Consider a company that succeeds before the Income Tax Appellate Tribunal (ITAT) in challenging a disallowance involving a tax effect of slightly less than Rs 2 crore. Two years later, the Revenue files an appeal before the High Court. Can the Income Tax Department pursue the appeal despite the amount involved? The answer lies in the monetary limits prescribed by the Central Board of Direct Taxes (CBDT) through its circulars. These CBDT monetary limits restrict departmental appeals where the tax effect falls below specified thresholds. But their application raises several important questions: Do these limits bind the Department? Do they apply to appeals already pending? How should tax effect be calculated where an order involves multiple assessment years or disputed issues? And which cases are exempt from these limits? This article examines the statutory framework under section 268A of the Income-tax Act, the changes introduced through successive CBDT circulars, and the judicial decisions governing their application.

The Statutory Source: Section 268A

The power to fix monetary limits is found in section 268A of the Income-tax Act, 1961, which was inserted by the Finance Act 2008 [insertion year to be confirmed against the Act]. Sub-section (1) allows the Board to issue orders, instructions or directions to other income-tax authorities, fixing monetary limits by reference to which those authorities may or may not file an appeal or an application for reference under Chapter XX. The remaining sub-sections soften the consequences of such a limit for both sides. Sub-section (2) provides that an authority which does not appeal on an issue because of the limit is not prevented from appealing on the same issue for the same assessee in another year, or for another assessee in the same or another year. Sub-section (3) prevents an assessee from arguing that the Department has accepted a decision merely because it did not appeal. Sub-section (4) directs the Tribunal or the court hearing an appeal to have regard to the Board’s directions and to the circumstances in which an appeal was filed or not filed. Sub-section (5) deems any order of the Board fixing monetary limits to have been issued under sub-section (1) (Income-tax Act, 1961, s.268A, as published on the Department’s website).

The design is worth noticing. Section 268A provides the statutory foundation for CBDT monetary limits for appeals, serving as an instrument of litigation management so that the Department does not spend public resources on small disputes. It is not a source of rights for the taxpayer. That is why the question whether the circulars bind anyone at all has had to be answered by the courts.

Whom The Circulars Bind

The settled position is that a Board circular binds the Department but not the assessee and not the courts. A Constitution Bench of the Supreme Court said in Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries (2008) 13 SCC 1 that circulars issued by the Board are binding in law on the authorities administering the statute, but that they cannot alter the meaning of the statute, and that a circular contrary to the statute has no legal existence.

For monetary limits, the first half of that proposition does the work. The Gujarat High Court held in PCIT, Vadodara-1 v. Kumari Nalini Surrendrabhai Patel [2023] 458 ITR 540 (Guj), decided on 4 September 2023, that where an appeal is not a writ matter, the monetary limits in the circulars apply, “the Department is bound by such monetary limits”, and the Department cannot pursue the matter if the limit is not crossed. The Division Bench rejected the argument that an appeal arising from an order under section 263 stood outside the circular, because the circulars then in force did not distinguish between orders under one section and another. On the facts, even a consolidated tax effect for the assessee’s matters stayed below the limit, and the appeal was dismissed on that ground. The Court followed CIT v. Pravinchandra S. Shah (Tax Appeal 419 of 2009, 13 July 2011) on penalty appeals.

The second half, that the circulars do not bind courts, has a practical consequence for the Department. Because the circular is directed to officers, a limit does not stop the court from hearing a matter of real public importance, and sub-section (4) of section 268A itself speaks only of the court having “regard” to the Board’s directions. It also explains why the Department is instructed, in paragraphs 6.2 and 7 of Circular 5 of 2024, to tell the Tribunal or court that non-filing on account of low tax effect gives the assessee’s case no precedent value.

CBDT Monetary Limits for Income Tax Appeals: Period-Wise Changes

The CBDT monetary limits for income tax appeals have increased in stages, and the date on which an appeal was filed or heard determines which threshold the court applies. The position, as far as the published circulars show, is as follows.

Circular 9 of 2024 states in paragraph 5 that it takes effect from the date of issue and applies to appeals and special leave petitions yet to be filed and also to those already pending before the Supreme Court, the High Courts and the Tribunals, which may accordingly be withdrawn. A Rajya Sabha reply of 4 August 2026 (Unstarred Question 1829) reports that after this circular 443, 4,791 and 744 appeals were withdrawn before the Tribunal, High Courts and Supreme Court respectively, and 11,390, 5,565 and 534 were not filed.

What “Tax Effect” Means And How It Is Counted

Paragraph 5.1 of Circular 5 of 2024 defines tax effect as the difference between the tax on the total income assessed and the tax that would have been chargeable had that income been reduced by the amount of income relating to the issues which the Department proposes to appeal (the “disputed issues”). It includes surcharge and cess, excludes interest unless the chargeability of interest is itself in dispute, includes notional tax on disputed additions where a returned loss is reduced or assessed as income, and, in a penalty case, means the quantum of penalty deleted or reduced. Paragraphs 5.2 and 5.4 supply special rules for minimum alternate tax cases and for TDS and TCS cases.

Two features of the counting rule often decide cases. The first is that the tax effect is measured on the tax, not on the addition. A disallowance of, say, Rs 5 crore may carry a tax effect well below that figure after surcharge and cess are applied at the assessee’s rate, or well above it where loss is converted into income. The second is the unit of computation. Under paragraph 5.3 the Assessing Officer calculates the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. Where the disputed issues arise in several years, an appeal can be filed for the year or years in which the tax effect crosses the limit and not for those in which it does not. And even in a composite order of a High Court or an appellate authority covering more than one year and “common issues in more than one assessment year”, no appeal lies for a year in which the tax effect falls below the limit; where a composite order involves more than one assessee, each is dealt with separately. This text first appeared as a substituted paragraph 5 of Circular 17 of 2019, and the Gujarat High Court reproduced it in Nalini Surrendrabhai Patel.

A less examined question is whether the tax effects of two different issues decided in the same year’s order can be added together to cross the limit. The text of paragraph 5.3 speaks of the tax effect “in respect of the disputed issues” for each assessment year, and its references to composite orders are framed around common issues across years and separate assessees. We have not located a reported decision that squarely answers the cross-issue question, and the point therefore turns on how paragraph 5.1 (which refers to all “disputed issues” against which an appeal is intended) is read alongside paragraph 5.3. A fair account must give both readings. On the one hand, paragraph 5.1 defines the tax effect by reference to all disputed issues together, which suggests aggregation within a year. On the other, paragraph 5.3 is specific about when composite orders may be aggregated and says nothing about cross-issue aggregation, which suggests that the drafters did not intend one. The matter is open.

Exceptions to CBDT Monetary Limits for Departmental Appeals

The exceptions to CBDT monetary limits are set out in paragraph 3.1 of Circular 5 of 2024, which lists the cases in which the decision to appeal is taken on merits, “without regard to the tax effect and the monetary limits”. They include cases where a provision or a Board circular has been held invalid or ultra vires (clauses a and b); assessments based on information from agencies such as the CBI, ED, DRI or DGGI (c); pending prosecutions (d); strictures or costs against the Department (e); cases where tax effect is not quantifiable, such as trust registration and, by way of illustration, orders under section 263 (f); undisclosed foreign income or assets (g); organised evasion, including bogus capital gains through penny stocks and accommodation entries (h); court-mandated appeals (i); writ matters (j); matters outside the Income-tax Act (k); TDS and TCS disputes on the nature of the transaction or treaty applicability (l); and cases the Board later specifies (m). Paragraph 3.2 adds a rule on deferred appeals under section 158AB.

Two points about these exceptions deserve care. First, the older circulars were wider in one respect: Circular 3 of 2018, para 10(c), treated an accepted audit objection as an exception. The Gujarat High Court applied that exception in PCIT (Central) v. Hanubhai R. Sangani (SCA 13034 of 2020, 30 July 2024), setting aside a Tribunal order that had dismissed the Revenue’s appeal for low tax effect without considering whether the audit objection had been accepted, and observing that the Tribunal should give due weightage to the Board’s circular. The list in paragraph 3.1 of Circular 5 of 2024 as reproduced above contains no corresponding audit-objection clause, so a reader should not assume that the 2018 exception survives into the present text. Second, the interaction between exception (f) and the decision in Nalini Surrendrabhai Patel is delicate. That decision declined to carve out section 263 appeals under the circulars as they then stood; the 2024 circular now names section 263 orders as an illustration of cases where tax effect is not involved. Whether this exception reaches an appeal filed before 15 March 2024 is a question of the temporal operation of the exceptions, to which we now turn.

CBDT Monetary Limits in Pending Income Tax Appeals

The courts’ answers have been less uniform than the text of Circular 9 of 2024 might suggest. Before the present series, the Supreme Court dealt with the question under the 2011 instruction. In CIT v. Surya Herbal Ltd. (SC, 2011) (a three-Judge Bench, as described in later decisions), the Court allowed the Revenue’s special leave petition against a High Court order which had dismissed an appeal on the basis of the Rs 10 lakh instruction, and observed that the circular should not be applied ipso facto where the matter has a cascading effect or where a common principle may affect a group of matters. In Director of Income-tax v. SRMB Dairy Farming (P) Ltd. (SC, reported as (2018) 400 ITR 9 [year and citation to be confirmed]), a bench of Nariman and Kaul, JJ. held that the 2011 circular applied to pending matters, following Surya Herbal, subject to the same two caveats. High Courts were not unanimous in the years in between: the Punjab and Haryana High Court in CIT v. Varindera Construction Co. (ITA 209 of 2003, 4 February 2011) read an earlier circular as regulating the filing and not the hearing of appeals, while the Bombay High Court in CIT v. Madhukar K. Inamdar (HUF) (2009) 318 ITR 149 (Bom) took the opposite view.

The present position of the Bombay High Court on CBDT monetary limits in pending income tax appeals is reasonably clear and draws a line between monetary thresholds and exceptions. In CIT (International Taxation)-1 v. Bennet Coleman & Co. Ltd. [2025] 178 taxmann.com 255 (Bom), decided on 4 September 2025, a Division Bench held that the monetary limits in the CBDT circulars apply to pending appeals, so that the Rs 2 crore limit in Circular 9 of 2024 governed an appeal filed in 2015, but that exceptions carved out by later circulars apply only prospectively and cannot justify prosecuting an appeal filed before the exception was introduced. It followed Pr. CIT v. Premier Industrial Corporation Ltd. [2025] 172 taxmann.com 289 (Bom). The same Court applied the rule in PCIT v. Jayprakash B. Barbhaya [2026] 188 taxmann.com 865 (Bom), decided on 22 December 2025, disposing of an appeal involving about Rs 1.44 crore with liberty to revive it if the tax effect proved to be above the limit.

The logic is easy to state. A limit lessens the Department’s burden, so applying a higher limit to a pending appeal fits the policy of reducing litigation. An exception enlarges the Department’s ability to litigate, and applying it to an appeal filed before it existed would be inconsistent with the footing on which that appeal was filed. The Revenue’s counter-argument is that the exceptions reflect a general public interest in contesting certain categories of case, so that they should apply whenever the court decides. We have not independently confirmed whether the Gujarat High Court has taken the same two-part view of Circular 9 of 2024 in a reported decision, and practitioners in Gujarat should check that point before relying on the Bombay line.

The Income-tax Act, 2025

The Income-tax Act, 2025 came into force on 1 April 2026 and repealed the 1961 Act, subject to savings. According to a published commentary on section 536 of the 2025 Act, clause (2)(j) of that section treats circulars, notifications and instructions issued under the old Act as issued under the corresponding provision of the new Act, and continues them in force so far as they are not inconsistent with it; clause (2)(e) preserves pending proceedings before authorities, the Tribunal and courts, to be continued as if the new Act had not been enacted [commentary seen: taxguru.in; section text not independently read]. The practical consequence is that the Board’s monetary-limit circulars, and the case law on them, should continue to be the working framework for appeals under either Act. We were not able to verify the section number of the provision of the 2025 Act which corresponds to section 268A, and the point is flagged for confirmation before publication.

What The Framework Achieves, And What It Leaves Open

Supporters point out that the framework concentrates the Department’s resources on disputes of real value and gives taxpayers earlier finality, while sub-sections (2) and (3) of section 268A preserve the Department’s ability to take up the same issue in another case. Critics reply that an administrative figure, revised upward every few years and applied to pending appeals, can end a dispute without the court deciding the law, so that the same question recurs in the next year. The courts have answered this in part: dismissals are routinely recorded as leaving the questions of law open (Pravinchandra S. Shah: “the legal issues raised are not touched”), and paragraph 6.2 of Circular 5 of 2024 concedes that non-filing is no acquiescence. A taxpayer should therefore expect little precedential value from such a dismissal.

For a litigant, the working method is mechanical: identify the circular in force and whether the court will apply the latest limit to a pending matter; compute the tax effect on the tax, year by year and assessee by assessee; test whether a paragraph 3.1 exception, with documentary proof, is available and existed when the appeal was filed.

Frequently Asked Questions

What are the CBDT monetary limits for income tax appeals? Ordinarily no. Appeals and SLPs not falling within the exceptions in paragraph 3.1 of Circular 5 of 2024 “shall not be filed” where the tax effect does not exceed the limit in force (Rs 60 lakh for the Tribunal, Rs 2 crore for the High Court, Rs 5 crore for the Supreme Court under Circular 9 of 2024). Exceeding the limit does not make an appeal compulsory either; paragraph 4.2 of Circular 5 of 2024 says it must still be decided on merits.

Do the current limits apply to an appeal filed years ago? Under paragraph 5 of Circular 9 of 2024, yes for the limits, and the Bombay High Court has so held (Bennet Coleman & Co., 2025), but it treats the exceptions as prospective only. The Supreme Court in SRMB Dairy Farming applied an earlier circular to pending matters, subject to the cascading-effect and common-principle caveats stated in Surya Herbal.

Does a dismissal for low tax effect mean the Department has accepted the Tribunal’s view? No. Section 268A(3) bars an assessee from arguing acceptance on that ground, and paragraph 6.2 of Circular 5 of 2024 repeats that no presumption of acquiescence arises and that the Department may appeal the same issue in another year or against another assessee.

Sources & Citations

• Income-tax Act, 1961, s.268A (sub-ss. (1)-(5)), as published at incometaxindia.gov.in; and CBDT Circular No. 5/2024 dated 15 March 2024 (F.No. 279/Misc.142/2007-ITJ (Pt.)), paras 3.1, 3.2, 4.1, 4.2, 5.1-5.4, 6.1-6.2, 7 and 10 (read in full from the firm’s library copy).
• CBDT Circular No. 9/2024 dated 17 September 2024 (amending para 4.1 of Circular 5/2024), paras 2-5 and 7 (read from the Department’s website).
• CBDT Circular No. 3/2018 dated 11 July 2018 (as amended 20 August 2018), Circular No. 5/2019 dated 5 February 2019 and Circular No. 17/2019 dated 8 August 2019, as set out in PCIT, Vadodara-1 v. Kumari Nalini Surrendrabhai Patel [2023] 458 ITR 540 / 295 Taxman 187 / (2023) 335 CTR 1088 (Guj), R/Tax Appeal 478 of 2023, 4 September 2023.
• CIT v. Pravinchandra S. Shah, Tax Appeal 419 of 2009, Gujarat High Court, 13 July 2011 (as quoted in Nalini Surrendrabhai Patel; not read independently).
• PCIT (Central) v. Hanubhai R. Sangani, R/SCA 13034 of 2020, Gujarat High Court, 30 July 2024 (secondary summary; following PCIT v. Emtici Engineering, SCA 9995 of 2021, 8 July 2022).
• CIT (International Taxation)-1 v. Bennet Coleman & Co. Ltd. [2025] 178 taxmann.com 255 / [2025] 307 Taxman 62 (Bom), IT Appeal 1191 of 2015, 4 September 2025 (read in full).
• PCIT v. Jayprakash B. Barbhaya [2026] 188 taxmann.com 865 (Bom), IT Appeal 3278 of 2018, 22 December 2025 (read in full).
• Pr. CIT v. Premier Industrial Corporation Ltd. [2025] 172 taxmann.com 289 (Bom) (as quoted in Bennet Coleman; not read independently).
• Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries (2008) 13 SCC 1 (Constitution Bench), 14 October 2008.
• CIT v. Surya Herbal Ltd. (SC, 2011) (reporter citation not verified); Director of Income-tax v. SRMB Dairy Farming (P) Ltd. (SC), (2018) 400 ITR 9 (citation as given in a secondary note; to be confirmed).
• CIT v. Varindera Construction Co., ITA 209 of 2003 (P&H), 4 February 2011; CIT v. Madhukar K. Inamdar (HUF) (2009) 318 ITR 149 (Bom) (both from a secondary summary).
• Rajya Sabha Unstarred Question No. 1829, answered 4 August 2026.
• Income-tax Act, 2025, s.536(2)(c), (e) and (j) (from a secondary commentary).

Related reading

• The Section 260A “Substantial Question of Law” and the Perversity Gateway
• Revision under Section 263: “Erroneous and Prejudicial” and the Problem of Enquiry
• Bogus Purchases and Accommodation Entries: Burden of Proof and Commission-Rate Additions
• Rectification under Section 254(2) and Review: What the Tribunal May and May Not Recall
• Depreciation on Goodwill in Amalgamations: From Smifs Securities to the Finance Act, 2021

© Bhatt & Joshi Associates. This article is general information, not legal advice.

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