD of Rs. 12,01,267. As per CBDT Circular, Tax effect is to be calculated only on disputed issues. Even if both additions are considered, still the tax effect will be below the monetary limit considering the decision of Jurisdictional Madras High Court in the case of SMILE Microfinance Vs ACIT (470 ITR 172). Both calculations are given below

A. TAX EFFECT CONSIDERING THE APPEAL IS ONLY ON DISPUTED ISSUE—Addition u/s 44AD

B. TAX EFFECT EVEN IF BOTH ADDITIONS ARE TAKEN TOGETHER FOR ARGUMENTS SAKE

3. PRAYER: Please take the above on record and dismiss the Departmental appeal as not maintainable due to monetary limits, for which I shall be grateful

And in the aforesaid scenario, he prayed that the instant appeal filed by the Revenue needs to be dismissed. And cited the decision of this Tribunal in the case of ACIT v Sethuraman Gurushankar [ ITA no 818/Chny/2026] dated 22.07.2026 wherein Tribunal has accepted similar plea of assessee and dismissed Revenue Appeal on Tax-effect by holding as under;-

2. At the outset, the Ld.AR of the assessee submitted that the instant appeal preferred by the Revenue is hit by the CBDT Circular No.09/2024 on 17.09.2024 on account of low tax effect as per the normal provisions. According to him, the AO has computed the addition u/s.68 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) as unexplained income and applied tax as per Section 115BBE of the Act @60%, which is incorrect, in light of the binding decision of the Hon’ble jurisdictional High Court in the case of Smile Microfinance Ltd. v. ACIT in WP (MD) No.2078 of 2020 & 1742 dated 19.11.2024 (Madras-HC), wherein, it was held that Sec.115BBE of the Act applies on transactions on or after 01.04.2017 and since, the transactions in question were on or before 31.03.2017, rate of tax @60% doesn’t arise instead applicable rate of tax would be 30% only; and placed before us the working/rate of tax as per the normal provisions, which is seen to be less than ₹60 lakhs [Total addition is of ₹12,03,315/- disallowance on account of agricultural income and ₹76,62,355/- u/s 68]. Hence, he prayed that the instant appeal filed by the Revenue needs to be dismissed

3. The Ld. DR for the department couldn’t controvert the aforesaid contentions of the Ld. Counsel for the assessee. Hence, we find force in the submissions of the Ld.AR of the assessee that the Revenue’s appeal is hit by the CBDT Circular No.09/2024 on 17.09.2024 on account of low tax effect as per the normal provisions. In this regard, we note that the additions made by the AO as unexplained is to the tune of ₹76,62,355/- and as is evident from the calculation of tax placed before us, which shows the tax effect would be less than ₹60 lakhs. Hence, we find merit in the contention of the Ld.AR for the assessee that since tax rate @60% as per Sec.115BBE of the Act applies on transactions on or after 01.04.2017 only as held by the decision of the Hon’ble Madras High Court in the case of Smile Microfinance Ltd. (supra), in this year under Sec.115BBE of the Act won’t apply. Hence, we find that the instant appeal of the Revenue is hit by the CBDT Circular on account of low tax effect as per the normal provisions and hence, the instant appeal filed by the Revenue stands dismissed. Grounds/Additional Grounds of Appeal raised by Revenue, is left open in light of our action (supra). Having stated so, and having gone through the order of the Ld.CIT(A) and the grounds of appeals, we find per-se that the tax effect in the captioned appeal is less than ₹60 lakhs. Accordingly, we dismiss the aforesaid appeal filed by the Revenue as not maintainable on the strength of the CBDT Circular (supra).

3. The Ld. DR couldn’t contradict the aforesaid submission of assessee. Hence, we find force in the submissions of the Ld.AR of the assessee that the Revenue’s appeal is hit by the CBDT Circular No.09/2024 on 17.09.2024 on account of low tax effect as per the normal provisions. In this regard, we note that the additions made by the AO as unexplained is to the tune of ₹91,61,707/-; and the other addition Rs 12,06,267/- as is evident from the calculation of tax placed before us, which shows the tax effect would be less than ₹60 lakhs. Hence, we find merit in the contention of the Ld.AR for the assessee that since tax rate @60% as per Sec.115BBE of the Act applies on transactions on or after 01.04.2017 only as held by the decision of the Hon’ble Madras High Court in the case of Smile Microfinance Ltd. (supra), in this year under Sec.115BBE of the Act won’t apply. Hence, we find that the instant appeal of the Revenue is hit by the CBDT Circular on account of low tax effect as per the normal provisions and hence, the instant appeal filed by the Revenue stands dismissed. Grounds/Additional Grounds of Appeal raised by Revenue, is left open in light of our action (supra). Having stated so, and having gone through the order of the Ld.CIT(A) and the grounds of appeals, we find per-se that the tax effect in the captioned appeal is less than ₹60 lakhs. Accordingly, we dismiss the aforesaid appeal filed by the Revenue as not maintainable on the strength of the CBDT Circular (supra). And since the CO of assessee is only supporting the impugned action of Ld CIT(A), the same is dismissed, since we dismiss the appeal of Revenue on the ground of Tax-Effect.

4. In the result, appeal filed by the Revenue and CO filed by the assessee stand dismissed.

Order pronounced on the 28th day of October, 2026 in Chennai.