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Forget ‘Ease Of Doing Business’: It Will Take At Least 23 Years To Settle Your Tax Dispute!

Dr. K. Shivaram, Sr. Advocate, has expressed shock that the Government’s promises of ushering in ‘ease of doing business’ is proving to be nothing more than empty rhetoric. He has revealed startling facts that the vacancy in tax judges will take 15 years to be filled up and that tax disputes will take at least 23 years to be resolved. He has offered practical suggestions about how the Government can speedup the process of resolving tax disputes, if it is really inclined to do so

In the Times of India on 16-9-2019, it was reported that it will take a minimum of 15 years to fill the vacancy of judges. Though the Government promises to help achieve ‘ease of doing business’ in India, unless the tax litigation is settled within a reasonable period of time, the object of doing business with ease in India may not be achieved. Total pendency of appeals before the ITAT as on 1-07-2018 is approximately 9,69,050, out of which a pendency of 22,039 is at Delhi and 16,108 is at Mumbai (2018) AIFTPJ–July–P 45.

It takes two years for the matters to come on board or be listed for hearing before the ITAT at Mumbai. The pendency before the Bombay High Court is around 10,000 appeals and only one Direct Tax Bench is available for hearing of the tax matters. One may note that the appeals which were admitted in the year 2002, have still not been taken up for final hearing and appeals which were filed in the year 2015 are yet to be taken up for admission.

After filing the return, it takes two years for assessment. If additions are made, it may take at least two years for an appeal to be decided before the CIT(A) and another two years for the disposal of the matter before the ITAT.

After filing an appeal before the High Court, it takes a minimum of three years to get a date for admission. If the case is admitted, it could take another 12 years for the matter to be heard in finality. If the matter is taken further in appeal before the Supreme Court, another four years may lapse. It can be therefore inferred with reasonable confidence that it takes an approximate period of 23 years to get finality in tax matters.

If an assessee succeeds before CIT(A), Tribunal and also the High Court and if Supreme Court decides against the assessee after 23 years, the assessee would have to pay interest from the date of notice of demand under section 156 read with the assessment order, till the date of giving effect to the order of Supreme Court. What will be the tax and interest liability? Is it fair to the assessee? This will make it may difficult for a businessman to take a decision to invest in India due to high level of uncertainty.

The following suggestions can put for debate so that speedy disposal of tax matters may be achieved.

1. Accountability in tax administration

One of the reasons for increase in tax litigation is lack of accountability provisions for the tax administration. Officers sometimes make additions for the sake of making additions, knowing very well that though the entire addition may get deleted before any appellate authority, they won’t be answerable. Prosecutions are initiated and launched even though the quantum proceedings may be pending in appeal. In the reported case of Devinder Singh Gill v. DCIT (Chd) (Trib) (www. itatonline. org.), it was held that in spite of a stay order granted by the Tribunal and giving a direction to the Income tax authorities to release the assessee who has been arrested for non-payment of tax, the tax administration follow the said directions.

It is only after approaching the High Court by the way of a writ petition the person arrested was released. The Apex Court in CIT v. HapurPilkhuwa Development Authority ( imposed a cost of Rs 10 lakh on tax administration for giving a misleading statement before the Court in a petition.

The Bombay High Court in the case of PCIT v. International Biotech Park Ltd. (www.itatonline. org) observed that “On a number of occasions, this Court has brought to the notice of the Department of Revenue, Ministry of Finance Government of India through Commissionerates that the Revenue has been selective in its approach. It picks either the assessee or the assessment years pertaining to that assessee for challenging the orders in relation to them, before higher forums. This results in revenue leakage or perpetuation of wrongs affecting adversely the collection of revenue. The public at large is at loss to understand as to why the Department/Revenue consistently loses the battle in the higher courts. This could be termed as a deliberate or intentional act. If the Department of Revenue, Ministry of Finance, Government of India is going to conveniently overlook this and not being the guilty persons to book by initiating disciplinary measures against them, then no purpose will be served at all. This is not short term exercise, but a major surgery which will have to be performed. If the Revenue Officials are prepared to take some bold decisions then only this state of affairs will improve and not otherwise.”

The AIFTP had sent a representation to the Chairman of CBDT for bringing to his notice that where the appeal of the revenue is allowed by the Apex Court or the High Courts, after long number of years of battle, there is no mechanism to find out whether the effect has been given and whether the taxes have been recovered.

In Piramal Fund Management Pvt. Ltd v. DCIT (Bom) (HC) (www. itatonline. org), strictures were passed against high-handed unfair approach of the Assessing Officer in refusing to give an acknowledgement of stay petition. The Chief CIT was directed to ensure that such a behaviour is not accepted.

It is the need of the hour to bring accountability provisions in the Income-tax Act as suggested by Dr. Raja J. Chelliah Tax Reform Committee (1992) 197 ITR 177(St) (257) para 5. 9:

"The Assessing Officers should be made accountable for their actions by being blamed for raising demands which are not upheld by a reasonable figure, say 50 per cent, the Officer should be given a blackmark and reprimanded. On the other hand an Assessing Officer should be protected and defended if he has observed instructions of the Board and followed the Court rulings even though audit might raise objections about his actions."

2. Appeal before CIT(A)

It is desirable that the Appeal before the CIT(A) is heard and order is passed within six months of filing of appeals. As there is no time limit prescribed for the sending of a remand report, the CIT(A), on several occasions, is unable to dispose the appeals within a reasonable time. The AIFTP has filed a petition before the Delhi High Court to increase the postings for CIT(A) and also made a representation to the CBDT to prescribe the time limit for sending the remand report.

The ITAT Rules, 1963, 34(5)(c) prescribe that within period of 60 days from the days from date on which the hearing of the case is concluded however shall not ordinarily be a day beyond period of 30 days of the hearing of appeal, the order must be passed. It is desired that similar rules may be prescribed for adjudication of appeals before the CIT(A).

3. Appeal before ITAT

It is desired that an appeal before the ITAT may be heard and the order is passed within six months of the filing of an appeal. The sanctioned strength of the ITAT is 63 Benches and 126 members, whereas the current situation shows that there is a shortage of 33 members and more will retire in the year 2019, therefore as on 31-12-2019, there will be an acute shortage of Members. It is desired that the filling up of vacancies may be done at the earliest so that the matters pending before the ITAT can be decided within six months of filing of an appeal without compromising on the quality of the orders.

4. Appeal before High Court

1. Separate legal cell of tax department

More than 65% of appeals in tax matters before the High Courts are those of the Revenue. However, there is no separate legal cell of the department to monitor the tax appeals in the various High Courts. It is desired that there is a centralised legal cell of the department. Every month the ITAT prepares a list of the appeals filed in various Benches across the country and matters are accordingly disposed off. If such a method is adopted, the department would be able to know the number of appeals pending before the High Courts and the issues involved. This will help the revenue in grouping of appeals and if required to apply for early hearing before the Apex Court in issues where a large number of appeals have been filed. This will
help in reducing the pendency before High Courts and also in bringing finality in tax matters at the earliest.

2. Filing an appeal to High Court

In CIT v. Reliance Infrastructure (Bom.) (HC)(, the Hon’ble 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. State Bank of India (2015) 375 ITR 20 (Bom.) (HC), it was held that the department cannot arbitrarily pick up and choose which orders of the ITAT should be challenged in the High Court.

It is desired that whether or not an appeal is to be filed against the order of the Tribunal may be decided by an independent committee in the Department, preferably headed by a Retired Judge of High Court as a Chairman and two Members, one of who could be a retired Member of the ITAT and the other could be a lawyer having more than 25 years of practice before the High Court. At present, appeals are filed by the department, before the High Court due to fear of audit, considering the amount of tax involved and even if the appeal maybe dismissed, nothing is lost and it is only the tax payer’s money which is spent.

However, when an assessee files an appeal before the High Court, he considers the cost factor, time involved and the chances of success. That is one of the reasons that only few matters of the assessee are pursued before the High Court. Approximately 80% of the orders of the Tribunal are accepted by assessees. If the above method is adopted, the department may succeed in more than 80% of the matters appealed by it and the tax payer’s money can be used for alternative productive purposes.

3. Use of technology

The Bombay High Court in CIT v. TCL India Holding Ltd. ( directed the Commissioner of Mumbai to host all the questions of law admitted by the High Court and also the Judgments of the Bombay High Court accepted by the Revenue on an online portal. Though the affidavit was filed on 5-5-2006 before the High Court stating that in the web site, it has been decided to add “legal corner” on the website where all questions of law admitted and dismissed by the Honourable Bombay High Court will be hosted. It was also observed that the said legal corner shall become functional from 10th June, 2016.

However, no action has been taken till date. Legal corner is not yet functional. This shows that in spite of filing an Affidavit in the year 2016, no action has been taken till date. If the CBDT publishes a list of cases accepted by the Revenue from time-to-time on their website and also the questions of law admitted by various High Courts, it would help in reducing the tax litigation and the assessees will be able to know the issues pending before various High Courts. Circular No 3 of 2018, dt.11th July, 2018 (2018) 405 ITR 29 (St) revising the monetary limit for filing the appeal is prescribed at Rs 50 lakh to Courts and circular is clearly mentioned that all pending appeals will also will be withdrawn.

It is seen that more than 3,500 appeals are filed by the Revenue where the tax in dispute is less than Rs 50 lakh, however the appeals are not withdrawn as the Revenue is not able to prepare the list of pending cases where the tax in dispute is less than Rs 50 lakhs due to non-availability of records. Due to this process, the High Court is unable to dispose matters quickly. If the department prepares the list and makes an application to withdraw all the appeals where the tax amount is less than Rs 50 lakh, all 3,500 matters can be disposed in a single day.

4. Increase the retirement age limit of Judges from 62 to 65

The Parliamentary Committee headed by Smt. Jayanti Natarajan, as the Chairperson in the year 2010, recommended the increase in the retirement age limit of judges from 62 to 65 years. However, no progress has been achieved till date. We are of the opinion that an increase in the retirement age limit of judges will help in reducing pendency of cases.

5. Appeal before Supreme Court

All the questions of law relating to direct taxes admitted by the Apex Court should be published on the website of the CBDT from time-to-time and this may help the assessees in knowing the issues pending before the Apex Court. Before the introduction of appeal provisions u/s. 260A of the Income-tax Act, S.257 provided a direct reference to the Supreme Court where important questions of law were involved.

Similar provisions may be introduced which may help in achieving finality in tax matters at the earliest stage. The AIFTP had suggested that an ‘E-Bench’ of the Supreme Court may be constituted and the same be linked with all the High Courts. Initially the SLP relating to direct taxes can be tried in such an ‘E-Bench’, after giving an option to the parties to either opt out or opt in.

The ITAT has started E-Benches which have been very successful. If the same ideas are adopted, even Advocates from Guwahati would be able to argue a matter before the Supreme Court from the premises of the Guwahati High Court. This will greatly help in making justice accessible to the public at large and bring a revolution in Indian justice administration. This can be one of the legacies of the digitalization of India, which is one of the dreams of Honourable Prime Minister of India, Shri Narendra Modi.

6. Instability of Income-tax Law

Shri Nani A. Palkhivala, in his article titled “The Maddening Instability of Income-tax Law“ (1996) Income tax review – Aug-Sept P. 57-60 reads as under, “A telling example of the total absence of a sense of time in our tax administration is afforded by the Supreme Court’s decision rendered last November in the case of Sutlej Cotton Mills Ltd v. CIT (1990) 2 SCALE 931. It was a case under the Business Profits Tax Act, 1947. The accounting period was 1946-47. The amount involved was paltry sum of a few lakhs of rupees. The High Court’s judgment was rendered in 1965. The Supreme Court sent the matter back to the Income-tax Appellate Tribunal to re-hear the appeal 44 years after the close of the accounting period. Is there any other civilised country where a taxpayer would not know the quantum of his liability for 44 years?“

Even the Tribunal may not be able to give any effect to the order of the Supreme Court as the records may not be available before the Tribunal.

We hope that the Government will fill the vacancies of Judges and Members of the ITAT within a reasonable time and will make sincere efforts to reduce the pendency and disposal of matters so that the object of ‘ease of doing business’ in India is achieved.

The professional organisations can play a proactive role by compiling all the judgments where the directions have been given to CBDT, but the same have not been followed to assist the Apex Court and High Courts. The same may also be forwarded to the Honourable Finance Minister for his consideration. If no response is received, the appropriate authority should be approached under the Right of Information Act for reasons for delay in compliance of these directions. If even that recourse fails, then respective High Courts may be approached for initiation of appropriate contempt proceedings. A thought for debate .

Dr. K. Shivaram
Editor-in-Chief, AIFTP Journal
(Source : AIFPT Journal September, 2018)

Dear ITAT Admin, Wake Up & Shake Off Your Apathy

Dr. K. Shivaram, Senior Advocate, is distraught at the blatant disregard by the Government towards the welfare of the ITAT. He has revealed shocking facts about how the Govt has acted in defiance to the directions of the High Court and the CAT and not bothered to appoint core staff to the ITAT for the past 15 years. The less said about the non-appointment of the Hon’ble President and Vice-Presidents, the better, he says

A wake – up call for the ITAT administration – Challenges due to acute shortage of Deputy Registrars, Assistant Registrars and other staff

The ITAT was not only the first Tribunal to be set up in this country but it has, over the years, proved itself true to its object of providing fair and speedy justice in the field of direct tax litigation. It is therefore a cause of concern that recently, issues that expose the underlying administrative apathy have come to light that are affecting the smooth and efficient functioning of the Tribunal. The orders of the ITAT have great financial implications on both the Government as well as common man and hence its smooth functioning is essential for the purposes of both speedy justice and revenue collection.

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Independence Of ITAT Is Under Threat. We Have To Save It: Tax Lawyer

Dr. K. Shivaram, Senior Advocate, has referred to a number of recent incidents which show that the ITAT is no longer as independent as it used to be in the past. He warns that if the ITAT loses its independence, taxpayers will lose confidence in the institution and this will have a debilitating effect on the administration of justice. He has called upon the Tax Bar to rise to the occasion and save the ITAT from Governmental interference

The Independence of the Income Tax Appellate Tribunal is the need of the hour for effective administration of justice – The Tax Bar has a greater responsibility to strengthen the independence of the mother Tribunal and to promote an unpolluted justice delivery system.

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Appointment Of Tribunal Members Rules 2017 – A Veiled Coup By The Executive Over The Judiciary? A Long Legal Battle Ahead!

Dr. K. Shivaram, Senior Advocate, has sent the grim warning that new terms of appointment and removal of the Tribunal Members does not auger well for the independence of the institution. He says that as the Government is the biggest litigant, its role in appointing and removing Members will play havoc with the free working of the judicial mind. Members may be wary of taking bold decisions against the Government for fear that there will be retaliatory punishment in the form of dismissal from office or non-renewal of the tenure

The Ministry of Finance has by Notification dated 1st June, 2017 notified the Rules for Appointment and Service Conditions of Members of 19 Tribunals in India. The Income Tax Appellate Tribunal [ITAT] is one such Tribunal. A reading of the Rules leaves no two opinions in the mind that the underlying agenda behind the Rules is elimination of the control of the Judiciary over ITAT and correspondingly tilting the same in to the hands of the Executive.

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Can A Judge Appointed President Of The ITAT Do Judicial Work Of Hearing And Deciding Appeals?

The learned author has raised the seminal question whether if a judge of the High Court is appointed President of the ITAT, he constitutes a “Member” and has the jurisdiction to hear and decide appeals u/s 252 and 255 of the Income-tax Act, 1961. He has argued that such a President is restricted to doing administrative work and has no jurisdiction to do judicial work

Section 252(3) of the Income-tax Act, 1961 was substituted w.e.f. 1/6/2017 to empower the Central Government to appoint a sitting or retired Judge of High Court and who has completed at least seven years of service as a Judge in a High Court, as the President of the ITAT. Before the substitution of the section, a President was appointed from amongst the Vice-Presidents or the Sr. Vice-President. Vice Presidents are appointed under Section 252(4) of the Act from amongst members of the Appellate Tribunal. Therefore, before the section was substituted, the pool from which a Vice President or a President was to be appointed was amongst the members of the ITAT. Under the substituted Section 252(3) of the Act, a qualified Judge is appointed directly as President and not from amongst the pool of Members of the ITAT.

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Important Case Laws Relating To Taxability Of Black Money (Demonetisation) & Levy Of Penalty Thereon

Advocate Neelam C. Jadhav has prepared a compilation of important judgements relating to the taxability of unaccounted black money deposited in bank accounts in the wake of demonetisation. The compilation of judgements will prove invaluable to tax professionals and tax payers in the wake of the heavy litigation between the tax payers and the income-tax department that is likely to ensue shortly

1. S. 4: Income – Chargeable as – Assessee’s books actually showing a cash balance of above Rs.38,000 as on the day immediately preceding the date of demonetisation. – In the absence of material before the Tribunal, it could not have held that only 22 out of 28 high denomination notes represented cash balance and the remaining 6 constituted income from undisclosed sources.

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War Against Corruption And Black Money – Tax Professionals Must Support The Govt


Dr. K. Shivaram, Senior Advocate, has hailed Demonetisation as a great move and a bold step to reduce the black money circulation in our country. He has called it a “War against corruption and black money” and opined that the move of the Government deserves to be appreciated and encouraged. He has also given important pointers on whether the disclosure of black money will attract penalty under s. 277A and other provisions of the Income-tax Act

The Press release issued by the Government of India Ministry of Finance Department of Economic Affairs reads as under “With a view to curbing financing of terrorism through the proceeds of Fake Indian Currency Notes (FICN) and use of such funds for subversive activities such as espionage, smuggling of arms, drugs and other contraband in to India, and for eliminating Black Money which casts a long shadow of parallel economy on our real economy, it has been decided to cancel the legal tender character of the High Denomination bank notes of Rs 500 and Rs 1000, issued by RBI till now. This will take effect from the end of 8th November, 2016

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Non-Appointment Of Vice-Presidents & Proposed Merger With Other Tribunals Spells Doom For The ITAT

Dr. K. Shivaram, Senior Advocate, is upset at the inaction of the Government in appointing Vice-Presidents to the ITAT. He explains that this inaction demoralizes the hardworking Members of the ITAT and robs them of the prospects of promotion. The author has also expressed grave reservations at the proposal of the Government to merge all the Tribunals into one body. He explains that the proposal is ill-conceived and has been mooted without paying regard to the specialized knowledge that is required to decide complex income-tax cases

Why is the Government not appointing the Vice-Presidents of the ITAT? Whether the move of the Government to merge the ITAT with other Tribunals is justified?

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Dear Income-Tax Dept, Please Inform Us Of The Remedial Measures Taken By You Pursuant To Directives And Strictures From Courts


Dr. K. Shivaram, Senior Advocate, points out that while Courts are dutifully issuing directions and strictures with the sincere objective of putting the income-tax department on the right path, there is no feedback from the department as to whether these directions and strictures are being implemented by them. He submits that the Bar is under the bounden duty to be vigilant and play a proactive role to ensure that the department abides by its obligations and is made accountable for its misdeeds.

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?

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Dear NAMO, Walk The Talk – Here Are 20+ Steps To Deliver Tax Nirvana To Citizens And Foreign Investors


Prime Minister Narendra Modi and Finance Minister Arun Jaitley spare no opportunity to talk about how they intend to usher in a “transparent, stable and predictable” tax regime. However, there is a big disconnect between the high-sounding words and the reality at the ground level. The author has put together a simple and easy-to-follow guide for the law makers to implement if they are really serious about bringing about radical and structural changes to the taxation regime of the Country

The Honourable Prime Minister of India, Shri Narendra Modi, in his address on the eve of Make in India week at Mumbai on 13th Feb, 2016, has promised more economic reforms and a stable tax regime. It is beyond doubt that the Government is making a very sincere attempt to bring about ease of doing business in India, so as attract more investments to India. We hope that the vision of the Honourable Prime Minster of India and the Honourable Finance Minister gets ingrained at the grass root level. Tax professionals highly appreciate the unequivocal steps taken by the Government to bring stability in tax laws and the firm assurance against any retrospective tax amendments. We are of the opinion that for achieving the dream of Honourable Prime Minster and Honourable Finance Minister following suggestions may be considered:

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