The Central Board of Direct Taxes displayed a sense of urgency to limit the filing of appeals. In March 2000, a decision was taken to reduce litigation by advising officers not to raise questions of law where the tax effect is less than the amount described in the instructions issued by the Board.
Instruction No. 1999 laid down monetary limits for filing appeals before the Income-Tax Appellate Tribunal, the High Court and the Supreme Court. Surprisingly, these instructions were flouted and appeals were filed at random. A stage was reached where the number of departmental appeals exceeded those by the taxpayers. In one case, where an appeal was filed disregarding the Circular, the Bombay High Court observed: Despite the above Circular, the Revenue has chosen to file the present appeal knowing fully well that the Corridors of the Courts are flooded with pending litigations. The presentation of this appeal is quite contrary to the instructions issued in the Circular which is binding on the Revenue.
The Bombay High Court dismissed the appeal in CIT vs Camco Colour Company (254 ITR 565). This decision was followed by various other High Courts also. The latest in this line is from the Andhra High Court in CIT vs A. Rajendra Prasad (299 ITR 227).
The Supreme Court noted in the Berger Paints (266 ITR 99) case that if the Revenue chose not to challenge the correctness of the law laid down by the High Court in one case, then, it is not open to the Revenue to agitate the matter afresh in other similar cases.
The Finance Bill amendment
As these rulings were not palatable to the Revenue, the Finance Bill, 2008 has introduced a new Section 268A in the Income-Tax Act, 1961. It is now provided that if an appeal is not filed because of the monetary limits laid down in the Circular in one case, it will not preclude the department from pursuing the appeal in the case of the same assessee for any other assessment year or any other assessee for the same or any other assessment year.
It shall not be lawful for an assessee to contend that the income-tax authority has acquiesced in the decision on the disputed issue by not filing an appeal in any case. Every order, instruction or direction fixing monetary limits for filing appeals shall be deemed to have been issued under the new Section 268A. This amendment takes retrospective effect from April 1, 1999.
Does the amendment make any sense? Taxpayers have a right to expect that the treatment will be the same to all taxpayers when it comes to the filing of departmental appeals. Now the department says that it will pick and chose cases for filing appeals.
It seeks to shut out an argument from the side of the taxpayer in the appellate fora. It will no longer be open to the party to the respondent in the appeal to contend that the matter in issue was conceded by the income-tax department either in the previous year in the same case or in the case of another taxpayer. The whole Rule of law is enshrined on the basis of the principle of stare decisis. The amendment strikes at this edifice.
Even after this amendment, it is open to the appellate authorities to refuse admission of appeals not justified by the circumstances of the case. In the first place, the Board ought not to have issued instructions prescribing monetary limits for filing appeals. Having issued instructions, it is duty bound to advise its officers to follow these instructions.
In the alternative, the Board should withdraw all such instructions and leave it to the wisdom and discretion of the senior officers of the I-T department to decide on filing of appeals. The Board doing neither of this would smack of Heads I win, tails you lose attitude. Either the Board is serious in its proclaimed objective of reducing litigation or its declaration is only expression of a pious intent not meant to be acted upon.
Approaching the judiciary for redress is not a one-way street. The Revenue is only one of the parties to the dispute. It is not open to a party to the dispute to dictate to the court what arguments it should hear and what appeals it should entertain. This amounts to interfering with judicial discretion. It may be worthwhile to examine how many of the departmental appeals were successful before the Income-Tax Appellate Tribunal, the High Court and the Supreme Court. If the Revenue loses a case, there is the temptation to amend the law with retrospective effect. And as if to confirm this comes the latest amendment by way of Section 268A.
Thankfully, courts have inherent powers and will sit in judgments and hear arguments quite irrespective of what the new Section 268A may or may not say.
T. C. A. Ramanujam (The author is a former Chief Commissioner of Income-Tax.)