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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
through its President
Mr.Hinesh R. Doshi
Address :
3, Rewa Chambers,
Ground Floor, 31,
New Marine Lines,
Mumbai 400 0 20.
2. Mahendra Sanghvi
10, LA Citadella,
99, Maharshi Karve Road,
Mumbai 400 0 20. ... Petitioners
Versus
1. The Central Board of Direct Taxes,
Department of Revenue,
Ministry of Finance,
Government of India, North Block
New Delhi 110 001.
2. Union of India
through the Secretary,
Department of Revenue,
Ministry of Finance,
Government of India, North Block
New Delhi 110 001.
R espondents
....
• Mr. S. E. Dastur, Senior Advocate a/w Mr. Vipul Joshi, Mr.
Harsh Kothari, Mr. Abhishek Padwalkar & Mr. Dharan V.
Gandhi for Petitioners.
• Mr. Anil Singh, ASG, a/w Mr. Sham V. Walve for Respondent
No.1.
Nesarikar
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.3343 OF 2018
1. The Chamber of Tax Consultants
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ALONG WITH
CIVIL APPELLATE JURISDICTION
PUBLIC INTEREST LITIGATION NO.144 OF 2018
1. ACELEGAL
D201,
2nd Floor,
Vashi Station Complex,
Vashi, Navi Mumbai 400 703.
2. Sneha Sarbhushan
C104,
Rachana Heights,
Near Old Post Office,
Panvel 410 2 06. ... Petitioners
Versus
1. Union of India
Through the Secretary,
Ministry of Finance,
Department of Revenue,
Government of India,
MSEB Building, 2nd Floor,
Estrella Battery Compound,
Labour Compound, Dharavi,
Matunga, Mumbai 40 0 019.
2. Chairman,
Central Board of Direct Taxes,
North Block,
New Delhi 1 10 001.
R espondents
....
• Ms. Ritika Agarwal a/w Ms. Deepti Jethva or Petitioners.
• Mr. Anil Singh, ASG, a/w Mr. Sham V. Walve for Respondent
No.2.
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CORAM : AKIL KURESHI &
SARANG V. KOTWAL, JJ.
DATE : 11th APRIL, 2019.
P.C. :
1. Heard learned Counsel for the parties for final disposal
of the Petitions.
2. The grievances of the Writ Petitioners and the Public
Interest Litigation Petitioners substantially overlap. We may
record brief facts. The Writ Petition is filed by the Association of
Tax Consultants and its office bearers. They have challenged a
portion of Central Action Plan (hereinafter referred to as the
said plan) prepared by Central Board of Direct Tax (for short
’CBDT’) for the financial year 20182019.
We shall take a detail
note of the relevant provisions contained in this plan later. For
the moment we may note that this plan contains various
provisions made by CBDT setting out targets of tax collection,
disposal of cases by income tax authorities and for awarding
points for such disposals. The grievances of the Petitioners relate
to two areas of this plan. Petitioner’s first grievance is in respect
of time line set and the directions to the Commissioner (Appeals)
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for deciding appeals within such time. According to Petitioners
such targets and time limits would put unnatural pressure on
the Commissioner to decide the cases in a hasty manner, which
has every possibility of denying a fair hearing to the assessee.
Second area of the Petitioners’ grievance is with respect to
allocation of units for disposal of what has been referred to as
quality orders . The Petitioners would point out that these
quality orders are those which result in favour of the
department. According to Petitioners granting more weightage
to such orders, would have the possibility of influencing the
outcome of the Appeals before the Appellate authorities.
3. The Petitioners of the Public Interest Litigation have
also challenged the same plan. The challenge however is
confined to the portion of the plan, where the CIT Appeals have
been given higher weightage for disposal of Appeals by quality orders.
4. The CBDT has framed the said plan for the financial
year 20182019.
The preamble of this document sets out the
purpose for framing the said plan and reads as under;
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The Vision 2020 document adopted by the Incometax
Department
sought to address all the current priorities in a holistic manner. It laid
special emphasis on a number of critical areas such as litigation
management, improving quality in diverse areas of work and
strengthening compliance and enforcement functions. The plan worked
well and resulted in enhanced levels of performance in all functions across
the board.
This Action Plan for 201819
retains the broad structure of the plan for
201718
and seeks to consolidate the achievements made, while reemphasising
priorities within the framework of the overall Vision. A new
chapter on Widening of Tax Base has been added, so as to highlight the
critical importance of this area. The Chapter on Audit has been omitted,
since the CITs(Audit) are already functioning under instructions and SOPs
formulated by the Directorate of Incometax
(Audit and Inspections). The
separate chapter on Prosecution and Compounding has been omitted and
the relevant targets, in consolidated form, have been incorporated in the
Chapter on Assessment Units (prosecution targets for TDS units already
form part of the Chapter on TDS). Targets in various key result areas have
been recalibrated
in the light of experience gained.
5. Chapter I of the plan sets out targets for tax collection.
It contains goals for major head wise direct tax collection for the
financial year 201819.
Such targets are broken up region wise,
keeping in view revenue potential of the region.
Chapter III of the plan pertains to Litigation
Management. The Petitioners’ challenge flows from this chapter.
The relevant portion of this chapter reads as under;
envisages an efficient and effective tax administration, progressive tax
policy and improved tax compliance. The Action Plan 201819
must work
towards accomplishing this vision.
The Action Plan for 201718
was a comprehensively remodeled
plan that
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CHAPTER-III
LITIGATION MANAGEMENT
“The rising litigation with the taxpayers and the quantum of revenue locked up in
is a matter of serious concern that requires attention.” – Vision 2020
Litigation is not only a cost on the credibility of a tax administration system but
also an indicator of the robustness and fairness of a system of taxation. Litigation
has been rising over the years and has now assumed grave proportions, as is
evident from the following data:
No. of appeals pending with CsIT (A) as on 01.04.2017 3,28,173
No. of appeals disposed of by CsIT (A) during FY 2017-18 1,23,480
No. of appeals pending with CsIT (A) as on 01.04.2018 3,21,843
Demand involved in appeals with CsIT (A) as on 01.04.2018 Rs.6.38 lakh crore
Demand stayed by ITAT/Courts as on 01.04.2018 Rs.87,035 crore
Such high volume of litigation has resulted in rendering a huge amount of tax as
uncollectible. Besides, it is a major impediment towards creating an environment
of tax certainty for the taxpayers. It also involves infructuous costs on account of
efforts to realize taxes blocked in these appeals. The substantial progress made last
year is required to be continued with renewed vigour so as to bring down the
quantum of litigation and unblock the revenue involved.
PART A – TARGETS FOR CIT (APPEALS)
2. The pendency of appeals with CsIT (A) and demand locked therein has been
increasing over the years. Analysis of the work done last year reveals the following:
Revenue involved Pending On Disposals New filings Pending On
01.04.2017 01.04.2018
A1 more than 50 crores 1295 1033 579 841
A2 1 to 50 Cr 34488 9813 11694 36369
A3 10 L to 1 cr 76771 23723 35701 88749
B Less than 10 Lakhs 215619 86205 1743 131157
C Current Less than 10 L 0 2706 67433 64727
328173 123480 117150 321843
(a) Total appeals pending where demand is less than 10 Lakh are 1,95,884 as on
01.04.2018, which shows a decline of about 9% from the corresponding figure
as on 01.04.2017. However, the pendency is still very large, and includes
1,15,706 appeals where demand is less than Rs. 2 lakhs. A special focus is
required on such cases during the current year.
(b) In regard to high demand appeals, there is a decline of 35% in A1 category but
an increase in pendency of A2 and A3 categories of 5 % and 16% respectively.
(c) The appeals pending as on 01.04.2018 include 22256 appeals that are more
than 5 years old.
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3. The results of last year s action plan strategy in litigation ‟ management at the level
having proportionate focus on optimizing disposal in terms of numbers and on
maximizing disposal of appeals involving high quantum of demand.
3.1 It is seen that the appeals pending in different categories are not evenly
distributed amongst PCCIT regions, as also within each PCCIT region. Hence the
targets for disposal are being set at the level of PCCIT regions, and at micro level
there shall be norms for disposal of appeals by individual CITs(A). In order to ensure
optimum distribution of work and maximum disposals, the PCCIT/CCITs may
redistribute the cases in such a manner as to attain/exceed the targeted disposals. The
allocations of pending appeals may also be reviewed periodically to ensure that each
CIT(A) delivers results in accordance with the norms laid down hereunder. Further,
the PCCITs/CCITs shall endeavor to ensure disposal of older appeals on priority,
particularly appeals that have been pending for more than 5 years.
3.2 Accordingly, the targets and norms for FY 2018-19 in respect of disposal of
appeals pending with CsIT (A) in each PCCIT Region are set out as under:
A. Each PCCIT Region shall ensure:
a. Disposal of at least 25% of appeals that involve demand of Rs.10
lakhs or more in categories A2, and A3 and 100% of appeals
pending as on 01.04.2018 that involve demand of Rs.50 crore and
above (category A1);
b. Disposal of at least 90% of appeals that involve demand of less
than Rs.2 lakhs (new category B3);
c. Disposal of at least 70% of appeals that involve demand of less
than Rs.10 lakhs, inclusive of the targeted disposal in B3 (less than
2 lakh demand) category.
B. 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. In PCCIT
regions where the average number of Category B3 appeals pending with
CITs(A) is more than 500, each individual CIT(A) shall be expected to achieve a
minimum of 800 units during the year.
C. In Regions where the targeted disposal as at A above translates into numbers
of units that fall short of the norms for individual CITs(A) stated at B above, the
PCCITs concerned shall scale-up the targets stated at A above so as to ensure
satisfaction of the norms. Such scaling-up shall be done, as far as possible, in respect
of Category A2 appeals followed by Category A3 appeals.
D. Correspondingly, in Regions where the targeted disposal as at A above
translates into numbers of units that are significantly higher than the norms for
individual CITs(A) stated at above, the PCCITs concerned may scale-down the
targets stated at A above, in consultation with the Member (A&J). Such scalingdown
shall be done, to the extent possible, only in respect of Category B appeals.
year‟of CIT(A) are encouraging. There has been a reduction in overall litigation,
particularly in cases involving very high quantum of demand, as also in cases with
tax demand of less than Rs.10 lakhs which have a wide-spread impact on taxpayers.
It is therefore reasonable to continue with a similar action strategy for the current
fiscal, to meet the core objectives of budget collection, reduction in outstanding
demand and litigation management. Accordingly, a two-pronged strategy as in last
year, with slight modifications to deepen the impact, shall be adopted this year, too,
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3.3 The above targets, along with demarcation of units, are represented by
the following Table:
TABLE 4
Taget Category
Unit
Per
Remarks
25% A
(>10 lakhs)
A1 Above 50Cr 3
No interse
priority except
100% disposal
of A1.
A2 Above 1 Cr to 50 Cr 2
A3 Above 10 Lakhs to 1 Cr 1
70% B
(<10 lakhs)
B1 Filed before 1.4.2015 (210
lakhs)
1
No interse
priority
except 90%
disposal of B3
B2 Filed from 1.4.2015 to
31.3.2018 (210
lakhs)
1
B3 All appeals filed before
31.03.2018 (demand <2
Lakhs)
1
Balance C
(<10 lakhs)
C Current Appeals filed
during FY 201819
1 May be
disposed of
with approval
of PCCIT/CCIT
3.4 For the purpose of evaluation of performance of an individual officer
holding additional appellate charge(s) during the year/part-year, the
aggregate disposal including in the additional charge(s) held, shall be
considered.
3.5 The individual norm of 550 appeals or 700 units stated above may also
be varied by the PCCIT concerned in respect of CITs (A) within his
jurisdiction, having regard to the number and categories of appeals pending
for disposal with the CITs(A), so as to attain maximum output and optimum
work allocation. However, each PCCIT Region as a whole must achieve the
targets of disposal of 25% of appeals involving demand exceeding Rs.10
lakhs and above, 90% of appeals involving demand less than Rs.2 lakhs and
70% overall in Category B appeals.
3.6. The above targets should cumulatively result in a significant increase in
disposal of appeals with CITs(A) and substantially reduce the pending
appeals carried forward, as well as unlock the demand locked therein of
about Rs.4.5 lakh crore.
ACTION ITEMS:
(1) Category A appeals involving demand above Rs. 50 Crore and
pending as on 01.04.2018 shall be disposed of by 31.12.2018.
(2) The priority for disposal of appeals in different Categories shall be as
under:
Appeal
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(i) Higher priority shall be given to appeals involving demand of less than Rs.2 lakhs
and filed up to 31.03.2018 (Category B3). There shall be no interse
priority
within the Category.
(ii) The next priority shall be given to disposal of appeals involving demand of Rs.10
lakhs and above (Category A), irrespective of the year in which the appeals are
filed. There shall be no interse
priority within the Category, except that appeals
involving demand of Rs.50 crore and above shall be disposed of by 31.12.2018.
Different subcategories
shall earn 1, 2 or 3 units respectively as indicated in
Table 4 above.
(iii) Lowest priority shall be given to appeals involving demand of less than Rs.10
lakhs and filed during the current FY 201819
(Category C). Such appeals can be
disposed of, with approval of the CCIT concerned, if there is inadequate number
of appeals of Category A or B pending with him. The CIT (A) may also dispose of
any such appeal on priority, if so directed by the PCCIT/CCIT concerned.
(iv) Appeals of the same assessee relating to different years involving substantially
similar issue(s) or inter related issue(s) may be disposed of irrespective of the
Category to which they belong, if one of the appeals falls for priority disposal. In
respect of group search & seizure cases, the CIT (A) may dispose of appeals of
group cases irrespective of the category to which they belong if one of the
appeals falls for priority disposal.
(v) Appeals pending for more than 5 years shall be given priority within each
Category. PCCITs shall endeavor to liquidate the pendency of such appeals
during the year.
(vi) Cases set aside and restored to the CIT (A) by Courts/ITAT are to be disposed of on
priority. These shall get points as per regular category.
(vii) Appeals involving Transfer Pricing issues shall earn 1 unit in addition to the normal
number of units specified against the relevant category in Table 4.
(viii) Appeals in cases where returned losses have been reduced or converted into income in
assessment will be entitled to normal units specified in Table 4, on the basis of
notional tax on the amount of disputed additions.
(3) Incentive for quality orders:
(i) With a view to encourage quality work by CITs(A), additional credit of 2 units
shall be allowed for each quality appellate order passed. The CIT (A) may claim
such credit by reporting such orders in their monthly DO letter to the CCIT
concerned. Quality cases would include cases where(
a) enhancement has been made,
(b) order has been strengthened, in the opinion of the CCIT, or
(c) penalty u/s 271(1) I has been levied by the CIT(A).
(ii) The concerned CCIT shall examine any such appellate orders referred to him by
the CIT(A), decide whether any of the cases reported deserve the additional
credit and convey the same through a DO letter to the CIT(A), which can be
relied upon while claiming the credit at the year end.
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6. From the above noted portion of the plan it can be
seen that in order to achieve certain disposal targets of pending
Appeals before the CIT Appeals, CBDT has made detail
provisions for expeditious disposal of such Appeals. Part 3 of
Chapter III pertains to incentive for quality orders and provides
that additional credit of 2 units shall be allowed for each quality
appellate order passed. Such term quality cases or quality orders
has also been defined in the said part.
7. In the background of such facts on 22/03/2019, we
had on the question of higher weightage for quality orders
made following observations;
5. With respect to the Petitioners second part of
the challenge, we are of the opinion that the CBDT
should reconsider the same. From the action plan, it is
not clear as to the utility of the norms set which the
Commissioner has to achieve. If the purpose of setting of
norms is to evaluate the performance of the
Commissioner, there would be all the more reason why
the abovequoted
portion of the action plan be
reconsidered by the CBDT.
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6. On the next date of hearing, the learned
utility of the norms that the Commissioner would need to
achieve and the outcome of the CBDTs deliberations on
our recommendation for reconsideration.
8. In response to this order, the counsel for CBDT placed
on record a communication issued by CBDT dated 04/04/2019,
clarifying the issues raised in the said order dated 22/03/2019.
Relevant portion of this communication reads as under;
Kindly refer to interim order of Bombay High Court in captioned
matter wherein the petitioners have challenged the CAP 201819
issued by the CBDT on two grounds viz, (i) directions issued by CBDT
for disposal of certain number of Appeals of specified categories
within specified time and (ii) incentivization of CsIT(A) for quality
orders where enhancement has been made, order of AO has been
strengthened and penalty has been levied by the CIT(A). Hon’ble
Court has directed that on the next date of hearing, I.e. 11.04.2019,
Department Counsel is required to apprise the
court about the utility of norms that the commissioner would need to
achieve and the outcome of DT’s deliberations СВ on their
recommendation for reconsideration.
Counsel for the Respondent would apprise us about the
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2. In this regard, I am directed to provide following inputs of CBDT
(a) As regard the utility of the norms that CIT(A) is required to
achieve, it is stated that the Department has been formulating
Central Action Plan (CAP) for the purpose of identifying the core
areas of departmental functioning and setting targets therein
including that of CIT(A). The concept of awarding credits has been
brought in by the Board to ensure parity in the performance of
CIT(A) as he is required to dispose of small appeals involving meagre
tax effect as well as large and complicated cases, involving multiple
issues, requiring greater effort and devoting of time.
Further, Litigation management particularly w.r.t appeals pending
before Commissioners of Income Tax (Appeals) is one of the key
priority areas of the CBDT. A two pronged strategy has been detailed
in the CAP for respect of disposal of appeals filed with CIT(A),.
having proportionate focus on optimizing disposal in terms of
numbers and on maximizing disposal of appeals involving high
quantum of demand.
(i) As per Central Action Plan (CAP) for the FY 201819,
the
Department has laid out targets and norms for disposal of
appeals pending with CsIT (A) in each PCCIT Region. CITs(A)
in each PCCIT charge shall be expected to dispose of a
for apprising the court on the twin issues:
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minimum of 550 appeals, inter alia involving a). Disposal of
at least 25% of appeals that involving tax effect of Rs10 lakhs
or more b). 100% of appeals pending as on 01.04.2018 that
involve tax effect of Rs.50 crores and above c). Disposal of at
least 90% of appeals that involve tax effect of less than Rs.2
lakhs and disposal of at least 70% of appeals that involve tax
effect of less than Rs. 10 lakhs inclusive of appeals with
demand less than Rs.2 lakhs.
(b) With respect to recommendation of Hon’ble court to reconsider
the incentivization provided to CsIT(A) for quality orders, it is
submitted that the additional weightage to the disposal of appeals
has been provided where the CIT (A) has to spend more time and
make extra efforts, in investigating the case, thereby making disposal
of such appeals a more time taking, strenuous and rigorous exercise.
It was never the intention of the CBDT to compromise the
independence and judicial autonomy of the CIT (Appeals) by
incentivizing the orders in favour of department. Rather CBDT has
always upheld their functional autonomy and judicial independence
to decide on merits on each case.
Nonetheless, in order to avoid further litigation and since fiscal
year 201819
is closing, the Board has taken the view that as
and when the exercise of formulation of CAP for 201920
begins, the existing definition of quality cases’ as provided in
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Para 3(i) of Chapter III of CAP would be modified to include all
appeal orders passed by the CIT (A), whether decided in favour
or against the revenue, where the supervisory Pr CCIT/CCIT is
of the view that the CIT(A) has devoted more time for
ascertaining the facts and passed exceptionally wellreasoned
and speaking order by carefully applying mind to the facts of
the case and considering applicable judicial precedents.
9. In the background of such facts, learned Senior Counsel
Mr.S.E. Dastur, for the Petitioners raised following contentions;
(i) Any directives from the CBDT to the Appellate
Commissioner to dispose of Appeals expeditiously, has
a possibility of miscarriage of justice. The assessee may
not get full opportunity of hearing if the Commissioner
(Appeals) is under pressure to decide the Appeals
within a time frame.
(ii) The learned Counsel drew our attention to subsection
(6A) of section 250 of the Income Tax Act, 1961 (for
short the Act);
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and he submitted that, this statutory provision also
does not lay down a rigid time frame for disposal of an Appeal.
Under the impugned circular the CBDT has; (a) shortened the
time for disposal of the appeal and; (b) laid down a rigid time
frame to decide the appeal which is wholly impermissible;
(iii) Counsel further submitted that the prescription of
higher weightage for disposal of cases through quality orders, is
wholly impermissible. This has every possibility of consciously or
subconsciously influencing the mind of the authority about the
ultimate outcome of the Appeal. Such directives have the scope
of influencing the outcome of Appeal on merits;
(iv) Learned Counsel submitted that there can be no
additional weightage to the orders, based on the contents or the
subject matter. He submitted that these directives issued by
CBDT transgress the exercise of quasi judicial functions by the
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statutory appellate authorities, which is impermissible. In this
respect our attention was drawn to section 119 of the Act, which
contains a provision that any instructions or providing directions
the CBDT may issue in exercise of such powers, shall not be so
as to require any incometax
authority to pass an order in a
particular manner.
10. In support of his contentions learned Counsel relied on
following decisions;
In case of P.K. Ghosh, IAS & Anr. Vs. J .G. Rajput,
reported in (1995) 6 Supreme Court Cases 744, in which it was
observed as under;
10. A basic postulate of the rule of law is that
’justice should not only be done but it must also be seen
to be done.’ If there be a basis which cannot be treated as
unreasonable for a litigant to except that his matter
should not be heard by a particular Judge and there is no
compelling necessity, such as the absence of an
alternative, it is appropriate that the learned Judge
should rescue himself from the Bench hearing that
matter. This step is required to be taken by the learned
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Judge not because he is likely to be influenced in any
manner in doing justice in the cause, but because his
hearing the matter is likely to give rise to a reasonable
apprehension in the mind of the litigant that the mind of
the learned Judge may
be subconsciously has
been
influenced by some extraneous factor in making the
decision, particularly if it happens to be in favour of the
opposite party. Credibility in the functioning of the
justice delivery system and the reasonable perception of
the affected parties are relevant considerations to ensure
the continuance of public confidence in the credibility
and impartiality of the judiciary. This is necessary not
only for doing justice but also for ensuring that justice is
seen to be done.
In case of Dedicated Health Care Services TPA
(India) Pvt. Ltd. and others, Vs. Assistant Commissioner of
IncomeTax
and others, reported in (2010) 324 ITR 345
(Bom), in which the Division bench by referring to section 119
of the Act struck down a circular issued by the CBDT on the
ground that the same would interfere with the exercise of the
quasijudicial
discretion of the Assessing Officer.
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11. Learned Counsel Ms. Ritika Agarwal appearing
for the
Petitioner of the Public Interest Litigation in addition to
adopting the arguments of Mr.Dastur further submitted that the
policy of the Government which transgresses the statutory
limits, should be struck down.
12. On the other hand learned ASG Mr.Anil Singh opposed
the Petitions. He submitted that the targets for tax collection and
disposal of income tax appeals, would have no effect on a fair
hearing that the assessee must get from the Commissioner
(Appeals). These targets and parameters for judging the output
of a Commissioner (Appeals) are well within the scope of
CBDT’s powers. Like any other organization, the CBDT also lays
down targets for tax collection. In order to judge the
quantitative output of the appellate Commissioners, certain
disposal norms are set. No directives have been issued to dispose
of any number or kind of Appeals within a rigid time frame, if
the same cannot be done having regard to the interest of justice.
With respect to Petitioners’ later part of the challenge to
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additional weightage for quality orders, Counsel pointed out
that the CBDT has reconsidered the issue and decided not to
implement the same henceforth. With respect to the orders
already passed, in any case, no harm or damage would be done
to the Petitioners or any of the assesses in allowing such
provisions to be effected.
13. Having heard learned Counsel for the parties and
having perused documents on record, we may first consider the
Petitioners’ challenge to the first part of the circular. We have
reproduced the relevant portion of the circular at length. Perusal
of this portion would show that the CBDT has set out broad
targets for revenue collection projected over the different
regions. Internal distribution between the regions has been
carried out on scientific basis. For any organization, setting of
goals and targets is neither impermissible nor unknown. Only
because certain targets for tax collection are set out, would not
render the policy arbitrary or unreasonable. In the context of the
disposal norms to be met by the appellate Commissioner also,
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we do not think that it is impermissible for any organization to
set out certain output norms to judge the output performance of
the person concerned. In absence of any such norms, it may be
extremely difficult to judge the quantitative performance of a
person concerned. Setting out of norms for disposal by the
Appellate Commissioners, per say, therefore cannot be said to be
either impermissible or beyond the scope of CBDT’s powers.
Disposal of appeals by the Commissioner is just one of the many
parameters for judging his performance. Range of other factors
such as the quality of the orders, his service record etc. would
his suitability for concern advancement. But to subject that
quantitative output should not enter such consideration at all
would not be correct.
14. In the context of the precise norms set by the CBDT for
disposal, firstly it has to be the decision of the organization to
set out appropriate norms. The Court does not have the
wherewithal to test such norms on the basis of reasonableness.
When an expert body like CBDT sets out disposal norms for the
Commissioner Appeals to achieve, it has the necessary expertise
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and wherewithal after taking into consideration all relevant
factors to come to a proper conclusion in this respect. The Court
would not substitute its wisdom for that of the CBDT, duly aided
and advised by the experts in the field.
15. With this preamble we may peruse the disposal norms
more minutely. These norms provide different units for disposal
of the Appeals depending on; the age and the valuation. For
example the policy provides the category ’A’ where the revenue
effect is more than Rs.10 lakhs. The cases involving tax effect of
more than Rs.50 Crores upon disposal would receive 3 units. For
cases between Rs.1 Crore and 50 Crores the disposal unit would
be two and for the rest, it would be one unit. The category ’B’ is
cases where the revenue effect is less than Rs.10 lakhs. Here the
policy trifurcates the cases between those filed before
01/04/2015 and in the range of Rs.2 to 10 lakhs, those filed
from 01/04/2015 to 31/03/2018 and the tax effect is between
Rs.2 to 10 lakhs and all case filed before 31/03/2018 where the
tax effect is less than Rs.2 lakhs. Category ’C’ are the cases where
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the tax effect is less than Rs.10 lakhs and the Appeals are filed
during the financial year 20182019.
The Policy prescribes that
individual norm of disposal 550 Appeals or 700 units should be
achieved, having regards to the number and categories of
Appeals pending before such Commissioner, so as to attain
maximum output and optimum work allocation. The policy also
makes certain general prescriptions such as giving the higher
priority to Appeals involving demand of less than Rs.2 lakhs and
filed upto 31/03/2018. Next priority would be given to disposal
of Appeals involving demand of Rs.10 lakhs and above
irrespective of the year of filing and the lowest priority would be
given to Appeals filed during the financial year 20182019
involving tax effect of less than Rs.10 lakhs.
16. We do not think that these guidelines in any manner
breach the reasonableness or can be stated to be arbitrary or
illegal. These guidelines are for general directives and
prescriptions to on one hand enable the revenue to collect taxes
which are otherwise due and on the other hand to assess the
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work output of the Appellate Commissioners which in any
organization is of considerable importance. We also do not think
that the guidelines have undertone of giving priority to the
issues which concern the revenue more than the assessees. As
noted the directives include giving priority to old cases of small
assessees. If the CBDT also recognizes that appeals involving
high tax effect are most likely to be more voluminous, involving
complex legal disputes, the prescription of higher units for
disposal of such cases, can neither be stated to be arbitrary nor
unreasonable, nor can be seen as restricting the discretion of the
Appellate Commissioner. We do not accept the suggestion that
such guidelines or prescriptions could possibly result in denial of
fair hearing to the assessees. Reference in the policy to
unblock or unlock the revenue blocked cannot be read in
isolation and must be understood in the larger context of the
whole document. Before the appellate Commissioner essentially
the assessees who are aggrieved by the orders of assessing
officers who would be in appeal. Pending such appeals stay of
the tax recovery would in many cases be granted conditionally
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or unconditionally. It is only after the appeal is decided by the
Commissioner (Appeals) that further recovery of tax if so
confirmed can be made. Expression to unlock the revenue
must be understood in this background. The policy nowhere
expects the disputed tax demand would be confirmed whether
justified or not. In a given case it may happen that upon disposal
of the appeal, tax provisionally collected may become
returnable.
17. In this context, we may also refer to subsection
(6A)
of section 250 of the Act, which reads as under;
In every appeal, the Commissioner (Appeals), where it is
possible, may hear and decide appeal within a period of
one year from the end of the financial year in which such
appeal is filed before him under subsection
(1) of section
246A.
This provision thus provides that the Commissioner
(Appeals) where it is possible may hear and decide the Appeal
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within a period of one year from the end of financial year in
which such Appeal is filed before him. This provision does not
lay down any fix time limit for the Commissioner (Appeals) to
dispose of the Appeals filed before him. It only requires that the
Appeal be disposed of when it is possible, within a certain time
frame. This however does not indicate that the guidelines issued
by CBDT in the impugned plan, are contrary to subsection
(6A)
of section 250 the Act. What the CBDT has done is to lay down
broad guidelines for disposal of Appeals categorywise.
There is
neither firm directives that certain class or kinds of Appeals must
be decided before a particular date, nor there is any negative
implication of a particular Commissioner (Appeals) not being
able to do so. The guidelines of the CBDT in this respect
therefore must be seen as directory and not mandatory.
18. Coming to the Petitioners’ second limb of the
grievance, we may recall the policy provided for incentive for
quality orders. This clause states that with a view to encourage
quality work by Commissioner (Appeals) additional credit of 2
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units shall be allowed for each quality appellate order passed.
Ofcourse subject to CCIT upon examination of the order finds of
deserving higher weightage.
The term quality cases is explained as those including
cases where (
a) enhancement has been made,
(b) order has been strengthened, in the
opinion of the CCID, and
(c) penalty under section 271(1) has been
levied by the CIT (A).
19. All these contingencies necessarily point to
circumstances where the order passed by the Commissioner
(Appeals) is in favour of the revenue. For example this policy
refers to the enhancement made by the Commissioner or a case
where the Commissioner has levied penalty under section
271(1) of the Act. This necessarily refers to enlargement of the
assessee’s liability before the Commissioner as compared to what
may have been determined by the Assessing Officer. In our
opinion, such policy is wholly impermissible and invalid. Any
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directives by the CBDT which gives additional incentive for an
order that the Commissioner (Appeals) may pass having regard
to its implication, necessarily transgresses in the Commissioner’s
exercise of discretionary quasijudicial
powers.
20. It is well laid down through series of judgments in field
of administrative law, interference or controlling of the
discretion of a statutory authority in exercise of the powers from
an outside agency or source, may even be superior authority, is
wholly impermissible. This general principal of administrative
law finds statutory embodiment in subsection
(1) of Section
119 of the Act. As is well known, under subsection
(1) of
section 119, the Board has the power to issue orders and
instructions for proper administration of the Act. This provision
reads as under;
119. (1) The Board, may from time to time, issue such
orders and directions to other incometax
authorities as it may deem fit for the proper
administration of this Act, and such authorities
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and all other persons employed in the execution of
this Act shall observe and follow such orders,
instructions and directions of the Board.
21. In terms of the provisions contained in subsection
(1)
of Section 119 of the Act, thus the Board may from time to time
issue such orders, instructions and directions to other income
tax authorities as it may deem fit, for proper administration of
the Act and such authorities shall observe and follow the orders,
instructions and directions of the board. While granting such
wide powers to the CBDT under subsection
(1) of section 119
of the Act, the proviso thereto provides that no such orders,
instructions or directions shall be issued, so as to require any
income tax authority to make a particular assessment or to
dispose of a particular case in a particular manner. In exercise of
these powers thus the CBDT cannot issue any instructions or
directions to any income tax authority to make a particular
assessment or to dispose of a case in a particular manner.
22. When the CBDT guidelines provide greater weightage
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for disposal of an Appeal by the Appellate Commissioner in a
particular manner, this proviso of subsection
(1) of section 119
of the Act, would surely in a breached. It is neither possible nor
necessary to judge the actual effect of such guidelines on the
orders passed by the appellate authorities. Suffice it to record
that such guidelines have a propensity to influence the appellate
Commissioners and be tempted to pass an order in a particular
manner so as to achieve a greater target of disposal. Any
temptation though in the guidelines referred to as incentives for
disposal of an Appeal in a particular manner, would not stand
the test of law.
23. Under the circumstances the CBDT has now decided to
withdraw the guidelines for the coming year. In our opinion in
its existing form for the past financial year also the same cannot
be allowed to have effect. We are conscious that the appellate
Commissioners have already passed the orders. Correction of
these orders cannot be doubted en masse only because they
were passed under the shadow of the said policy. Nevertheless
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to allow the implementation of this policy, on the orders passed
by the Appellate Commissioners even for the past financial year,
would amount to an illegal prescription to prevail and operate.
24. In the result, the Petition is allowed in part;
(i) The following portion of the impugned Action Plan of
CBDT is set aside.
Incentive for quality orders :
(i) With a view to encourage quality work by CITs
(A),additional credit of 2 units shall be allowed for
each quality appellate order passed. The CIT (A)
may claim such credit by reporting such orders in
their monthly DO letter to the CCIT concerned.
Quality cases would include cases where (
a) enhancement has been made,
(b) order has been strengthened, in the opinion
of the CCID, and
(c) penalty u/s 271(1) has been levied by the
CIT (A).
(ii) The concerned CCIT shall examine any such
appellate orders referred to him by the CIT (A),
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decide whether any of the cases reported deserve
the additional credit and convey the same through
a DO letter to the CIT (A), which can be relied
upon while claiming the credit at the year end.
(ii) Both the Petitions are disposed of accordingly.
(SARANG V. KOTWAL, J.) (AKIL KURESHI, J.)
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