INCOME TAX DEPARTMENT SHOULD HAVE AN INDEPENDENT LEGAL DEPARTMENT TO
MONITOR THE TAX APPEALS BEFORE VARIOUS HIGH COURTS AND APEX COURT

1. City of Mumbai contribute 40% of Direct Tax Revenue. However, it is very unfortunate that major of tax litigant before the High Court of Bombay does not have its own legal department. Before Bombay High Court 2800 references and 2400 appeals are pending of which 80% are of the Department. Though the references are pending for more than 20 years the tax administration is not able to comply with the legal requirement of serving the notice and papers to the parties concerned, due to which when matters reach before the Hon’ble Court, matters have to be adjourned number of times. Whenever adjournments are taken the tax administration has to make payment to the counsel concerned. The fees for adjournment are paid from the tax-payer’s money. This leads to waste of courts precious time as well as wasting of tax-payer’s money only for paying the professional fees for seeking adjournments.

2. Very recently Bombay High Court has dismissed number of appeals of the tax department mainly on the ground that no representative of the tax department was present in the Court, when the matters came for hearing. In CIT vs. Shri Manoj M. Shah (Notice of motion No. 1732 of 2003 dt. 20th March, 2007) Bombay High Court has also ordered to pay costs of Rs 10,000 from the salary of Chief Commissioner who is responsible for not filing proper affidavit as the delay in filing the appeal was 314 days. The Hon’ble Court made observation as under “Though we have granted a number of adjournments to file a better affidavit, there is no such better affidavit justifying the delay of 314 days in filing the appeal. By this process the Revenue suffers and if that be so, all the members of the public also suffer since the tax is contributed by the members of the public. The person responsible for this will have to be made answerable and accountable.
    
   Under these circumstances, the Notice of Motion is dismissed with costs quantified at Rs. 10,000/-. The cost shall be paid by the Appellant to the Respondent within a period of two weeks from today. Costs shall be recovered from the concerned Commissioner of Income tax and the affidavit indicating as to how the costs is recovered shall also be filed in this court within a period of two weeks from today”.

3. The Tax Bar whole heartedly welcomed the order because this is the only way the accountability can be enforced on the tax administration. For representing the matters before the Bombay High Court, the Department has a panel of lawyers, with due respect, some of the panelists have no experience whatsoever in tax matters. Because of lack of knowledge and experience they are not able to assist the Court satisfactorily. We feel the Government must have lost crores of tax only on account of delay in filing of appeals before the court and also by not complying with the procedural requirement of serving the papers, removing the objections etc.

4. We citizens and honest tax-payers of the country honestly believe that the tax-payer’s money should not be used for unproductive purposes. Before filing an appeal the Tax Department should verify whether it is worth pursuing the matter before the High Court. If it is worth they should make a sincere attempt to make an effective representation before the High Court. We therefore suggest as under:

1. Separate legal cell of Tax Department
   
   Each state should have a separate legal cell in the Tax Department. The legal cell shall be managed by the panel of lawyers in co-ordination with the chief commissioner judicial. Before filing an appeal the legal Cell should consider the tax involved, issues involved and chances of success. Once panel of legal department satisfied then only the appeal be directed to be filed. As soon as the appeal is filed the legal department should be able to find out the issues involved and the tax effect. If it is a very important issue affecting the large number of matters the legal department should make a request to group all the matters together. If it is of national importance the legal department may engage any special counsel of eminence to represent the matter, which will help the court to decide the matter early. At Board level there has to be central legal Cell to monitor the tax appeals pending before various High Courts and Apex court. Each State legal Cell should send the list of cases filed before the High Court the issues involved and matters heard and disposed of. Once in a year the Board should prepare the list of cases pending before the various High Courts, Apex court and publish the same for the information of tax-payers.

2. Technology of the Income Tax Appellate Tribunal may be adopted
   
   At any given point of time the Income Tax Appellate Tribunal is in a position to inform the the tax-payers bench wise, how many appeals are pending and how many are of the Department. The technology of the Income Tax Appellate Tribunal may be adopted by the Board for monitoring the matters before various High Courts.

3. Co-ordinations with the panel of lawyers and Commissioners
   
   In earlier days, one departmental representative was always present in the court, which helped the counsel to co-ordinate with the commissioners. However, such a system is discontinued. Nowadays only inspectors of respective officers are deputed to the court to help the counsel. The tax administration should reconsider and send the departmental representative, preferably one who has done law, to help the counsel, representing the matter before the Court. This will help the tax administration ensure better representation before the court.

4. Joint meeting with Tax Bar
   
   Interaction with the tax Bar, a on regular basis may help quicker disposal of tax matters and grouping of matters.

5. Research team to monitor the tax matters before various High Courts
   
   The City like Mumbai should have a well equipped library to assist the counsel who represents the matters before the Court. The Department may take assistance of young lawyers by paying a small honorarium to assist the counsel. They have to prepare the note on issues involved, cases for and against. This may make for better representation before the Court. This may help the tax department to build the team of panel of lawyers for the Tax Department.

6. We hope the Chairperson of Central Board of Direct Tax and Chief Commissioner of Mumbai will initiate a dialogue to have a separate Legal Department for Income tax, which may help to Tax Administration and Tax-payers.

Dr. K. Shivaram
Editor-in-chief.