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| DATE: | December 20, 2013 (Date of publication) |
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| Click here to download the judgement (motorola_AO_strictures.pdf) |
Severe strictures passed against AO for acts of “malfeasance by pleading apparent ignorance and acting in subterfuge and an underhand manner“. CBDT requested to train officers properly to avoid them taking the law into their own hands with complete impunity and disregard for the law
The AO made a transfer pricing adjustment for the AMP expenditure incurred by the assessee and raised a demand of Rs. 210 crore. The assessee filed an appeal before the Tribunal and a stay application. The Tribunal granted a stay on recovery of the demand on the condition that the assessee would not seek an adjournment of the hearing. When the matter came up for hearing, the assessee pointed out that a similar issue was pending before the Special Bench (now decided as L. G. Electronics 152 TTJ 273) and so the Bench adjourned the appeal to await the judgement of the Special Bench. The AO took the view that the assessee had sought an adjournment and violated the stay order and so he attached the bank account u/s 226(3) and recovered some part of the demand. The assessee filed an application before the Tribunal and claimed that it had not sought an adjournment and that the AO had acted in defiance of the stay order and should be directed to vacate the attachment and refund the moneys recovered. The Tribunal accepted the plea that the assessee had not sought an adjournment and directed the AO to refund the sums collected (order attached). The AO filed a MA against the order and also a Writ Petition before the High Court. In the Writ Petition, the AO did not disclose the fact that the MA had been filed. The High Court granted an interim stay (now finally decided) against the Tribunal’s order directing refund. During the pendency of the Writ petition, the AO argued in the MA that the recovery of the demand was justified and that as the appeal was “in the process of final hearing”, “judicial propriety demanded that the interim order directing a refund should not have been passed”. HELD by the Tribunal dismissing the MA:
(i) “It alarms us that unfortunately with complete impunity and disregard of the factual position, the AO repeatedly makes apparently naive misplaced, mis-guiding and factually incorrect assertions that the Tribunal was in the process of final hearing of the appeal”. These assertions indicate either a gross ignorance or ineptitude of the Department or a deliberately calculated belief that even misstatement of facts before the Tribunal could be accepted as gospel truth on a mere assertions of the government officers. Both or either of these situations are equally dangerous and fraught of dangers as vast powers have been given by the Act to the AO in order to exercise its powers and discharge the functions under the Income Tax Act;
(ii) An AO cannot claim to be in constant and perpetual ignorance nor can the officers under whom she was functioning themselves feign ignorance of this actual factual position on the issue where on the grounds of judicial propriety the Department was constantly seeking adjournments in almost all stay granted appeals on the said issue over the years;
(iii) Being ignorant of relevant facts shows a pattern which needs to be considered before such laxity becomes endemic and plays havoc with “the interest of the revenue” which the AO most vociferously seeks to uphold;
(iv) The actions of the AO, which earlier appeared to be wrongful acts of misfeasance by a public official were actually serious acts of malfeasance. In our adversarial system, one or the other side will probably be lying, if only to exaggerate their position and hence perjury is likely to be far more common place then we would choose to admit. In either case and especially in the case of the Revenue, apparently when swearing falsely or referring to wrong facts, the concerned officers may be under the belief that he or she is doing so in a good cause that is “protecting the interest of revenue.” Judges and judicial authorities are not so unrealistic that they do not recognize that a substantive portion of the population displays a lack of respect for or otherwise merely pays lip service on oath to tell the truth. But unlike in the Courts having “lay litigants”, the litigants in tax matters are invariably of a class which recognize the solemnity of the occasion and understand the consequences of swearing to an affidavit or affirmation as a serious act outside the course of their everyday lives and it is hoped that the deponents understand the sanction for breach of such oath and the seriousness with which such a breach will be normally regarded by adjudicating authorities. In the present case, the acts of malfeasance by pleading apparent ignorance or acting in a subterfuge and underhand manner in apparently trying to achieve their objectives and targets of higher tax collection are required to be understood and addressed by the appropriate authorities;
(v) The CBDT is requested to ensure that proper legal knowledge and training is imparted to the officers addressing the appropriate interpretation of orders of higher forums and instead of resorting to underhand manner in achieving the targets set. Such an exercise will go a long way in addressing identical situations where the AO may be tempted to take matters in his or her own hands with complete impunity and disregard for the laws of the land.
This is happening in almost in all the places and the taxpayers are driven to approach the judiciary to save such harassments. The Honorable I T A T of Delhi has requested the Board to ensure proper training for the interpretation of law to the assessing officers. The Revenue audit is primarily responsible for such actions from the AOs as the revenue audit raise most irrelevant and unnecessary points which are against the principles of law and accounting practices. The proper training for them will save time and money for the tax payers as misconception of law and principles of accountancy will be avoided.
It is not clear whether writ petition was filed before M.A.In that case the A.O. had no occasion to disclose the fact that the M. A. was pending before the Hon’ble ITAT in the writ petition filed before the Hon’ble High court. I am not defending the A.O. It is for the C.B.D.T. to look into the reason as to why such a wrong statement of facts ( if any) was made before the I.T.A.T.The main reason , which I see , is excessive pressure on the A.O.and his superiors to achieve budget target. They resort to various methods ( some of them may not be proper ) to achieve budget targets. The officers are threatened that they will be transferred to inconvenient place , if they are not able to achieve their budget targets. C.B.D.T. should realize that achievement of budget target is only one of the criteria for evaluating officer’s performance , there are other parameters also. It is high time for the C.B.D.T. to re look into instruction , which mandates the A.O. to collect 50% of disputed demand , even before first appeal is decided , irrespective of monetary limits.In this case demand was raised on account of transfer pricing adjustment of A.M.P. expenses amounting to Rs. 210 Cr. It will either be deleted or confirmed . There is a very remote possibility of reducing the demand partly in appeal. Such class of cases can be excluded or a monetary limit can be fixed by the Board, demand above those limit can be collected by the A.O. only after the first appeal is decided.
“Severe strictures passed on the AO for acts of “malfeasance by pleading apparent ignorance and acting in subterfuge and an underhand manner“. CBDT requested to train officers properly to avoid them taking the law into their own hands with complete impunity and disregard for the law”
Random (personal) reflections:
As never before, In recent times, history has been obligingly made to repeat more often than not; thereby betraying the hollowness in the old belief that it repeats itself.
It is more than obvious that, being extremely vexed by the abhorring turn of events, not without justification, the ITAT has, in its wisdom gathered in hindsight, without mincing words, done so. But the inescapable paradox , rather the dilemma the CBDT (besides its controlling law and finance ministers, has now perforce been confronted with, is this: Where to make a beginning (with the starting line of the 3 ‘rs’ itself , or any other next stage) ; further, for how long to pursue, and even if seriously done, to accomplish what end??
In the ultimate analysis, the imponderable is, – who/what is to be blamed for such a disparaging scenario in the overwhelmingly galloping and resultant multiplicity of vexing ‘litigation’ ?
To dilate:
The language , – ‘English’ is at the root of it all; the real culprit so to say. Have a quick look at a standard dictionary; and make a note of the mutually varying, often conflicting, meaning of every word or term, or idiom, etc., in order to find why so ?
No less to be blamed are, inter alia, – hasty and mindless drafting/structuring of any enactment (in sum, legislation) and the inevitable result of it being riddled with complicity/ ties. Judicial or quasi judicial interpretation / construction of any word or term used mutually varying, every time /in every case the adjudicating authority is called upon to do so, etc., etc.
For instance, see how any principle of interpretation, historically enunciated/continue to be so done by courts uninterruptedly, for use as ‘aids’ for the purpose, has invariably proved a breeding ground for growing controversies. For a specimen, consider, the so-called principle very often tempting and hence conveniently chosen to be followed, being to assign and understand a word/concept in its “contextual meaning”. As may be recalled, a few of such glaring instances are, the long drawn controversy and the line of judicial rulings centere4d on the words (apparently so simple, but turned out to be deceptively so) – being “SEND” “MAY”, “SUBSTANTIAL” occurring in several of the provisions of law , among others, on income tax.
(Sorry! Left Unedited)
May be contd.