CA Sudeep Vijay Chhallani
It is beyond any doubt to state that Income Tax Act, 1961 governing statute for Income Tax in India is one of the most intricate statute with timely amendments needless to state “retrospectively”, making it more jarring and mind-blogging for tax payers.
As stated by our Hon’ble Finance Minister Shri Arun Jaitley in Budget recently, “The sovereign right of the Government to undertake retrospective legislation is unquestionable. However, this power has to be exercised with extreme caution and judiciousness keeping in mind the impact of each such measure on the economy and the overall investment climate. This Government will not ordinarily bring about any change retrospectively which creates a fresh liability”
It is not usual to hear that tax demand of more than Rs 4 lakh Crore is under dispute before various courts and Appellate Authorities as mentioned by Hon’ble Finance Minister Shri Arun Jaitley.
Keeping fingers crossed as new Cabinet on Board with some of the prodigious luminaries, some relief in respect of litigation and pending appeals is expected by the counsels.
Needless to state the prejudice and high handedness stand taken by revenue authorities in many of the obvious squarely covered cases is being observed now days. No doubt relief is granted at Appellate stage or by Higher Authorities but the appellant has to face the brunt of professional charges.
Aghast and upset with the trend, the Delhi and Bombay High Courts and CBDT have decided to take the Income Tax bull by its horns! In order to meet the end of justice and regain the faith and credence among the tax payers CBDT and many High Court has passed strictures and recovered cost.
As recent held in:
CIT vs. Larsen and Toubro Ltd (Bombay High Court) (Relevant Extract)
Frivolous appeals by dept results in harassment to assessee & wastage of judicial time. Dept to pay costs of Rs. 3 Lakhs. Costs may be recovered from, disciplinary action taken against, concerned official.
The Revenue officers must realize that just like other powers an executive power conferred in them is in the nature of a Trust. They hold office as trustees of the public at large. They deal with public
revenue and public money and that cannot be wasted in such frivolous litigation. We, therefore, dismiss these appeals with costs quantified at Rs.1,00,000/each (for three appeals)
It would be open for the superior/competent authority to recover the costs personally from the
officer responsible and equally take disciplinary action against him if the power to decide about filing such appeals is abused or the decision making authority is utilized to harass innocent Assessees.
Every case must be dealt with on its merit and no routine exercise ought to be undertaken merely because the Revenue impact is higher or the status or financial position of the Assessee is influential and strong. That cannot be the only yardstick or criteria.
High Court imposes costs of Rs. 50,000 on AO for filing frivolous appeal & wasting public money & judicial time
Though the Bench clearly indicated to the department’s counsel that the appeal had no merit and gave the department an opportunity to withdraw, the department did not do so. HELD by the High Court, passing strictures and imposing costs:
“We do not find how Officers lower down in the hierarchy can take decisions to file Appeals and that too against the decision of the Tribunal. The tendency not to accept any adverse verdict on facts results in frivolous Appeals being filed in this Court. That causes huge loss to the public exchequer and results in wastage of precious judicial time of this Court. All this ought to have been discouraged long time back. The High Court has not adopted a strict approach and that has possibly encouraged the Revenue in filing Appeals to challenge essentially findings of fact and with regard to matters which should stand concluded at the level of the authorities. The officials should realize that the authorities like CIT(A) and the ITAT are envisaged as appellate and possibly final fact finding authorities and at least the Tribunal is last in that hierarchy. The fact finding therefore if demonstrably perverse or palpably erroneous and as would amount to unsettling the settled position in law alone should be questioned by filing Appeals to this Court. However, a routine exercise and by people who do not wish to take any responsibility, results in number of Appeals being filed and pending. This benefits no one and rather defeats larger public interest. The Revenue collection and equally the participation of the assessee in the exercise undertaken by the authorities to assess their income, therefore is affected adversely. None takes a position or decision because of pendency of matters and for a long time. In these circumstances, while dismissing this Appeal, we impose costs quantified at Rs.50,000/. The costs be paid to the assessee within four weeks from today. We at least now expect the authorities to take cognizance and initiate proceedings for recovery of this amount personally from such of the Officers who do not take decisions or postpone them endlessly. A copy of this order be forwarded to the CIT Pune. It should also be forwarded to the Chief CIT, Pune who may decide as to who should pay the costs personally as between them or anybody else who has brought about this situation.
ITAT issues strictures against AO & CIT & fines them for filing a frivolous appeal
The department filed an appeal before the Tribunal raising several grounds relating to s. 69C etc. The CIT(A) had allowed relief to the assessee on the ground that as the expenses were duly recorded in the books and there was no dispute as to their genuineness, s. 69C had no application. HELD by the Tribunal dismissing the appeal:
The ITO, the Appellant, as well as the CIT, who has authorised the AO to prefer an appeal, did not apply their mind in the correct perspective and in a very lacklustre and routine manner filed the appeal which, in turn, resulted in wastage of time of the court … At this juncture it may be noticed that the power is vested in the CIT and not with the AO because the Legislature, in its wisdom, thought that a superior/ senior officer can take a more balanced decision so as to avoid filing frivolous appeals in routine manner. However, even the CIT has not given his reasons as to why he has authorised the AO to file an appeal on this issue…. we are of the firm view that the AO has raised a soulless ground which deserves to be dismissed in limine. We could have saved a lot of time had the CIT not given his authorisation on such frivolous issues. On the contrary, it is incumbent upon the Commissioner, as a supervisory authority, to admonish the AO for making an addition without basic understanding of legal position…. this is a peculiar case where even the CIT (Admin) who is supposed to supervise the proper functioning of the AO, under his charge, has allowed him to file appeals without properly examining the assessment order and the order of the CIT(A), which results in unnecessary expenditure to the assessee when appeal is filed by the Revenue and the assessee had to undergo the trauma of engaging counsel and paying substantial fees to defend the case when the Revenue has no case at all … Therefore we award a token cost of Rs. 5,000 upon the CIT who has given the authorisation and cost of Rs. 10,000 upon the AO who has filed this appeal… The said payment should be made to the assessee within one month from the date of receipt of this order. Registry is also directed to mark a copy to the Chairman, CBDT so that in future the Income Tax Commissioners, who are responsible for filing appeal before the Tribunal, would take proper care to scrutinize the issues before authorising the AO to file appeals before the Tribunal.”
Now coming to statistics as on 15-2-2014, the pendency of appeals and references before the Bombay High Court was more than 9,700, which includes 1,850 old references, 4,700 appeals admitted and pending for final hearing and 3,150 pending for admission. Moreover, unfortunately there is no mechanism to find out whether any remedial action has been taken against the strictures passed by various competent authorities!
Latest in addition to above New CBDT Chief Shri. K. V. Chowdary, the newly appointed Chairman of the CBDT, has addressed a letter dated 01.08.2014 to the income-tax department in which he has pointed out that one of the immediate challenging task is reaching the “not so easy” target for Revenue collection without undue harassment and high handedness. He has emphasized that the department has to improve its image and become a “friendly, professional, non adversarial and competent organization focused on Revenue collection, tax payers services and ensuring strict compliance with direct tax laws”.
Mr. Chowdary has emphasized that one of the issues that requires “immediate and earnest attention” is quicker and reasonable resolution of the requests/ grievances of the taxpayers, early resolution of disputes, effective assessments analyzing all the facts and avoiding high pitched assessments, promotion of compliance, sending strong message by dealing with tax evasion and tax frauds firmly effectively and quickly, widening the tax base, etc
Winding up with discussion we all hope that with recent judgments in context with frivolous appeals and high pitched assessment, a feeling of yearning desire is expected after hearing the words of wisdom of New CBDT Chairman.
“Good Governance” as promised by ruling Party, everybody is looking forward to see the arduous change in working of Revenue Department and making it user friendly.
(Author is Partner with Chhallani Agarwal & Associates)