PCIT-1 & Another Vs Prem Lata Verma (Allahabad High Court)
Allahabad High Court dismisses Revenue’s appeal for being below the ₹2 crore monetary threshold; quashing of a reassessment order on legal grounds does not make the tax effect unquantifiable under CBDT Circulars.
Case Summary: The Allahabad High Court dismissed the Revenue’s appeal against the ITAT Agra order quashing the reassessment proceedings in the case of Prem Lata Verma. The reassessment order under Sections 147/144 of the Income-tax Act, 1961, had assessed income to tax of ₹1,41,74,009. The Revenue contended that the case fell within the exception under the applicable CBDT circulars for matters where the tax effect is not quantifiable or is not involved. The Court rejected this contention, holding that where an assessment or reassessment has resulted in a quantified tax demand, the tax effect remains quantifiable even if the order is subsequently quashed on a legal ground, such as non-service of notice. Since the tax effect was below the prescribed monetary threshold of ₹2 crore, the Revenue’s appeal was not maintainable.
Core Issue: Whether the exception under the CBDT monetary-limit circulars for cases where tax effect is not quantifiable or is not involved applies to a Revenue appeal against an ITAT order quashing a reassessment that had determined a quantified tax liability of ₹1,41,74,009.
Fact: The assessee’s appeal for FY 2016-17 was allowed by the ITAT Agra Bench by order dated 15 January 2026 in ITA No. 441/Agra/2025. The Tribunal quashed the reassessment order dated 30 March 2021 passed under Sections 147/144 of the Income-tax Act. The reassessment had assessed income to tax of ₹1,41,74,009. The Revenue challenged the Tribunal’s order before the High Court. A preliminary objection was raised regarding maintainability in view of CBDT Circular No. 5 of 2024 dated 15 March 2024 and Circular No. 9 of 2024 dated 17 September 2024, which prescribed a monetary threshold of ₹2 crore for filing appeals by the Revenue.
AO / CIT(A) Finding: The Assessing Officer passed the reassessment order under Sections 147/144 on 30 March 2021, determining the tax liability on assessed income of ₹1,41,74,009. The ITAT subsequently quashed the reassessment order. The High Court judgment does not record a separate CIT(A) finding relevant to the monetary-threshold issue.
High Court Finding: The Court rejected the Revenue’s argument that the case fell within the exception under Clause 3.1(f) of the CBDT circular concerning cases where tax effect is not quantifiable or is not involved. It explained that the exception may apply in matters such as cancellation of registration granting exemption or certain proceedings under Section 263 where a fresh assessment may subsequently be required and the tax effect may not be quantifiable at that stage. However, where an assessment or reassessment has already determined a quantified tax liability and is subsequently set aside, the tax effect remains quantifiable. The mere fact that the reassessment was quashed on a legal ground, including non-service of notice, does not bring the case within the exception. Since the tax effect in the present case was below ₹2 crore, the Revenue’s appeal was below the prescribed monetary threshold.
Reference : The judgment refers to CBDT Circular No. 5 of 2024 dated 15 March 2024 and CBDT Circular No. 9 of 2024 dated 17 September 2024. No separate judicial precedent was identified in the supplied judgment as the basis for the decision.
Outcome: The Revenue’s appeal was dismissed as not maintainable because the quantified tax effect was below the ₹2 crore monetary threshold prescribed by the applicable CBDT circulars. The Court clarified that quashing a reassessment on legal grounds does not, by itself, make the tax effect unquantifiable or permit the Revenue to bypass the prescribed monetary limit.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. In compliance of the last order, Sri Amit Mahajan, learned Senior Standing Counsel for the revenue has placed on record copy of the Circular Letters i.e. Circular No. 5 of 2024 dated 15.03.2024, Circular No. 9 of 2024 dated 17.09.2024 and copy of the written instructions received by him dated 21.10.2026. Those have been marked as “X” and retained on record.
2. Heard Sri Amit Mahajan, learned Senior Standing Counsel for the revenue, Sri Mayank Patawari (through video conference) along with Sri Sarthak Ahuja, learned counsel for the assessee.
3. Present income tax appeal has been filed against the order of the Income tax, Appellate Tribunal Agra Bench, Agra dated 15.01.2026, ITA No. 441/Agr/2025 for the Financial Year 2016-2017 (Prem Lata Verma Vs. DCIT).
4. The Tribunal has allowed the appeal and quashed the re-assessment order passed under Section 147/144 of the Income Tax Act, 1961, dated 30.03.2021.
5. Undeniably, the assessment order assessed the petitioner to tax Rs. 1,41,74,009/-.
6. Therefore, preliminary objection has been raised as to maintainability of the present appeal in face of Circular No. 5 of 2024 dated 15.03.2024 issued by the C.B.D.T. read with further Circular No. 9 of 2024 dated 17.09.2024 issued by the C.B.D.T. Thus, it has been contended that the tax effect is below the revised threshold limit of Rs. 2 crores. Therefore, the present appeal is not maintainable.
7. On the other hand, learned counsel for the revenue would contend that the present case falls under Clause 3.1 (m) of the above noted Circulars. For ready reference Clause 3.1(f) reads as below:-
“3.1 Monetary limits given in paragraph 4 with regard to filing appeal/SLP shall be applicable to all cases including those relating to TDS/TCS under the Act with the following exceptions where the decision to appeal/file SLP shall be taken on merits, without regard to the tax effect and the monetary limits:
(f) Where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under sections 10(23C), 12A/12AA/12AB of the Act, order passed u/s 263 of the Act etc. The reference to cases involving sections referred here, where it is not possible to quantify tax effect or tax effect is not involved, is for the purpose of illustration only.”
8. To the extent, the appeal before the Tribunal had not arisen from proceedings in which tax may not have been quantified or may not be involved and further inasmuch as, the appeal had arisen directly from reassessment order whereby tax Rs. 1,41,74,009/- had been imposed, the revenue is not right in contending that present is the case that falls under Clause 3.1(m) of the Circular No. 5 of 2024 dated 15.03.2024.
9. On the plain reading of the said clause, it may apply to cases where the tax effect is not quantifiable or may not be involved such as cases where registration granted for the purposes of exemption may have been cancelled or where the assessment order may have been interfered with in revisional jurisdiction that would further involve passing of a fresh assessment order. In cases of that variety, in given facts, it may be said that the tax effect may not be quantified or may not be involved. However, where assessments or re-assessments have been made and those have been set aside, the position would be entirely different. In such cases, quantification of the tax amount exists.
10. In the present case, merely because the assessment order has been set aside on legal ground of notice not served etc, it cannot be said that the tax effect was not quantified. As to merit consideration- the addition involved in the present case is clearly below the monetary limit of the above noted Circulars.
11. Accordingly, the appeal is found to be below the threshold taxable limit prescribed under the Circular issued by the C.B.D.T.
12. The present appeal is accordingly dismissed.
