Rajasthan High Court Dismisses Income Tax Appeal Over Monetary Limit

New Delhi, India Jul 16, 2026 ALN: Jodhpur: The Rajasthan High Court has recently dismissed an appeal from the Income Tax Department regarding a case that centered on the interpretation of monetary limits for departmental appeals. The dismissal was based on the stipulations outlined in Circular No. 5 of 2024, which sets a monetary threshold for appeals that can be heard by the High Court. The court ruled that even if the maximum conceivable tax effect were calculated entirely in favor of the Revenue, it would not surpass the prescribed limit.

This decision was rendered by a division bench consisting of Justice Arun Monga and Justice Maneesh Sharma, who emphasized the importance of adhering to the monetary limits set by the Central Board of Direct Taxes (CBDT). The bench noted that the distinction between 'tax not quantifiable' and 'tax not quantified' was particularly relevant in this case. The appellant's counsel conceded that the tax effect, regardless of how it was computed, would not exceed approximately Rs 2 crore, which is below the threshold set by the CBDT.

The court's ruling highlighted the intention behind Circular No. 5 of 2024, which aims to streamline the process of tax litigation and ensure that the resources of the judicial system are not unduly burdened by cases with negligible tax implications. The judges observed, "Even if the tax effect is treated as not presently quantifiable, and even if it were to be quantified hereafter upon remand to the Assessing Officer, it would, on the appellant’s own showing, not exceed ₹2 crores in any eventuality. Clause 3.1(f) cannot be pressed into service to sustain an appeal where the maximum conceivable tax effect admittedly falls below the prescribed monetary limit; to hold otherwise would defeat the very object of the Circular."

The appeal originated from a previous order issued on June 24, 2024, by the Income Tax Appellate Tribunal (ITAT) in Jaipur. The ITAT had set aside a revisional order made by the Commissioner of Income Tax (International Taxation), Delhi-I, under Section 263 of the Income Tax Act. This order had directed the Assessing Officer to reassess the case of the respondent-assessee, Sajjad Ali, a general merchant based in Kapasan, Chittorgarh, and restore the original assessment order dated March 26, 2022.

Sajjad Ali had filed his income tax return on March 20, 2018, declaring a total income of roughly Rs 1 lakh. However, reassessment proceedings were initiated under Section 147 of the Income Tax Act after the department received information about Ali's investments in immovable property. A notice under Section 148 was issued on March 30, 2021, but Ali did not respond with a return. The case was subsequently transferred to the Circle (International Tax), Jaipur, for reassessment, which concluded with the acceptance of the originally declared income.

Following this, the Commissioner of Income Tax (International Taxation), Delhi-I, reviewed the assessment records after concerns were raised by the Internal Audit Party. The Commissioner concluded that the Assessing Officer had not adequately examined Ali's claim for exemption under Section 54 of the Income Tax Act, which amounted to about Rs 82.29 lakh. This claim was related to Ali's purchase of a residential flat with M/s Sana Land Developers Pvt. Ltd. on April 30, 2015, which was later canceled, leading to a refund during the financial year 2017-18. Ali subsequently purchased another flat from M/s Nyati Builders Pvt. Ltd. on December 28, 2017, claiming exemption under Section 54 for this new purchase. The Commissioner determined that the later purchase did not meet the time frame stipulated under Section 54, which is counted from the date of transfer of the original capital asset, identified as April 7, 2015. As a result, the Commissioner deemed the original assessment order erroneous and prejudicial to the interests of the Revenue, directing a fresh assessment.

In response to the Commissioner’s order, Ali appealed to the ITAT, which ruled that the conditions required under Section 263 were not satisfied, thereby setting aside the revisional order. This led to the current appeal by the Revenue.

At the outset of the proceedings, the appellant's counsel argued that the appeal was maintainable as the order in question was issued by the Commissioner in the exercise of his revisional jurisdiction under Section 263, which they claimed fell outside the purview of Circular No. 5 of 2024. Conversely, the respondent's counsel contended that the Circular did not provide any exceptions and that the only relevant criterion was the tax effect as outlined in the Circular.

Upon reviewing Circular No. 5 of 2024, the bench found no exceptions for orders made under Section 263. They noted that the only clause that could potentially support the appellant's case—Clause 3.1(f), which addresses cases where the tax effect is "not quantifiable"—did not apply in this situation. When the court inquired whether the tax effect would exceed Rs 2 crore under any circumstances, even if all factors were decided in favor of the Revenue, the appellant's counsel conceded that it would not.

The bench referenced a prior ruling from a coordinate bench dated February 21, 2025, in D.B. Income Tax Appeal No. 8 of 2025, The Principal Commissioner of Income Tax v Pinkcity Jewelhouse Pvt. Ltd., which had drawn a similar distinction regarding tax quantifiability. The court quoted the earlier bench's finding, which affirmed that there is indeed a difference between 'tax not quantifiable' and 'tax not quantified.' The court reiterated that even if the department's position was upheld, the tax effect would still fall below the Rs 2 crore threshold.

In an order issued on July 9, 2026, the bench upheld the reasoning of the coordinate bench and dismissed the appeal, stating that it was not maintainable. They also clarified that all questions of law remained open for future consideration, and all pending applications related to the case were disposed of accordingly.

This ruling underscores the judiciary's commitment to ensuring that tax litigation remains efficient and focused on cases with substantial tax implications. By dismissing appeals that do not meet the prescribed monetary limits, the court aims to alleviate the burden on the judicial system and prioritize cases that merit judicial scrutiny.

Title: Deputy Commissioner Of Income Tax (Intl. Tax), Jaipur v Sajjad Ali

Case No.: D.B. Income Tax Appeal No. 34/2025

Citation: [2026:RJ-JP:25823-DB]

Counsel for appellant: Mr. Shantanu Sharma, Mr. Parth Vashishtha

Counsel for respondent: Mr. Shrawan Kumar Gupta, Mr. Ashok Kumar Gupta