In public interest, time and again, High Courts have passed strictures against tax administration for failure to follow the due process of law in the course of assessment, recovery and quasi-judicial – If directions of High Court are followed, it may be communicated by press release or by a circular – If not, then what remedial action has been taken?

Time and again, various High Courts have passed strictures against the Income-tax Department (the “Department”). Many a times, in public interest, High Courts have to give directions to the Department to prevent harassment to assessees. Few such instances are as follows:

In Arun Ganesh Jogdeo v. UOI (, the Bombay High Court directed the department to follow directions of Delhi High Court in Court on its own motion v. CIT (2013) 352 ITR 273 (Delhi) and to be vigilant and ensure that the mistakes in issuing notice under sections 244 and 245 as pointed out by the Petitioner do not occur. Department was also directed to set up a self-auditing vigilance cell to redress taxpayers’ grievances.

In Shakari Khand Udyog Mandal Ltd. v. ACIT (2015) 370 ITR 107 (Guj.)(HC), the Gujarat High Court laid down guidelines to streamline the procedure for reopening of assessment in the State of Gujarat. It is desired that CBDT should direct all Assessing Officers irrespective of the State to follow the guidelines of the Gujarat High Court.

In CIT v. State Bank of India (2015) 375 ITR 20 (Bom.) (HC), the Bombay High Court held that the Department cannot arbitrarily pick and choose which orders of the ITAT should be challenged in the High Court. If ITAT has followed an order which is not challenged by the Department, then an affidavit must be filed explaining the distinguishing features which warrants a different view in a subsequent case with identical facts.

In Pirmal Fund Management Pvt. Ltd. v. DCIT (Bom.) (HC), strictures were passed against high-handed and unfair approach of the AO in refusing to give an acknowledgement of stay application. The Chief CIT was directed to ensure such behaviour is not repeated. Department was directed to nominate another AO to hear stay application.

In A.T. Kearmey India Pvt. Ltd. v. ITO (2014) 363 ITR 172 (Delhi) (HC), the High Court warned the AO of contempt action for seeking to overreach ITAT’s stay order and directed the revenue to lift the attachment and ensure that the amounts recovered are deposited to the bank account of assessee. A copy of the order was also sent to the CBDT for information.

In CIT v. Reliance Infrastructure Ltd. (Bom.) (HC) (, the 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. Harinagar Sugar Mills Ltd. (2014) 226 Taxmann 190 (Bom.) (HC), the High Court did not condone a delay of 117 days in filing appeal and of 1,248 days in filing review petition. A copy of the order was forwarded to Chief Commissioner of Income-tax and to the Secretary Finance, Government of India for remedial action.

In Thermax Babcock & Wilcock Ltd. v. CIT (Bom.)(HC) (, the High Court laid down zero–tolerance policy over adjournments. It was held that appeals may be dismissed, heard ex-parte and/or costs imposed if counsels are not prepared. The copy of the order was forwarded to Joint Secretary, Department of Law & Judiciary, Government of India.

In CIT v. Kirloskar Oil Engineers Ltd. (2014) 364 ITR 88 (Bom.) (HC), the Department was given last opportunity and warned of heavy costs for wasting judicial time by filing appeals on covered matters.

In BBC World News Limited v. ADIT (2014) 362 ITR 577 (Delhi) (HC), proceedings of original records were not found. The High Court expressed alarm at the shoddy record keeping by the Department. Adverse remark was made because papers/documents on record were not serially numbered and indexed. A direction was given to keep proper records.

In UTI Mutual Fund v. ITO (2012) 345 ITR 71 (Bom.) (HC), referring to the judgment in KEC International v. B. R. Balakrishnan (2001) 251 ITR 158 (Bom.) (HC), the Court laid down the guidelines on how stay application should be dealtwith. In Rajasthani Sammelan Sarvoday Balika Vidyalaya and Anr. v. ADIT (2013) 350 ITR 349 (Bom.) (HC), the High Court cautioned the Department and directed it to follow the settled guidelines for recovery of tax.

In Directorate of Revenue v. Uttamchand (2016) (333) E.L.T. 80 (Delhi) (HC), strictures were passed against the Revenue for condemnable lethargic attitude in pursuing prosecution matters. Where the petition was filed after eight months of order of the Trial Court, no reason was given as to why the trial was protracted at the Trail Court stage for more than 24 years.

It may also be appreciated that in recent time even ITAT has also passed strictures against the revenue officials for filing an appeal before the Tribunal without application of mind and directed the CBDT to take note and remedial action. .

In Commissioner of Customs (Import) v. Do Best Infoway the CESTAT has commented adversely on the casual manner in which the matter was handled by the Adjudicating Authority and the Commissioner (Appeals). CESTAT has asked CBEC to issue appropriate guidelines to quasi judicial authorities to discharge their duties publicly keeping in view the spirit of the ratio laid down by Apex Court in the case of Gordhandas Bhanji (1952) AIR 16 SC. In response, the Central Board of Excise and Customs vide Instruction No. 390 dt. 13-4-2016 ( issued the guidelines to all quasi-Judicial officers, as regards the manner in which the proceedings should be conducted by the public authority. The timely action of the CBEC deserves to be appreciated. We hope similar circular will be issued by the CBDT. The question to be asked is what action has been taken against such officers who do not follow the basic principles of law, are they fit to discharge the function as quasi-judicial authority?

While the Judiciary can only pass orders to address grievances and to improve administration, there is no mechanism by which the Judiciary is able to oversee the implementation of its orders. Therefore, I think it is the duty of the Bar to ensure proper implementation of the orders. While the above are few recent cases wherein strictures have been passed against the Department or certain directions issued, there could be many more such orders. It is my humble appeal to all tax professionals to forward to the Federation, all such orders which could then be compiled and forwarded to the Hon’ble Finance Minister for remedial action. With the help of the Right to Information Act, the Federation and other professional organisations can play a proactive role in implementing the orders passed by High Courts.

It has been observed that even when the CBDT accepts the law laid down by various High Courts, the same is not communicated to the public at large. It is desired that the CBDT publishes a yearly circular or notification informing the taxpayers of the judgments accepted by the CBDT. This will help in reducing the litigation in various High Courts as well as assist taxpayers in planning their taxation issues.

In as early as in the year 1955, the CBDT vide Circular No. 14 (XL-35) dated 11th April, 1955, guided Assessing Officers as regards their duty to assist taxpayers in every reasonable way, particularly in the matter of claiming and securing reliefs. It is desirable that this instruction may be reiterated by the CBDT so as to assure tax payers of its commitment for fairness.

In the recent past, in order to reduce litigation, the CBDT has come out with instructions on various subjects such as taxability of surplus on sale of shares and securities as capital gains or as business income {[2016] 382 ITR (St.) 14}. Also, in order to address taxpayer grievances, the CBDT has also issued instructions for passing of rectification orders in writing and within the prescribed time limit {[2016] 382 ITR (St.) 16/ 17}. The CBDT deserves credit for such taxpayer initiatives.

Dr. K. Shivaram

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