Published On: Wed, Apr 24th, 2019

Bombay High Court junks policy linking Appellate I-T Commissioners’ appraisal to favourable rulings

Mumbai: The Bombay High Court has set aside a central government policy that offered incentives and linked the appraisals of appellate income tax commissioners to the number of rulings they gave in favour of the Income Tax Department.

CBDT Chairman Pramod Chandra Mody

In a judgement passed on Monday, a bench of justices Akil Kureshi and Sarang Kotwal has set aside a part of the ‘Central Action Plan’ (CAP) notified by the Central Board of Direct Taxes (CBDT) in November last year.

In the CAP, the central agency had said, among other things, that the annual performance assessment of central appellate I-T officers for the year 2018-19 will be dependent on the number of ‘quality orders’ they passed to boost tax recoveries by levying penalties on taxpayers, enhancing the tax assessment of a taxpayer, strengthening the stand of the department’s assessing officers, etc.

The CAP also imposed a time limit upon the officers to pass such orders in each case.

The high court, however, held in its judgement that such a policy was “wholly impermissible and invalid”.

The bench was hearing a writ petition filed by Hinesh Doshi and others from the Chamber of Tax Consultants, and a Public Interest Litigation (PIL) filed by law firm AceLegal.

The petitioners had challenged the CBDT’s new appraisal system, saying that such targets and time limits would put unnatural pressure on the commissioner to decide the cases in a hasty manner, and the same would result in denying a fair hearing to the assessee or the taxpayer.

The petitioners also told the HC that the criteria set by the CBDT essentially meant such orders that were in favour of the department (of Income Tax).

“Granting more weightage to such quality orders, would have the possibility of influencing the outcome of the appeals before the appellate authorities,” they said.

The CBDT submitted that its decision was not arbitrary.

However, it subsequently volunteered to withdraw the new appraisal system for the appellate commissioners.

The bench, however, agreed with the petitioners on the portion of the CAP dealing with ‘quality orders’.

It said that in issuing directives that gave additional incentives to I-T commissioners (Appeals) for such orders, the CBDT had “transgressed into the commissioners’ exercise of their discretionary quasi-judicial powers”.

“All these contingencies (the submissions made by petitioners) necessarily point to circumstances where the order passed by the commissioner (appeals) is in favour of the revenue collected. For example, this policy (CAP) refers to the enhancement made by the commissioner or a case where the commissioner has levied penalty under the Act (I-T 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 a policy is wholly impermissible and invalid,” the bench said while setting aside the part of CAP that dealt with ‘quality orders’.


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