STRATEGY FOR APPELLATE FUNCTIONS
1. In accordance with the mandate of national litigation policy, 2010 several steps to reduce litigation have been taken by the Board, with the result, the pendency of appeals with ITAT has significantly been reduced. However, the pendency of appeals with the CIT(Appeals) has been incrementally increasing over last 5 years.
2. The Institution of CIT(Appeals) plays an important role in dispensing justice and in plugging the loopholes/weakness in the assessment order. Keeping in view the mounting number of appeals, the number of CIT(Appeals) was increased to 362 from 242 in November, 2014. However, the pendency is still incrementally increasing. As per Central Statistical Advisor (March, 2016), there is an estimated pendency of 58 lakhs appeals with CIT(Appeals) as on 31 .3.2016. The average pendency per CIT(Appeals)as on 31 .3.2016 is 715 appeals, which includes 391 appeals in B1 and B2 categories. As against this, the average per CIT(Appeals) disposal has been 306 over last 6 years.
At this pace, the existing appeals will take two and half years, if no new appeals are filed. Over the last 3 years, the number of new appeals instituted have far exceeded the number of appeals disposed off, as a result of which, there has been increase in cumulative workload of net appeals by 37.7% over last 5 years. More importantly, the existing appeals involve estimated demand of Rs. 5.30 lakh crores. It therefore, needs a multi-pronged strategy involving all key stakeholders to reduce the number of pendency of first appeals.
3. The pendency of first appeal across various CCIT regions is also highly iniquitous, with Bhopal, Kolkata, Kochi, Jaipur, Pune and Nagpur having average per CIT(A) pendency of 1043, 947, 985, 986, 901 and 875, respectively (as on 31.03.2016). Further, CCIT regions such as, Delhi (53%), Ahmedabad (65%), Mumbai (47%), Kolkata (45%), Lucknow (45%), Kanpur (46%) and Guwahati (42%) have high number of current appeals filed during the F.Y. 2015-16. The CSA statistics shows that 44% of total demand locked up in appeals relate to current appeals. Therefore, a common strategy for all regions will not serve the desired purpose and it would require a different strategy for CCIT regions with low arrears of appeals but high proportion of demand locked up in current appeals.
4. Due to variations in working strengths, nature of appeals, there is wide variation in the average CIT(Appeals)-wise pendency in different baskets. Therefore, common quantitative basket-wise targets in a straight jacket manner will not help reduction in pendency of appeals. The inequity in average per CIT(Appeals) pendency across regions is shown in Table-1 and Table-2 below.
Table-1: Pendency of appeals as on 31 .3.2016 (Source:CSA)
|Region||No. of CIT(A)||B-1A||B-1B||B-2||B-3||B-4A||B-4B||Total|
Table-2 Average per CIT pendency as on 31.3 .2016(Source CSA statistics)
|Region||No. of CIT(A)||B-1A||B-1B||B-2||B-3||B-4A||B-4B||Total|
5. The existing appellate strategy primarily has quantity-focus and ignores other priority areas of the Board. For example, the Board has offered preferential taxpayer services to corporates opting for Large Taxpayer Unit (LTU). However, appeals by LTU tax payers are treated as normal appeals and, therefore, are not picked up until the next year. Further, Board has given instructions to the AOs to dispose of rectification application u/s 154, application u/s 195(2)/1 97 and pass orders to give appeal effect in a time-bound manner. However, there is no priority assigned to appeals against such orders u/s 154, 195(2)/1 97 passed by AO. Furthermore, the appeals against the set-aside assessments are also treated at par with normal appeals under the B1 or B2 categories depending upon quantum of demand even though the taxpayer has already faced protracted litigation. The new appeal strategy provides special priority treatment for such appeals.
6. In the existing strategy, there is no incentive for improving quality in the appellate orders. The new strategy intends to assign weighted credit for such quality appellate orders with 2 units per such appeal. For making claim for such weighted credit for quality in appellate functions, the CIT(A) shall report in the monthly DO letter such quality cases, which may interalia, include cases where‑
(a) enhancement was made,
(b) penalty u/s 271(1 )(c) was levied,
(c) Assessment order was made by making further investigation or by applying relevant case laws that were ignored by the AO, or
(d) where a new substantial question of law was laid down.
The concerned CCIT, on examination of appellate orders, decide where any of the cases reported by the CIT(Appeals) deserve the weighted credit, which will be conveyed through a DO letter to the CIT(Appeals), which he can rely upon while claiming the credit at the year end.
7. The proposed strategy for appellate functions revolves around active role of other stakeholders, namely, AO, Pr. CIT(Admn.), CCIT and Pr. CCIT, in addition to the CIT(Appeals). Secondly, instead of assigning common targets in a straight-jacket manner across various CCIT regions, targets shall be determined in a dynamic way keeping in view important parameters such as age of appeals, revenue involved, priority areas of the Board in a decentralized manner.
8. New Strategy for appellate functions
(i) Identifying cases, where administrative actions can redress the grievance of the taxpayer, thereby making the appeal infructuous-
The concerned Principal CITs shall take stock of pending appeals filed against the action of the AO of not granting due tax credit, or not passing rectification order u/s 154 or appeals against 143(1) orders of CPC, or appeals that have become infructuous or the appeals on issues on which department has not preferred appeals in earlier years or in other cases, which can be better redressed through administrative actions. On identification of such pending appeals, the concerned CIT(Appeals) will be informed of the action taken by the AO to enable the him to dispose of such appeals accordingly. Progress in this regard is to be communicated to the concerned Principal CCIT by 30.6.2016. Similar exercise can be carried out by the CIT(Appeals) as well.
(ii) Redistribution of appeals within the same Pr. PCCIT(CCA) region
(e) Principal CCsIT have to assess the existing workload of CIT(Appeals) in consultation with the concerned CCIsT keeping in view the reasons for high pendency and make suitable proposal to the Board, suggesting transfer of posts or inter-region change in jurisdiction. These proposals should reach by 15.5.2016 (Action: All Pr. CCsIT).
(f) Redistribution of appeals amongst CIT(Appeals) within the same Pr. CCIT region needs to be carefully done and not left to the discretion of CIT(Appeals) alone, who though will need to be actively consulted in the matter. For inviting the proposals for transfer of appeals, the Pr. CCsIT shall circulate a suitable guideline by 15.5.2016, which shall interalia, provide that,-
(a) In cases proposed for transfer, not more than 3 hearings were conducted by the CIT(Appeals) or/ and his predecessor,
(b) appeal on the same ground/grounds in the case of appellant were not decided by CIT(A);
(c) appeal on the same ground/grounds in the case of same appellant are not pending with the transferor CIT(Appeals);
(d) In Search cases, all group cases remain with one CIT(Appeals).
The concerned CCIT should get these facts verified before recommending transfer of appeals by 31.5.2016[Responsibility: CCIT]. The Pr CCIT shall pass the order u/s 127 for transfer of the appeals by 15.6.2016. Physical Transfer of appellate records will have to be completed by 30.6.2016 and the transferor and transferee CIT(A) shall report the compliance to the Principal CCIT by 01.7.2016 [Responsibility: CIT(A)]. In order to monitor benefit of such transfer and reduction of compliance burden on the appellant, the transferee CIT(Appeals) will separately report disposal in respect of such transferred-in appeals in the monthly DO letter to the concerned CCIT(responsibility CIT(A)/CCIT).
(iii) Quick appraisal of nature of appeals at admission stage
CIT(Appeals) need not wait for an appeal to be converted from B4 category to other categories on the next 1st April but will examine the nature of new appeal filed at the admission stage itself, and find out whether the appeal can be redressed through administrative action of the AO. These appeals may include appeals for the action of the AO of not granting of due tax credit or interest on refund, or not passing the rectification order u/s 154 or not giving proper appeal effect or appeals being against 143(1) intimation of CPC, etc. The CIT(Appeals) shall communicate with the Pr CIT(Adm.) for appropriate action within the first week of the next month in respect of all such new appeals filed during a month. Timely action by the AO will make such appeals infructuous.
(iv) Accuracy of statistics
Targets of appeals cannot be monitored due to significant statistical mismatches. Statistics compiled by CSA show significant mismatch between the closing balance of appeals in different brackets at the end of first financial year as compared with reclassification of appeals in different categories as opening balance in the next financial year (Table 3).
Principal CCITs/CCITs should seek reasons for such mismatch from the concerned CIT(Appeals) and furnish reconciliation to Board, with a copy to the CSA by 30.6.2016 in this regard.
|Table 3 Difference in Workload of Appeals ( as on 31 .3.201 5)|
|S. No.||All India|
|1||Opening Balance of Pending Appeals as on 1st April (as per opening balance of aggregate MDRs for 2015- 16)||18291||33295||115312||64406||0||0||231304||9552||916|
|2||Opening Balance of Pending Appeals as on 1st April(as per closing balance of aggregate MDRs for 2014- 15||18763||33254||116040||64069||0||0||232126||11707||767|
(v) Enabling disposal of pending appeals
(a) The Pr CsIT (Admn.) will review the pending remand reports as on 1.4.2016 and ensure that the remand reports based on examination of merit of additional evidence under Rule 46A or based on the inquiries on the lines directed by the CIT(Appeals) are prepared and sent by 30.6.2016. Where the CIT-(Appeals) has forwarded the written submissions of the appellant as such without any specific direction or without any additional evidence for examination, the AO can refer to the relevant CBDT instructions and inform the status to the CIT(Appeals) accordingly.
(b) All remand reports are to be furnished within 60 days of reference made by the CIT-(Appeals). The Principal CIT(Admn.) and the CIT(appeals) shall inform the status of Remand reports to the concerned CCIT through the monthly DO letter and explain delay, if any, beyond 60 days.
(vi) Targets and units for disposal of appeals for f.y. 201 6-17 (Responsibility:
(i) Annual target– Each CIT(Appeals) charge will be required to achieve disposal of 360 appellate orders or earn 550 units. However, for evaluation of performance of an individual officer holding additional appellate charge during the year/part-year, performance in additional charge(s) shall be added.
(ii) The blanket manner of keeping same targets across all regions may not address the local issues such as High number of old appeals (in B2 and B1 B baskets) or high demand locked up in current appeals (B4 appeals). Therefore, in order to ensure that these competing targets are smoothly addressed, flexibility is provided through a common umbrella approach, by which appeals in B1A, B1B and B2 categories and priority appeals (LTU, against 154/195(2)/197/set aside assessments/ appeals on international taxation/transfer pricing matters) will be clubbed in one common umbrella “A”. The CIT(Appeals) will be required to dispose of minimum 300 appeals out of the common umbrella.
(iii) The balance 60 appeals (100 units) will be disposed of out of Common umbrella “B” comprising B3 appeals.
(iv) Where there is a shortfall in the existing pendency in the common umbrella “A”, the CIT(Appeals) will pick up appeals from Common umbrella “B”, after informing the concerned CCIT in this regard.
(v) In addition, where despite meeting targets in common umbrella “A”, there are still appeals pending in the Common umbrella “A”, an appeal in B4A and B4B Baskets can be considered for disposal keeping in view the urgency of the matter, genuine difficulty to the taxpayer or common issue involved in dispute or any other reason, on prior approval of CCIT on a case by case basis.
(vi) Board has already assigned targets of 120 units for the first quarter. The concerned CCIT will determine the targets for the last 3 quarters in consultation with the CIT(Appeals) within the overall annual targets of 360 appeals(550 units), as per the CAP for 2016-1 7.
(vii) Credit of Units‑
(a) The following orders will earn 2 units:
(i) Appeals in B-1A, B2B and B4A category – Appeal involving Demand of Rs. 10 lakhs or addition of Rs. 50 lakhs and above.
(ii) Appeals against Search assessments.
(iii) Quality appellate orders, which are endorsed for weighted credit by the concerned CCIT.
(b) Appeals in B2, B3 and B4B baskets (other than those referred above, that are eligible for credit of 2 units) will earn 1 unit.
(c) All appeals involving International tax/transfer pricing disputes will earn double the credit as in (a) and (b) above, as the case may be.
(d) In addition, those CIT(Appeals), who make 100% disposal of appeals through ITBA shall earn 25 units on the endorsement of DGIT(Systems).
(iii) Priority of appeals
(A) Each CIT (Appeals) shall dispose of 360 appeals during the year or earn 550 units to meet the annual CAP targets.
|Common umbrella comprising appeals in B1A , B1B and B2 baskets and other priority appeals||B3 basket|
(B) Out of this, 300 appeals will be from a common umbrella “A” comprising B1A, B1B and B2 baskets without any inter-se preference. In addition, this umbrella would also include all LTU Appeals, appeals against order u/s 195(2)/197/154/set aside assessment, appeals against search assessments and appeals involving International tax/transfer pricing disputes, irrespective of the original basket. Where, there are insufficient number of appeals in the common umbrella “A” in any charge, the CIT(A) will be free to choose appeals from B4A basket, in chronological order, to meet the shortage after informing the concerned CCIT in this regard.
(C) 60 appeals from B3 basket. Where in any charge, there is insufficient number of appeals in the B-3 basket, the CIT-(A) will be free to choose appeals from B4A or B4B baskets, in chronological order, to meet the shortage after informing the concerned CCIT in this regard.
(D) In circumstances other than (A), (B) and (C) above, any B4A / B4B appeal can be taken up for disposal on prior approval of the concerned CCIT.
(E) The concerned CCITs will determine the quarterly targets of each CIT-(Appeals) under his supervision depending upon the work load in different baskets, after redistribution of appeals is over.