Introduction: In a recent judgment, the Kerala High Court has delivered a crucial decision regarding the binding nature of administrative circulars on a Tax Commissioner, emphasizing their role as quasi-judicial authorities. The case of T.S. Aji vs. ITO highlights the court’s stance on whether an administrative circular can be considered as a legal constraint on the Tax Commissioner’s actions. This article delves into the details of the case, its analysis, and the broader implications of this significant ruling.
The Case Background: The case revolves around a writ petition filed by T.S. Aji, challenging the validity of an official notice, Ext.P4, dated 20th July 2023. The petitioner sought a directive to the first respondent, the Income Tax Officer (ITO), to reconsider a stay application (Ext.P3). During the course of the legal proceedings, the petitioner’s counsel informed the court that an appeal against the assessment order was already pending before the appellate authority, namely the 2nd or 3rd respondent.
Judicial Proceedings: Upon hearing arguments from the petitioner’s counsel, it was revealed that the appeal process was underway, leading to a significant development in the case. The petitioner was granted one week’s time to submit a stay application before the relevant appellate authority. Importantly, the court directed the appellate authority to evaluate this application fairly, taking into account various factors, including the content of Office Memorandums (Ext.P5 to Ext.P7) issued by the Central Board of Direct Taxes.
The court also referred to a Supreme Court judgment, specifically the case of Principal Commissioner of Income Tax-5 & Others v. LG Electronics India Private Limited [(2018) 18 SCC 447]. In this precedent, the Supreme Court observed that an administrative circular should not act as a constraint on the Commissioner since the Commissioner functions as a quasi-judicial authority. The Supreme Court ruling further emphasized that in cases similar to the one in question, authorities have the discretion to grant deposit orders for amounts lower than 20% while appeals are pending.
Significance of the Judgment: The Kerala High Court’s judgment holds paramount importance as it clarifies the standing of administrative circulars concerning the actions of a Tax Commissioner. By asserting the quasi-judicial role of the Commissioner, the court reiterates that such circulars do not bind them in a rigid manner. Instead, the Commissioner retains the authority to make case-specific decisions based on individual circumstances and merits.
This decision ensures that Tax Commissioners can exercise their discretion, especially when it comes to setting deposit orders during the pendency of appeals. It underscores the principle that administrative directives cannot infringe on the Commissioner’s quasi-judicial independence. The judgment not only provides guidance for the current case but also establishes a broader legal precedent regarding the applicability of administrative circulars in taxation matters.
Conclusion: The Kerala High Court’s verdict in the case of T.S. Aji vs. ITO reiterates the quasi-judicial authority of Tax Commissioners and their independence in decision-making. The judgment emphasizes that administrative circulars do not act as rigid constraints on a Commissioner’s actions. Instead, they should consider each case individually and exercise discretion, particularly when determining deposit orders during the pendency of appeals. This decision has far-reaching implications, setting a legal precedent that upholds the quasi-judicial role of Tax Commissioners in the face of administrative directives.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
1. The present writ petition has been filed impugning Ext.P4 notice dated 20.07.2023 and for a direction to the 1st respondent to reconsider Ext.P3 stay application.
2. After some arguments, learned Counsel for the petitioner submitted that an appeal against the assessment order is pending before the appellate authority, i.e., 2nd/3rd
3. The petitioner is granted one week time to file a stay application before the appellate authority concerned. The appellate authority is directed to consider the said application on its merit after taking into consideration Ext.P5 to Ext.P7 Office Memorandums issued by Central Board of Direct Taxes as well as the judgment of the Supreme Court in the case of Principal Commissioner of Income Tax-5 & Others LG Electronics India Private Limited [(2018) 18 SCC 447] wherein it has been observed as under;
“2. Having heard Shri. Vikramjit Banerjee, learned ASG appearing on behalf of the appellant, and giving credence to the fact that he has argued before us that the administrative circular will not operate as a fetter on the Commissioner since it is a quasi-judicial authority, we only need to clarify that in all cases like the present, it will be open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20%, pending appeal.”
4. With aforesaid, the present writ petition stands disposed of. Pending interlocutory application/s, if any, in the writ petition stand/s dismissed.