Each year Central Broad of Direct Taxes (CBDT) comes out with strategy called as Central Action Plan which prescribes the mechanism and approach for various internal tax departments and authorities to improve tax compliances, widening the tax base, litigation management, reduction in outstanding demand and most importantly, to meet the core objective of budget collection. The said Action Plan also lays down the procedure on how to approach the assessments and appeals thereof.
The taxpayer has the option of filing an appeal before the Commissioner of Income Tax (Appeals) known as first appellate authority if he is aggrieved by the addition/ disallowance made during assessment proceedings. In India, currently there are 3,21,843 no. of appeals pending with CIT(A) as on 01.04.2018 (compared to 3,28,173 as on 01.04.2017) with tax demand involved therein of Rs. 6.38 lakh crore.
With the intention of reduction in litigation, particularly cases involving very high quantum of demand, current year Action Plan set out targets, by which each individual CIT(A) shall be expected to dispose of a minimum of 550 appeals, or achieve a minimum of 700 units during the year.
Apparently, the CBDT in the name of incentive for quality order, also allowed additional credit of 2 units to CIT(A) where: (a) enhancement has been made; (b) order has been strengthened, in the opinion of the CCIT, or; (c) penalty under section 271(1) has been levied by the CIT(A). It will substantially reduce the pendency of appeals as well as unlock the demand of Rs. 4.5 lakh crore.
Here, it is important to note that the ruling government has come to power with the promise of tax friendly policies and was keen to eradicate the tax terrorism image of the country, but, the direction in recent Action Plan seems contrary and discerned. If the primary intention was to curtail the pendency of appeal matters, then it should be carried out in impartial manner; and not by incentivizing the CIT(A) with additional credit of 2 units only when he either enhanced the assessment or strengthened the order of lower authority.
By following this action plan, the CIT(A), in order to earn more credit units, with predetermined conclusion, would be more interested in either strengthening the order of the lower authority or necessarily dismiss the appeal filed, instead of adjudicating the appeal in a fair and unbiased manner.
Moreover, the fact cannot be ignored that CIT(A) himself was once an Assessing Officer, who even as CIT(A), directly fall within the jurisdiction of Chief Commissioner of Income-Tax (CCIT), who is responsible for evaluating the performance of the CIT(A). This itself makes the institution of CIT(A) inclined to biasness against tax payer. Therefore, overall scenario may lead to no end of assessment proceedings even before appellate authorities.
But, for Tax-payer, the CIT(A) is sitting in the chair of a judge to adjudicate the dispute between tax payer and tax department. Though, the CIT(A) has the power of enhancement, however, he is expected to exercise these in a judicial, fair and impartial manner without being influenced by any superior authority.
Even the Apex Court, repeatedly held that ‘there can be no interference/ fetter in the judicial work of CIT(A) as it is a quasi- judicial authority’. Even, the Income Tax Act itself precluded the CBDT to issue any order, instruction or direction to CIT(A) in the exercise of appellate functions. However, this quality order incentive is indeed interference in the work of quasi-judicial authority, which is likely to create prejudice in the approach of CIT(A) while exercising appellate functions.
The key takeaway is that the said direction in Action Plan will certainly create an unnecessary burden and harassment of the tax payer who is left with no option other than to follow the statutory provisions and approach before CIT(A) against the redressal of grievance transpired due to assessment proceedings. Therefore, a positive reconsideration of this Quality Order direction is immediately awaited by widespread industry.
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