Fulfilling the promise of the ‘ease of doing business’ in India may not be achievable without the speedy dispensation of tax matters – It takes approximate time of 23 years to get finality in tax matters after filing of the return – Major changes may have to be made by the Ministry of Finance and Law – A thought for debate
In the Times of India on 16-9-2019, it was reported that it will take a minimum of 15 years to fill the vacancy of judges. Though the Government promises to help achieve ‘ease of doing business’ in India, unless the tax litigation is settled within a reasonable period of time, the object of doing business with ease in India may not be achieved. Total pendency of appeals before the ITAT as on 1-07-2018 is approximately 9,69,050, out of which a pendency of 22,039 is at Delhi and 16,108 is at Mumbai (2018) AIFTPJ–July–P 45. It takes two years for the matters to come on board or be listed for hearing before the ITAT at Mumbai. The pendency before the Bombay High Court is around 10,000 appeals and only one Direct Tax Bench is available for hearing of the tax matters. One may note that the appeals which were admitted in the year 2002, have still not been taken up for final hearing and appeals which were filed in the year 2015 are yet to be taken up for admission. After filing the return, it takes two years for assessment. If additions are made, it may take at least two years for an appeal to be decided before the CIT(A) and another two years for the disposal of the matter before the ITAT. After filing an appeal before the High Court, it takes a minimum of three years to get a date for admission. If the case is admitted, it could take another 12 years for the matter to be heard in finality. If the matter is taken further in appeal before the Supreme Court, another four years may lapse. It can be therefore inferred with reasonable confidence that it takes an approximate period of 23 years to get finality in tax matters. If an assessee succeeds before CIT(A), Tribunal and also the High Court and if Supreme Court decides against the assessee after 23 years, the assessee would have to pay interest from the date of notice of demand under section 156 read with the assessment order, till the date of giving effect to the order of Supreme Court. What will be the tax and interest liability? Is it fair to the assessee? This will make it may difficult for a businessman to take a decision to invest in India due to high level of uncertainty.
The following suggestions can put for debate so that speedy disposal of tax matters may be achieved.
1. Accountability in tax administration
One of the reasons for increase in tax litigation is lack of accountability provisions for the tax administration. Officers sometimes make additions for the sake of making additions, knowing very well that though the entire addition may get deleted before any appellate authority, they won’t be answerable. Prosecutions are initiated and launched even though the quantum proceedings may be pending in appeal. In the reported case of Devinder Singh Gill v. DCIT (Chd) (Trib) (www. itatonline. org.), it was held that in spite of a stay order granted by the Tribunal and giving a direction to the Income tax authorities to release the assessee who has been arrested for non-payment of tax, the tax administration follow the said directions. It is only after approaching the High Court by the way of a writ petition the person arrested was released. The Apex Court in CIT v. Hapur Pilkhuwa Development Authority (www.itatonline.org) imposed a cost of ₹ 10 lakh on tax administration for giving a misleading statement before the Court in a petition. The Bombay High Court in the case of PCIT v. International Biotech Park Ltd. (www.itatonline. org) observed that “On a number of occasions, this Court has brought to the notice of the Department of Revenue, Ministry of Finance Government of India through Commissionerates that the Revenue has been selective in its approach. It picks either the assessee or the assessment years pertaining to that assessee for challenging the orders in relation to them, before higher forums. This results in revenue leakage or perpetuation of wrongs affecting adversely the collection of revenue. The public at large is at loss to understand as to why the Department/Revenue consistently loses the battle in the higher courts. This could be termed as a deliberate or intentional act. If the Department of Revenue, Ministry of Finance, Government of India is going to conveniently overlook this and not being the guilty persons to book by initiating disciplinary measures against them, then no purpose will be served at all. This is not short term exercise, but a major surgery which will have to be performed. If the Revenue Officials are prepared to take some bold decisions then only this state of affairs will improve and not otherwise.” The AIFTP had sent a representation to the Chairman of CBDT for bringing to his notice that where the appeal of the revenue is allowed by the Apex Court or the High Courts, after long number of years of battle, there is no mechanism to find out whether the effect has been given and whether the taxes have been recovered. In Piramal Fund Management Pvt. Ltd v. DCIT (Bom) (HC) (www. itatonline. org), strictures were passed against high-handed unfair approach of the Assessing Officer in refusing to give an acknowledgement of stay petition. The Chief CIT was directed to ensure that such a behaviour is not accepted. It is the need of the hour to bring accountability provisions in the Income-tax Act as suggested by Dr. Raja J. Chelliah Tax Reform Committee (1992) 197 ITR 177(St) (257) para 5. 9: “The Assessing Officers should be made accountable for their actions by being blamed for raising demands which are not upheld by a reasonable figure, say 50 per cent, the Officer should be given a blackmark and reprimanded. On the other hand an Assessing Officer should be protected and defended if he has observed instructions of the Board and followed the Court rulings even though audit might raise objections about his actions.”
2. Appeal before CIT(A)
It is desirable that the Appeal before the CIT(A) is heard and order is passed within six months of filing of appeals. As there is no time limit prescribed for the sending of a remand report, the CIT(A), on several occasions, is unable to dispose the appeals within a reasonable time. The AIFTP has filed a petition before the Delhi High Court to increase the postings for CIT(A) and also made a representation to the CBDT to prescribe the time limit for sending the remand report. The ITAT Rules, 1963, 34(5)(c) prescribe that within period of 60 days from the days from date on which the hearing of the case is concluded however shall not ordinarily be a day beyond period of 30 days of the hearing of appeal, the order must be passed. It is desired that similar rules may be prescribed for adjudication of appeals before the CIT(A).
3. Appeal before ITAT
It is desired that an appeal before the ITAT may be heard and the order is passed within six months of the filing of an appeal. The sanctioned strength of the ITAT is 63 Benches and 126 members, whereas the current situation shows that there is a shortage of 33 members and more will retire in the year 2019, therefore as on 31-12-2019, there will be an acute shortage of Members. It is desired that the filling up of vacancies may be done at the earliest so that the matters pending before the ITAT can be decided within six months of filing of an appeal without compromising on the quality of the orders.
4. Appeal before High Court
1. Separate legal cell of tax department
More than 65% of appeals in tax matters before the High Courts are those of the Revenue. However, there is no separate legal cell of the department to monitor the tax appeals in the various High Courts. It is desired that there is a centralised legal cell of the department. Every month the ITAT prepares a list of the appeals filed in various Benches across the country and matters are accordingly disposed off. If such a method is adopted, the department would be able to know the number of appeals pending before the High Courts and the issues involved. This will help the revenue in grouping of appeals and if required to apply for early hearing before the Apex Court in issues where a large number of appeals have been filed. This will help in reducing the pendency before High Courts and also in bringing finality in tax matters at the earliest.
2. Filing an appeal to High Court
In CIT v. Reliance Infrastructure (Bom.) (HC)(www.itatonline.org), the Hon’ble High Court summoned the senior officials of the Department and strictures were passed for “irresponsible conduct” of filing an appeal on a point which was admittedly covered against the department by a judgment of the Supreme Court. In CIT v. State Bank of India (2015) 375 ITR 20 (Bom.) (HC), it was held that the department cannot arbitrarily pick up and choose which orders of the ITAT should be challenged in the High Court.
It is desired that whether or not an appeal is to be filed against the order of the Tribunal may be decided by an independent committee in the Department, preferably headed by a Retired Judge of High Court as a Chairman and two Members, one of who could be a retired Member of the ITAT and the other could be a lawyer having more than 25 years of practice before the High Court. At present, appeals are filed by the department, before the High Court due to fear of audit, considering the amount of tax involved and even if the appeal maybe dismissed, nothing is lost and it is only the tax payer’s money which is spent. However, when an assessee files an appeal before the High Court, he considers the cost factor, time involved and the chances of success. That is one of the reasons that only few matters of the assessee are pursued before the High Court. Approximately 80% of the orders of the Tribunal are accepted by assessees. If the above method is adopted, the department may succeed in more than 80% of the matters appealed by it and the tax payer’s money can be used for alternative productive purposes.
4. Use of technology
The Bombay High Court in CIT v. TCL India Holding Ltd. (www.itatonline.org) directed the Commissioner of Mumbai to host all the questions of law admitted by the High Court and also the Judgments of the Bombay High Court accepted by the Revenue on an online portal. Though the affidavit was filed on 5-5-2006 before the High Court stating that in the web site www.incometaxmumbai.gov.in, it has been decided to add “legal corner” on the website where all questions of law admitted and dismissed by the Honourable Bombay High Court will be hosted. It was also observed that the said legal corner shall become functional from 10th June, 2016. However, no action has been taken till date. Legal corner is not yet functional. This shows that in spite of filing an Affidavit in the year 2016, no action has been taken till date. If the CBDT publishes a list of cases accepted by the Revenue from time-to-time on their website and also the questions of law admitted by various High Courts, it would help in reducing the tax litigation and the assessees will be able to know the issues pending before various High Courts. Circular No 3 of 2018, dt.11th July, 2018 (2018) 405 ITR 29 (St) revising the monetary limit for filing the appeal is prescribed at ₹ 50 lakh to Courts and circular is clearly mentioned that all pending appeals will also will be withdrawn. It is seen that more than 3,500 appeals are filed by the Revenue where the tax in dispute is less than ₹ 50 lakh, however the appeals are not withdrawn as the Revenue is not able to prepare the list of pending cases where the tax in dispute is less than ₹ 50 lakhs due to non-availability of records. Due to this process, the High Court is unable to dispose matters quickly. If the department prepares the list and makes an application to withdraw all the appeals where the tax amount is less than ₹ 50 lakh, all 3,500 matters can be disposed in a single day .
4. Increase the retirement age limit of Judges from 62 to 65
The Parliamentary Committee headed by Smt. Jayanti Natarajan, as the Chairperson in the year 2010, recommended the increase in the retirement age limit of judges from 62 to 65 years. However, no progress has been achieved till date. We are of the opinion that an increase in the retirement age limit of judges will help in reducing pendency of cases.
5. Appeal before Supreme Court
All the questions of law relating to direct taxes admitted by the Apex Court should be published on the website of the CBDT from time-to-time and this may help the assessees in knowing the issues pending before the Apex Court. Before the introduction of appeal provisions u/s. 260A of the Income-tax Act, S.257 provided a direct reference to the Supreme Court where important questions of law were involved. Similar provisions may be introduced which may help in achieving finality in tax matters at the earliest stage. The AIFTP had suggested that an ‘E-Bench’ of the Supreme Court may be constituted and the same be linked with all the High Courts. Initially the SLP relating to direct taxes can be tried in such an ‘E-Bench’, after giving an option to the parties to either opt out or opt in. The ITAT has started E-Benches which have been very successful. If the same ideas are adopted, even Advocates from Guwahati would be able to argue a matter before the Supreme Court from the premises of the Guwahati High Court. This will greatly help in making justice accessible to the public at large and bring a revolution in Indian justice administration. This can be one of the legacies of the digitalization of India, which is one of the dreams of Honourable Prime Minister of India, Shri Narendra Modi.
6. Instability of Income-tax Law
Shri Nani A. Palkhivala, in his article titled “The Maddening Instability of Income-tax Law“ (1996) Income tax review – Aug-Sept P. 57-60 reads as under, “A telling example of the total absence of a sense of time in our tax administration is afforded by the Supreme Court’s decision rendered last November in the case of Sutlej Cotton Mills Ltd v. CIT (1990) 2 SCALE 931. It was a case under the Business Profits Tax Act, 1947. The accounting period was 1946-47. The amount involved was paltry sum of a few lakhs of rupees. The High Court’s judgment was rendered in 1965. The Supreme Court sent the matter back to the Income-tax Appellate Tribunal to re-hear the appeal 44 years after the close of the accounting period. Is there any other civilised country where a taxpayer would not know the quantum of his liability for 44 years?“
Even the Tribunal may not be able to give any effect to the order of the Supreme Court as the records may not be available before the Tribunal.
We hope that the Government will fill the vacancies of Judges and Members of the ITAT within a reasonable time and will make sincere efforts to reduce the pendency and disposal of matters so that the object of ‘ease of doing business’ in India is achieved. The professional organisations can play a proactive role by compiling all the judgments where the directions have been given to CBDT, but the same have not been followed to assist the Apex Court and High Courts. The same may also be forwarded to the Honourable Finance Minister for his consideration. If no response is received, the appropriate authority should be approached under the Right of Information Act for reasons for delay in compliance of these directions. If even that recourse fails, then respective High Courts may be approached for initiation of appropriate contempt proceedings. A thought for debate .
Dr. K. Shivaram