The Chhattisgarh High Court has clarified that the Income Tax Department cannot file appeals before the High Court solely on the basis of monetary thresholds. Even if the tax demand exceeds the prescribed limit, the appeal must be supported by substantive legal grounds.
In a recent order, a division bench led by Justice Sanjay K. Agrawal and Justice Sachin Singh Rajput dismissed a departmental appeal as the disputed tax liability was below ₹2 crore, aligning with the revised CBDT guidelines.
🔎 Background: CBDT Circular No. 5/2024
- The case arose from a departmental appeal where the Revenue cited a higher tax effect as the basis for litigation.
- However, the Court relied on CBDT Circular No. 5/2024 (dated 17 September 2024), which raised the monetary thresholds for filing appeals:
- ITAT: ₹60 lakh
- High Court: ₹2 crore
- Supreme Court: ₹5 crore
- Importantly, the circular makes it clear that appeals cannot be filed automatically just because the tax effect crosses the prescribed limits. The merits of the case must justify the appeal.
On this reasoning, the High Court refused to entertain the appeal, since the disputed amount was less than ₹2 crore.
⚖️ Key Takeaways from the Ruling
- Merit over magnitude – High Courts will dismiss revenue appeals that are based only on monetary thresholds without legal merit.
- Litigation management – The judgment supports the government’s policy of reducing unnecessary tax litigation.
- Certainty for taxpayers – By limiting frivolous appeals, taxpayers gain more clarity and stability in their legal positions.
📜 Policy Rationale & Historical Context
The decision reflects the CBDT’s long-standing approach of curbing repetitive and mechanical appeals:
- Earlier instructions capped High Court appeals at ₹50 lakh, later increased to ₹1 crore, and now ₹2 crore.
- This progressive enhancement ensures that the Revenue focuses on significant disputes with strong legal grounds rather than contesting every case on monetary value alone.
📊 Summary at a Glance
- Court: Chhattisgarh High Court
- Bench: Justice Sanjay K. Agrawal & Justice Sachin Singh Rajput
- Circular Referred: CBDT Circular No. 5/2024 (17 Sept 2024)
- High Court Appeal Threshold: ₹2 crore
- Court’s Observation: Tax appeals must be based on merits, not merely on exceeding limits
- Policy Objective: Reduce frivolous appeals, improve legal certainty, and save judicial time
✅ Bottom Line
The Chhattisgarh HC ruling is a timely reminder that “numbers alone don’t make a case”. The Revenue Department cannot pursue appeals simply because the disputed tax exceeds ₹2 crore. Future litigation must be backed by strong legal arguments and substantial questions of law, ensuring that the judiciary is not burdened with avoidable cases.