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TMI Blog2019 (4) TMI 1489X X X X Extracts X X X X X X X X Extracts X X X X ..... a detail note of the relevant provisions contained in this plan later. For the moment we may note that this plan contains various provisions made by CBDT setting out targets of tax collection, disposal of cases by income tax authorities and for awarding points for such disposals. The grievances of the Petitioners relate to two areas of this plan. Petitioner's first grievance is in respect of time line set and the directions to the Commissioner (Appeals) for deciding appeals within such time. According to Petitioners such targets and time limits would put unnatural pressure on the Commissioner to decide the cases in a hasty manner, which has every possibility of denying a fair hearing to the assessee. Second area of the Petitioners' grievance is with respect to allocation of units for disposal of what has been referred to as "quality orders". The Petitioners would point out that these quality orders are those which result in favour of the department. According to Petitioners granting more weightage to such orders, would have the possibility of influencing the outcome of the Appeals before the Appellate authorities. 3. The Petitioners of the Public Interest Litigation have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the quantum of revenue locked up in appeals is a matter of serious concern that requires attention." - Vision 2020 Litigation is not only a cost on the credibility of a tax administration system but also an indicator of the robustness and fairness of a system of taxation. Litigation has been rising over the years and has now assumed grave proportions, as is evident from the following data: No. of appeals pending with CsIT (A) as on 01.04.2017 3,28,173 No. of appeals disposed of by CsIT (A) during FY 2017-18 1,23,480 No. of appeals pending with CsIT (A) as on 01.04.2018 3,21,843 Demand involved in appeals with CsIT (A) as on 01.04.2018 Rs.6.38 lakh crore Demand stayed by ITAT/Courts as on 01.04.2018 Rs.87,035 crore Such high volume of litigation has resulted in rendering a huge amount of tax as uncollectible. Besides, it is a major impediment towards creating an environment of tax certainty for the taxpayers. It also involves infructuous costs on account of efforts to realize taxes blocked in these appeals. The substantial progress made last year is required to be continued with renewed vigour so as to bring down the quantum of litigation and unblock the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distribution of work and maximum disposals, the PCCIT/CCITs may redistribute the cases in such a manner as to attain/exceed the targeted disposals. The allocations of pending appeals may also be reviewed periodically to ensure that each CIT(A) delivers results in accordance with the norms laid down hereunder. Further, the PCCITs/CCITs shall endeavor to ensure disposal of older appeals on priority, particularly appeals that have been pending for more than 5 years. 3.2 Accordingly, the targets and norms for FY 2018-19 in respect of disposal of appeals pending with CsIT (A) in each PCCIT Region are set out as under: A. Each PCCIT Region shall ensure: a. Disposal of at least 25% of appeals that involve demand of Rs. 10 lakhs or more in categories A2, and A3 and 100% of appeals pending as on 01.04.2018 that involve demand of Rs. 50 crore and above (category A1); b. Disposal of at least 90% of appeals that involve demand of less than Rs. 2 lakhs (new category B3); c. Disposal of at least 70% of appeals that involve demand of less than Rs. 10 lakhs, inclusive of the targeted disposal in B3 (less than 2 lakh demand) category. B. Each individual CIT (A) shall be expected to dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and above, 90% of appeals involving demand less than Rs. 2 lakhs and 70% overall in Category B appeals. 3.6. The above targets should cumulatively result in a significant increase in disposal of appeals with CITs(A) and substantially reduce the pending appeals carried forward, as well as unlock the demand locked therein of about Rs. 4.5 lakh crore. ACTION ITEMS: (1) Category A appeals involving demand above Rs. 50 Crore and pending as on 01.04.2018 shall be disposed of by 31.12.2018. (2) The priority for disposal of appeals in different Categories shall be as under: (i) Higher priority shall be given to appeals involving demand of less than Rs. 2 lakhs and filed up to 31.03.2018 (Category B3). There shall be no inter-se priority within the Category. (ii) The next priority shall be given to disposal of appeals involving demand of Rs. 10 lakhs and above (Category A), irrespective of the year in which the appeals are filed. There shall be no inter-se priority within the Category, except that appeals involving demand of Rs. 50 crore and above shall be disposed of by 31.12.2018. Different subcategories shall earn 1, 2 or 3 units respectively as indicated in Table 4 abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen that in order to achieve certain disposal targets of pending Appeals before the CIT Appeals, CBDT has made detail provisions for expeditious disposal of such Appeals. Part 3 of Chapter III pertains to incentive for quality orders and provides that additional credit of 2 units shall be allowed for each quality appellate order passed. Such term quality cases or quality orders has also been defined in the said part. 7. In the background of such facts on 22/03/2019, we had on the question of higher weightage for "quality orders" made following observations; "5. With respect to the Petitioners' second part of the challenge, we are of the opinion that the CBDT should reconsider the same. From the action plan, it is not clear as to the utility of the norms set which the Commissioner has to achieve. If the purpose of setting of norms is to evaluate the performance of the Commissioner, there would be all the more reason why the above-quoted portion of the action plan be reconsidered by the CBDT. 6. On the next date of hearing, the learned Counsel for the Respondent would apprise us about the utility of the norms that the Commissioner would need to achieve and the outcome of the CB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spose of a minimum of 550 appeals, inter alia involving a). Disposal of at least 25% of appeals that involving tax effect of Rs. 10 lakhs or more b). 100% of appeals pending as on 01.04.2018 that involve tax effect of Rs. 50 crores and above c). Disposal of at least 90% of appeals that involve tax effect of less than Rs. 2 lakhs and disposal of at least 70% of appeals that involve tax effect of less than Rs. 10 lakhs inclusive of appeals with demand less than Rs. 2 lakhs. (b) With respect to recommendation of Hon'ble court to reconsider the incentivization provided to CsIT(A) for quality orders, it is submitted that the additional weightage to the disposal of appeals has been provided where the CIT (A) has to spend more time and make extra efforts, in investigating the case, thereby making disposal of such appeals a more time taking, strenuous and rigorous exercise. It was never the intention of the CBDT to compromise the independence and judicial autonomy of the CIT (Appeals) by incentivizing the orders in favour of department. Rather CBDT has always upheld their functional autonomy and judicial independence to decide on merits on each case. Nonetheless, in order to avoid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income-tax authority to pass an order in a particular manner. 10. In support of his contentions learned Counsel relied on following decisions; In case of P.K. Ghosh, IAS & Anr. Vs. J.G. Rajput, reported in (1995) 6 Supreme Court Cases 744, in which it was observed as under; "10. A basic postulate of the rule of law is that 'justice should not only be done but it must also be seen to be done.' If there be a basis which cannot be treated as unreasonable for a litigant to except that his matter should not be heard by a particular Judge and there is no compelling necessity, such as the absence of an alternative, it is appropriate that the learned Judge should rescue himself from the Bench hearing that matter. This step is required to be taken by the learned Judge not because he is likely to be influenced in any manner in doing justice in the cause, but because his hearing the matter is likely to give rise to a reasonable apprehension in the mind of the litigant that the mind of the learned Judge may be subconsciously has been influenced by some extraneous factor in making the decision, particularly if it happens to be in favour of the opposite party. Credibility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtion would show that the CBDT has set out broad targets for revenue collection projected over the different regions. Internal distribution between the regions has been carried out on scientific basis. For any organization, setting of goals and targets is neither impermissible nor unknown. Only because certain targets for tax collection are set out, would not render the policy arbitrary or unreasonable. In the context of the disposal norms to be met by the appellate Commissioner also, we do not think that it is impermissible for any organization to set out certain output norms to judge the output performance of the person concerned. In absence of any such norms, it may be extremely difficult to judge the quantitative performance of a person concerned. Setting out of norms for disposal by the Appellate Commissioners, per say, therefore cannot be said to be either impermissible or beyond the scope of CBDT's powers. Disposal of appeals by the Commissioner is just one of the many parameters for judging his performance. Range of other factors such as the quality of the orders, his service record etc. would his suitability for concern advancement. But to subject that quantitative out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hink that these guidelines in any manner breach the reasonableness or can be stated to be arbitrary or illegal. These guidelines are for general directives and prescriptions to on one hand enable the revenue to collect taxes which are otherwise due and on the other hand to assess the work output of the Appellate Commissioners which in any organization is of considerable importance. We also do not think that the guidelines have undertone of giving priority to the issues which concern the revenue more than the assessees. As noted the directives include giving priority to old cases of small assessees. If the CBDT also recognizes that appeals involving high tax effect are most likely to be more voluminous, involving complex legal disputes, the prescription of higher units for disposal of such cases, can neither be stated to be arbitrary nor unreasonable, nor can be seen as restricting the discretion of the Appellate Commissioner. We do not accept the suggestion that such guidelines or prescriptions could possibly result in denial of fair hearing to the assessees. Reference in the policy to "unblock" or "unlock" the revenue blocked cannot be read in isolation and must be understood in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination of the order finds of deserving higher weightage. The term quality cases is explained as those including cases where (a) enhancement has been made, (b) order has been strengthened, in the opinion of the CCID, and (c) penalty under section 271(1) has been levied by the CIT (A). 19. All these contingencies necessarily point to circumstances where the order passed by the Commissioner (Appeals) is in favour of the revenue. For example this policy refers to the enhancement made by the Commissioner or a case where the Commissioner has levied penalty under section 271(1) of the Act. This necessarily refers to enlargement of the assessee's liability before the Commissioner as compared to what may have been determined by the Assessing Officer. In our opinion, such policy is wholly impermissible and invalid. Any directives by the CBDT which gives additional incentive for an order that the Commissioner (Appeals) may pass having regard to its implication, necessarily transgresses in the Commissioner's exercise of discretionary quasi-judicial powers. 20. It is well laid down through series of judgments in field of administrative law, interference or controlling of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Under the circumstances the CBDT has now decided to withdraw the guidelines for the coming year. In our opinion in its existing form for the past financial year also the same cannot be allowed to have effect. We are conscious that the appellate Commissioners have already passed the orders. Correction of these orders cannot be doubted en masse only because they were passed under the shadow of the said policy. Nevertheless to allow the implementation of this policy, on the orders passed by the Appellate Commissioners even for the past financial year, would amount to an illegal prescription to prevail and operate. 24. In the result, the Petition is allowed in part; (i) The following portion of the impugned Action Plan of CBDT is set aside. "Incentive for quality orders : (i) With a view to encourage quality work by CITs (A), additional credit of 2 units shall be allowed for each quality appellate order passed. The CIT (A) may claim such credit by reporting such orders in their monthly DO letter to the CCIT concerned. Quality cases would include cases where (a) enhancement has been made, (b) order has been strengthened, in the opinion of the CCID, and (c) penalty u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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