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CIRCULARS- WHY THEY ARE NOT FOLLOWED EVEN BEFORE THE SUPREME COURT AND LITIGATION IS CONTINUED? BRAIN DRAIN IN UN-NECESSARY LITIGATION MUST COME TO AN END

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CIRCULARS- WHY THEY ARE NOT FOLLOWED EVEN BEFORE THE SUPREME COURT AND LITIGATION IS CONTINUED? BRAIN DRAIN IN UN-NECESSARY LITIGATION MUST COME TO AN END
By: CA DEV KUMAR KOTHARI
December 5, 2018
  • Contents

Synopsis:

Readers are well aware that not following binding precedence and even Circulars are not un-common amongst tax authorities. Even Circulars which are intended to reduce litigation and where revenue impact is low are not followed by tax authorities. We find large number of appeals of revenue eligible for withdrawal but they are not withdrawn. Many of such appeals are dismissed by Tribunals, High Courts and the Supreme Court. In this write-up legal and practical aspects of Circular are discussed in simple language. As illustration a table containing seven cases in which the Supreme Court dismissed appeals of Revenue (Pr. CIT/ CIT) due to low tax effect. In six out of seven the Supreme Court had to consider even petition for COD. In all cases several counsels appeared for revenue, whereas this appeals could have been simply withdrawn in advance so that cases would not have appeared in the cause list and time of honourable judges could have been saved.

 This shows how much time is wasted even at level of the Supreme Court and this causes brain drain. Such brain drain must come to an end.

Circulars about not filing appeals, not pressing and  withdrawals of pending appeal:

The CBDT had issued Circulars from time to time for not filing appeal, and not pressing pending appeals and withdrawing appeals preferred by Revenue which are pending before Tribunal, High Courts and The Supreme Court.  Situations in which such circulars have been issued from time to time and also revised from time to time are illustrated follows:

a. Lower amount of tax involved for which different limits are fixed for three stages.

b. Matters settled by way of judgments accepted by revenue.

c. Matters decided by CBDT in favour of assesse.

Situation a-  Lower  amount of tax involved for which different limits are fixed for three stages.

           it is the policy decision of the CBDT about litigation. This is to bring into more result orientation and not to litigate on cases involving small (less than limit) tax effect. Such circulars are for the benefit of public at large by way of reducing public spent on petty matters and also by reducing burden in Courts  due to  un-necessary petty  cases.

In the context of overall revenue of the Government, tax involved in such cases would be very low therefore such policy decision are very much justified. Off course there can be some exceptions.

Situation b: Matters settled by way of judgments accepted by revenue.

Judgment of the Supreme Court is law for the entire nation and is binding on all other courts, Tribunal and  authorities. Therefore, there should not be litigation on settled issues by the judgment of the Supreme Court. Even in absence of Circular, pending cases which are governed by judgment of the Supreme Court should be withdrawn.

When a judgment of Tribunal , High Court is accepted by the Revenue, and is not challenged by revenue , it is settled legal position. ( except when appeal is not filed due to low tax effect). Therefore, in such situations, judgment which has attained finality is binding and revenue should not perpetuate litigation in such cases.

Situation c. Matters decided by CBDT in favour of assesse.

When the CBDT has decided any issue in favour of tax payer, whether it be based on judgments or otherwise, such circular is binding on revenue all over India (subject to any exceptions in the Circular). Therefore, in such cases no further litigation should be initiated and perpetuated. Pending lis, by revenue on such issues should be withdrawn and pending matters before original or appellate authorities should be decided in favour of tax payers.

Binding nature of Circulars:

Such circulars are in favour of tax payers because they bring in certainty and relive tax payers from litigation. Therefore such circulars are binding on Revenue. These circulars should be followed in a fitting manner so that purpose is served.

Ground reality:

However, ground reality is that Circulars are not followed by Revenue Authorities as well as Counsels of Revenue. Circulars are not followed many times by Assessing Officers and CIT(A) and also CIT. Many appeals are filed contrary to circulars and are not withdrawn as per Circular.

Contrary to the intention and purpose of such circulars litigation is continued. Sometimes Courts dismiss appeals for low tax effect. However, because such circular is not binding upon Tribunal and Courts, sometimes appeals, are adjudicated although there is low tax effect. Continuation of litigation on such appeals should not be permitted.

Not withdrawing appeals even before the Supreme Court:

The Revenue should withdraw appeals which are contrary to Circular. The Counsels should also recommend Revenue Officers to withdraw such appeals. There is no show of intellectual on behalf of counsel of revenue to appear before the Court in such cases and withdraw appeal or not press it. They should not be so greedy that un-necessary litigation is carried which causes loss of revenue, and valuable time of Courts.  However, it seems that in many situations greed is major reason of litigation at all levels.  Greed of Counsels is also one of reason for litigation and continuation of litigation for long time.

Recently we have come across many cases in which honourable Supreme Court has dismissed appeals of revenue due to low tax effect. Author had noticed some of such judgments during November, 2018. A list of such judgments reported on this website are given in table below. This table is not exhaustive because  many of such judgments might not have been reported and some might have been missed by author also.

TABLE

Examples of judgments  and  orders of the Supreme Court dismissing appeals of revenue for low tax effect during November 2018:

SL NO.

CASE CITATION 

1

2018 (11) TMI 1072 - SUPREME COURT DEPUTY COMMISSIONER OF INCOME TAX VERSUS JALIL ABDULBHAI SHAIKH

2

2018 (11) TMI 1069 - SUPREME COURT - COMMISSIONER OF INCOME TAX VERSUS M/S CHEMICAL DYESTUFF INDUSTRIES

3

2018 (11) TMI 1065 - SUPREME COURT - PRINCIPAL COMMISSIONER OF INCOME TAX -7 VERSUS M/S PACE EXPRESS TRAVEL AND CARGO PVT. LTD.

4

2018 (11) TMI 700 - SUPREME COURT  - PRINCIPAL COMMISSIONER OF INCOME TAX VERSUS RUBY SINGLA

5

2018 (11) TMI 656 - SUPREME COURT  - PRINCIPAL COMMISSIONER OF INCOME TAX VERSUS M/S FIIT JEET LTD.

6

2018 (11) TMI 395 - SUPREME COURT - THE COMMISSIONER OF INCOME TAX -EXEMPTION VERSUS PATANJALI YOGPEETH (NYAS)

7

2018 (11) TMI 54 - SUPREME COURT - PRINCIPAL COMMISSIONER OF INCOME TAX -4 VERSUS SUZLON ENERGY LIMITED

In many of above cases there was also case of Condonation of Delay. The Supreme Court condoned delay and then dismissed appeals.

Number of cases pending can be reduced:

We find that in cases before Courts, for one matter there can be several appeals and petitions. On same issue there can be appeals for several years even in case of one assesse. There are petitions in nature of SLP, Diary no. General Application, Application of admitting appeal -,like ITAT Tendered  and then ITA on admittance of appeal. Petitions for Condonation of Delay, petition for Stay etc.

All such cases are allotted several appeal and petition numbers that increases number of pendency.

Therefore a total tone up in system of litigation by Government is required.

 

By: CA DEV KUMAR KOTHARI - December 5, 2018

 

 

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