{"id":20518,"date":"2019-04-23T13:20:09","date_gmt":"2019-04-23T07:50:09","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=20518"},"modified":"2019-04-23T13:20:09","modified_gmt":"2019-04-23T07:50:09","slug":"the-chamber-of-tax-consultants-vs-cbdt-bombay-high-court-final-order-s-250-the-cbdt-is-empowered-to-lay-down-broad-guidelines-for-disposal-of-appeals-by-csita-however-it-cannot-offer-incentive","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/the-chamber-of-tax-consultants-vs-cbdt-bombay-high-court-final-order-s-250-the-cbdt-is-empowered-to-lay-down-broad-guidelines-for-disposal-of-appeals-by-csita-however-it-cannot-offer-incentive\/","title":{"rendered":"The Chamber of Tax Consultants vs. CBDT (Bombay High Court) (Final Order)"},"content":{"rendered":"
See also: Top Tax Professionals Slam CBDT For \u201cIncentive\u201d To CsIT(A) To \u201cEnhance Assessments\u201d| Legal Action Threatened<\/a> <\/div>\n

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
\nORDINARY ORIGINAL CIVIL JURISDICTION
\nWRIT PETITION NO.3343 OF 2018
\n1. The Chamber of Tax Consultants
\nthrough its President
\nMr.Hinesh R. Doshi
\nAddress :
\n3, Rewa Chambers,
\nGround Floor, 31,
\nNew Marine Lines,
\nMumbai \u2013 400 020.
\n2. Mahendra Sanghvi
\n10, LA Citadella,
\n99, Maharshi Karve Road,
\nMumbai \u2013 400 020. … Petitioners
\nVersus
\n1. The Central Board of Direct Taxes,
\nDepartment of Revenue,
\nMinistry of Finance,
\nGovernment of India, North Block
\nNew Delhi \u2013 110 001.
\n2. Union of India
\nthrough the Secretary,
\nDepartment of Revenue,
\nMinistry of Finance,
\nGovernment of India, North Block
\nNew Delhi \u2013 110 001. \u2026 Respondents
\n\u2026….
\n\u2022 Mr. S. E. Dastur, Senior Advocate a\/w Mr. Vipul Joshi, Mr.
\nHarsh Kothari, Mr. Abhishek Padwalkar & Mr. Dharan V.
\nGandhi for Petitioners.
\n\u2022 Mr. Anil Singh, ASG, a\/w Mr. Sham V. Walve for Respondent
\nNo.1.
\nNesarikar<\/p>\n

ALONG WITH
\nCIVIL APPELLATE JURISDICTION
\nPUBLIC INTEREST LITIGATION NO.144 OF 2018
\n1. ACELEGAL
\nD201,
\n2nd Floor,
\nVashi Station Complex,
\nVashi, Navi Mumbai \u2013 400 703.
\n2. Sneha Sarbhushan
\nC104,
\nRachana Heights,
\nNear Old Post Office,
\nPanvel \u2013 410 206. … Petitioners
\nVersus
\n1. Union of India
\nThrough the Secretary,
\nMinistry of Finance,
\nDepartment of Revenue,
\nGovernment of India,
\nMSEB Building, 2nd Floor,
\nEstrella Battery Compound,
\nLabour Compound, Dharavi,
\nMatunga, Mumbai \u2013 400 019.
\n2. Chairman,
\nCentral Board of Direct Taxes,
\nNorth Block,
\nNew Delhi \u2013 110 001. \u2026 Respondents
\n\u2026….
\n\u2022 Ms. Ritika Agarwal a\/w Ms. Deepti Jethva or Petitioners.
\n\u2022 Mr. Anil Singh, ASG, a\/w Mr. Sham V. Walve for Respondent
\nNo.2.<\/p>\n

CORAM : AKIL KURESHI &
\nSARANG V. KOTWAL, JJ.
\nDATE : 11th APRIL, 2019.
\nP.C. :
\n1. Heard learned Counsel for the parties for final disposal
\nof the Petitions.
\n2. The grievances of the Writ Petitioners and the Public
\nInterest Litigation Petitioners substantially overlap. We may
\nrecord brief facts. The Writ Petition is filed by the Association of
\nTax Consultants and its office bearers. They have challenged a
\nportion of \u201cCentral Action Plan\u201d (hereinafter referred to as \u2018the
\nsaid plan\u2019) prepared by Central Board of Direct Tax (for short
\n‘CBDT’) for the financial year 20182019.
\nWe shall take a detail
\nnote of the relevant provisions contained in this plan later. For
\nthe moment we may note that this plan contains various
\nprovisions made by CBDT setting out targets of tax collection,
\ndisposal of cases by income tax authorities and for awarding
\npoints for such disposals. The grievances of the Petitioners relate
\nto two areas of this plan. Petitioner’s first grievance is in respect
\nof time line set and the directions to the Commissioner (Appeals)<\/p>\n

for deciding appeals within such time. According to Petitioners
\nsuch targets and time limits would put unnatural pressure on
\nthe Commissioner to decide the cases in a hasty manner, which
\nhas every possibility of denying a fair hearing to the assessee.
\nSecond area of the Petitioners’ grievance is with respect to
\nallocation of units for disposal of what has been referred to as
\n\u201cquality orders\u201d. The Petitioners would point out that these
\nquality orders are those which result in favour of the
\ndepartment. According to Petitioners granting more weightage
\nto such orders, would have the possibility of influencing the
\noutcome of the Appeals before the Appellate authorities.
\n3. The Petitioners of the Public Interest Litigation have
\nalso challenged the same plan. The challenge however is
\nconfined to the portion of the plan, where the CIT Appeals have
\nbeen given higher weightage for disposal of Appeals by quality orders.
\n4. The CBDT has framed the said plan for the financial
\nyear 20182019.
\nThe preamble of this document sets out the
\npurpose for framing the said plan and reads as under;<\/p>\n

\u201cThe Vision 2020 document adopted by the Incometax
\nDepartment
\nenvisages an efficient and effective tax administration, progressive tax
\npolicy and improved tax compliance. The Action Plan 201819
\nmust work
\ntowards accomplishing this vision.
\nThe Action Plan for 201718
\nwas a comprehensively remodeled
\nplan that
\nsought to address all the current priorities in a holistic manner. It laid
\nspecial emphasis on a number of critical areas such as litigation
\nmanagement, improving quality in diverse areas of work and
\nstrengthening compliance and enforcement functions. The plan worked
\nwell and resulted in enhanced levels of performance in all functions across
\nthe board.
\nThis Action Plan for 201819
\nretains the broad structure of the plan for
\n201718
\nand seeks to consolidate the achievements made, while reemphasising
\npriorities within the framework of the overall Vision. A new
\nchapter on Widening of Tax Base has been added, so as to highlight the
\ncritical importance of this area. The Chapter on Audit has been omitted,
\nsince the CITs(Audit) are already functioning under instructions and SOPs
\nformulated by the Directorate of Incometax
\n(Audit and Inspections). The
\nseparate chapter on Prosecution and Compounding has been omitted and
\nthe relevant targets, in consolidated form, have been incorporated in the
\nChapter on Assessment Units (prosecution targets for TDS units already
\nform part of the Chapter on TDS). Targets in various key result areas have
\nbeen recalibrated
\nin the light of experience gained.\u201d
\n5. Chapter I of the plan sets out targets for tax collection.
\nIt contains goals for major head wise direct tax collection for the
\nfinancial year 201819.
\nSuch targets are broken up region wise,
\nkeeping in view revenue potential of the region.
\nChapter III of the plan pertains to Litigation
\nManagement. The Petitioners’ challenge flows from this chapter.
\nThe relevant portion of this chapter reads as under;<\/p>\n

CHAPTER-III
\nLITIGATION MANAGEMENT
\n\u201cThe rising litigation with the taxpayers and the quantum of revenue locked up in
\nappeals is a matter of serious concern that requires attention.\u201d \u2013 Vision 2020
\nLitigation is not only a cost on the credibility of a tax administration system but
\nalso an indicator of the robustness and fairness of a system of taxation. Litigation
\nhas been rising over the years and has now assumed grave proportions, as is
\nevident from the following data:
\nNo. of appeals pending with CsIT (A) as on 01.04.2017 3,28,173
\nNo. of appeals disposed of by CsIT (A) during FY 2017-18 1,23,480
\nNo. of appeals pending with CsIT (A) as on 01.04.2018 3,21,843
\nDemand involved in appeals with CsIT (A) as on 01.04.2018 Rs.6.38 lakh crore
\nDemand stayed by ITAT\/Courts as on 01.04.2018 Rs.87,035 crore
\nSuch high volume of litigation has resulted in rendering a huge amount of tax as
\nuncollectible. Besides, it is a major impediment towards creating an environment
\nof tax certainty for the taxpayers. It also involves infructuous costs on account of
\nefforts to realize taxes blocked in these appeals. The substantial progress made last
\nyear is required to be continued with renewed vigour so as to bring down the
\nquantum of litigation and unblock the revenue involved.
\nPART A \u2013 TARGETS FOR CIT (APPEALS)
\n2. The pendency of appeals with CsIT (A) and demand locked therein has been
\nincreasing over the years. Analysis of the work done last year reveals the following:
\nRevenue involved Pending On Disposals New filings Pending On
\n01.04.2017 01.04.2018
\nA1 more than 50 crores 1295 1033 579 841
\nA2 1 to 50 Cr 34488 9813 11694 36369
\nA3 10 L to 1 cr 76771 23723 35701 88749
\nB Less than 10 Lakhs 215619 86205 1743 131157
\nC Current Less than 10 L 0 2706 67433 64727
\n328173 123480 117150 321843
\n(a) Total appeals pending where demand is less than 10 Lakh are 1,95,884 as on
\n01.04.2018, which shows a decline of about 9% from the corresponding figure
\nas on 01.04.2017. However, the pendency is still very large, and includes
\n1,15,706 appeals where demand is less than Rs. 2 lakhs. A special focus is
\nrequired on such cases during the current year.
\n(b) In regard to high demand appeals, there is a decline of 35% in A1 category but
\nan increase in pendency of A2 and A3 categories of 5 % and 16% respectively.
\n(c) The appeals pending as on 01.04.2018 include 22256 appeals that are more
\nthan 5 years old.<\/p>\n

3. The results of last year s action plan strategy in litigation \u201f management at the level
\nof CIT(A) are encouraging. There has been a reduction in overall litigation,
\nparticularly in cases involving very high quantum of demand, as also in cases with
\ntax demand of less than Rs.10 lakhs which have a wide-spread impact on taxpayers.
\nIt is therefore reasonable to continue with a similar action strategy for the current
\nfiscal, to meet the core objectives of budget collection, reduction in outstanding
\ndemand and litigation management. Accordingly, a two-pronged strategy as in last
\nyear, with slight modifications to deepen the impact, shall be adopted this year, too,
\nhaving proportionate focus on optimizing disposal in terms of numbers and on
\nmaximizing disposal of appeals involving high quantum of demand.
\n3.1 It is seen that the appeals pending in different categories are not evenly
\ndistributed amongst PCCIT regions, as also within each PCCIT region. Hence the
\ntargets for disposal are being set at the level of PCCIT regions, and at micro level
\nthere shall be norms for disposal of appeals by individual CITs(A). In order to ensure
\noptimum distribution of work and maximum disposals, the PCCIT\/CCITs may
\nredistribute the cases in such a manner as to attain\/exceed the targeted disposals. The
\nallocations of pending appeals may also be reviewed periodically to ensure that each
\nCIT(A) delivers results in accordance with the norms laid down hereunder. Further,
\nthe PCCITs\/CCITs shall endeavor to ensure disposal of older appeals on priority,
\nparticularly appeals that have been pending for more than 5 years.
\n3.2 Accordingly, the targets and norms for FY 2018-19 in respect of disposal of
\nappeals pending with CsIT (A) in each PCCIT Region are set out as under:
\nA. Each PCCIT Region shall ensure:
\na. Disposal of at least 25% of appeals that involve demand of Rs.10
\nlakhs or more in categories A2, and A3 and 100% of appeals
\npending as on 01.04.2018 that involve demand of Rs.50 crore and
\nabove (category A1);
\nb. Disposal of at least 90% of appeals that involve demand of less
\nthan Rs.2 lakhs (new category B3);
\nc. Disposal of at least 70% of appeals that involve demand of less
\nthan Rs.10 lakhs, inclusive of the targeted disposal in B3 (less than
\n2 lakh demand) category.
\nB. Each individual CIT (A) shall be expected to dispose of a minimum of
\n550 appeals, or achieve a minimum of 700 units during the year. In PCCIT
\nregions where the average number of Category B3 appeals pending with
\nCITs(A) is more than 500, each individual CIT(A) shall be expected to achieve a
\nminimum of 800 units during the year.
\nC. In Regions where the targeted disposal as at A above translates into numbers
\nof units that fall short of the norms for individual CITs(A) stated at B above, the
\nPCCITs concerned shall scale-up the targets stated at A above so as to ensure
\nsatisfaction of the norms. Such scaling-up shall be done, as far as possible, in respect
\nof Category A2 appeals followed by Category A3 appeals.
\nD. Correspondingly, in Regions where the targeted disposal as at A above
\ntranslates into numbers of units that are significantly higher than the norms for
\nindividual CITs(A) stated at above, the PCCITs concerned may scale-down the
\ntargets stated at A above, in consultation with the Member (A&J). Such scalingdown
\nshall be done, to the extent possible, only in respect of Category B appeals.
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\n29PIL14418.
\nodt
\n3.3 The above targets, along with demarcation of units, are represented by
\nthe following Table:
\nTABLE 4
\nTaget Category Unit
\nPer
\nAppeal
\nRemarks
\n25% A
\n(>10 lakhs)
\nA1 Above 50Cr 3 No interse
\npriority except
\n100% disposal
\nof A1.
\nA2 Above 1 Cr to 50 Cr 2
\nA3 Above 10 Lakhs to 1 Cr 1
\n70% B
\n(<10 lakhs)\nB1 Filed before 1.4.2015 (210\nlakhs)\n1\nNo interse\npriority\nexcept 90%\ndisposal of B3\nB2 Filed from 1.4.2015 to\n31.3.2018 (210\nlakhs)\n1\nB3 All appeals filed before\n31.03.2018 (demand <2\nLakhs)\n1\nBalance C\n(<10 lakhs)\nC Current Appeals filed\nduring FY 201819\n1 May be\ndisposed of\nwith approval\nof PCCIT\/CCIT\n3.4 For the purpose of evaluation of performance of an individual officer\nholding additional appellate charge(s) during the year\/part-year, the\naggregate disposal including in the additional charge(s) held, shall be\nconsidered.\n3.5 The individual norm of 550 appeals or 700 units stated above may also\nbe varied by the PCCIT concerned in respect of CITs (A) within his\njurisdiction, having regard to the number and categories of appeals pending\nfor disposal with the CITs(A), so as to attain maximum output and optimum\nwork allocation. However, each PCCIT Region as a whole must achieve the\ntargets of disposal of 25% of appeals involving demand exceeding Rs.10\nlakhs and above, 90% of appeals involving demand less than Rs.2 lakhs and\n70% overall in Category B appeals.\n3.6. The above targets should cumulatively result in a significant increase in\ndisposal of appeals with CITs(A) and substantially reduce the pending\nappeals carried forward, as well as unlock the demand locked therein of\nabout Rs.4.5 lakh crore.\nACTION ITEMS:\n(1) Category A appeals involving demand above Rs. 50 Crore and\npending as on 01.04.2018 shall be disposed of by 31.12.2018.\n(2) The priority for disposal of appeals in different Categories shall be as\nunder:\n\n\n(i) Higher priority shall be given to appeals involving demand of less than Rs.2 lakhs\nand filed up to 31.03.2018 (Category B3). There shall be no interse\npriority\nwithin the Category.\n(ii) The next priority shall be given to disposal of appeals involving demand of Rs.10\nlakhs and above (Category A), irrespective of the year in which the appeals are\nfiled. There shall be no interse\npriority within the Category, except that appeals\ninvolving demand of Rs.50 crore and above shall be disposed of by 31.12.2018.\nDifferent subcategories\nshall earn 1, 2 or 3 units respectively as indicated in\nTable 4 above.\n(iii) Lowest priority shall be given to appeals involving demand of less than Rs.10\nlakhs and filed during the current FY 201819\n(Category C). Such appeals can be\ndisposed of, with approval of the CCIT concerned, if there is inadequate number\nof appeals of Category A or B pending with him. The CIT (A) may also dispose of\nany such appeal on priority, if so directed by the PCCIT\/CCIT concerned.\n(iv) Appeals of the same assessee relating to different years involving substantially\nsimilar issue(s) or inter related issue(s) may be disposed of irrespective of the\nCategory to which they belong, if one of the appeals falls for priority disposal. In\nrespect of group search & seizure cases, the CIT (A) may dispose of appeals of\ngroup cases irrespective of the category to which they belong if one of the\nappeals falls for priority disposal.\n(v) Appeals pending for more than 5 years shall be given priority within each\nCategory. PCCITs shall endeavor to liquidate the pendency of such appeals\nduring the year.\n(vi) Cases set aside and restored to the CIT (A) by Courts\/ITAT are to be disposed of on\npriority. These shall get points as per regular category.\n(vii) Appeals involving Transfer Pricing issues shall earn 1 unit in addition to the normal\nnumber of units specified against the relevant category in Table 4.\n(viii) Appeals in cases where returned losses have been reduced or converted into income in\nassessment will be entitled to normal units specified in Table 4, on the basis of\nnotional tax on the amount of disputed additions.\n(3) Incentive for quality orders:\n(i) With a view to encourage quality work by CITs(A), additional credit of 2 units\nshall be allowed for each quality appellate order passed. The CIT (A) may claim\nsuch credit by reporting such orders in their monthly DO letter to the CCIT\nconcerned. Quality cases would include cases where(\na) enhancement has been made,\n(b) order has been strengthened, in the opinion of the CCIT, or\n(c) penalty u\/s 271(1) I has been levied by the CIT(A).\n(ii) The concerned CCIT shall examine any such appellate orders referred to him by\nthe CIT(A), decide whether any of the cases reported deserve the additional\ncredit and convey the same through a DO letter to the CIT(A), which can be\nrelied upon while claiming the credit at the year end.\n\n\n6. From the above noted portion of the plan it can be\nseen that in order to achieve certain disposal targets of pending\nAppeals before the CIT Appeals, CBDT has made detail\nprovisions for expeditious disposal of such Appeals. Part 3 of\nChapter III pertains to incentive for quality orders and provides\nthat additional credit of 2 units shall be allowed for each quality\nappellate order passed. Such term quality cases or quality orders\nhas also been defined in the said part.\n7. In the background of such facts on 22\/03\/2019, we\nhad on the question of higher weightage for \u201cquality orders\u201d\nmade following observations;\n\u201c5. With respect to the Petitioners\u2019 second part of\nthe challenge, we are of the opinion that the CBDT\nshould reconsider the same. From the action plan, it is\nnot clear as to the utility of the norms set which the\nCommissioner has to achieve. If the purpose of setting of\nnorms is to evaluate the performance of the\nCommissioner, there would be all the more reason why\nthe abovequoted\nportion of the action plan be\nreconsidered by the CBDT.\n\n\n6. On the next date of hearing, the learned\nCounsel for the Respondent would apprise us about the\nutility of the norms that the Commissioner would need to\nachieve and the outcome of the CBDT\u2019s deliberations on\nour recommendation for reconsideration.\u201d\n8. In response to this order, the counsel for CBDT placed\non record a communication issued by CBDT dated 04\/04\/2019,\nclarifying the issues raised in the said order dated 22\/03\/2019.\nRelevant portion of this communication reads as under;\n\u201cKindly refer to interim order of Bombay High Court in captioned\nmatter wherein the petitioners have challenged the CAP 201819\nissued by the CBDT on two grounds viz, (i) directions issued by CBDT\nfor disposal of certain number of Appeals of specified categories\nwithin specified time and (ii) incentivization of CsIT(A) for quality\norders where enhancement has been made, order of AO has been\nstrengthened and penalty has been levied by the CIT(A). Hon'ble\nCourt has directed that on the next date of hearing, I.e. 11.04.2019,\nDepartment Counsel is required to apprise the\ncourt about the utility of norms that the commissioner would need to\nachieve and the outcome of DT's deliberations \u0421\u0412 on their\nrecommendation for reconsideration.\n\n\n2. In this regard, I am directed to provide following inputs of CBDT\nfor apprising the court on the twin issues:\n(a) As regard the utility of the norms that CIT(A) is required to\nachieve, it is stated that the Department has been formulating\nCentral Action Plan (CAP) for the purpose of identifying the core\nareas of departmental functioning and setting targets therein\nincluding that of CIT(A). The concept of awarding credits has been\nbrought in by the Board to ensure parity in the performance of\nCIT(A) as he is required to dispose of small appeals involving meagre\ntax effect as well as large and complicated cases, involving multiple\nissues, requiring greater effort and devoting of time.\nFurther, Litigation management particularly w.r.t appeals pending\nbefore Commissioners of Income Tax (Appeals) is one of the key\npriority areas of the CBDT. A two pronged strategy has been detailed\nin the CAP for respect of disposal of appeals filed with CIT(A),.\nhaving proportionate focus on optimizing disposal in terms of\nnumbers and on maximizing disposal of appeals involving high\nquantum of demand.\n(i) As per Central Action Plan (CAP) for the FY 201819,\nthe\nDepartment has laid out targets and norms for disposal of\nappeals pending with CsIT (A) in each PCCIT Region. CITs(A)\nin each PCCIT charge shall be expected to dispose of a\nminimum of 550 appeals, inter alia involving a). Disposal of\nat least 25% of appeals that involving tax effect of Rs10 lakhs\nor more b). 100% of appeals pending as on 01.04.2018 that\ninvolve tax effect of Rs.50 crores and above c). Disposal of at\nleast 90% of appeals that involve tax effect of less than Rs.2\nlakhs and disposal of at least 70% of appeals that involve tax\neffect of less than Rs. 10 lakhs inclusive of appeals with\ndemand less than Rs.2 lakhs.\n(b) With respect to recommendation of Hon'ble court to reconsider\nthe incentivization provided to CsIT(A) for quality orders, it is\nsubmitted that the additional weightage to the disposal of appeals\nhas been provided where the CIT (A) has to spend more time and\nmake extra efforts, in investigating the case, thereby making disposal\nof such appeals a more time taking, strenuous and rigorous exercise.\nIt was never the intention of the CBDT to compromise the\nindependence and judicial autonomy of the CIT (Appeals) by\nincentivizing the orders in favour of department. Rather CBDT has\nalways upheld their functional autonomy and judicial independence\nto decide on merits on each case.\nNonetheless, in order to avoid further litigation and since fiscal\nyear 201819\nis closing, the Board has taken the view that as\nand when the exercise of formulation of CAP for 201920\nbegins, the existing definition of quality cases' as provided in\nPara 3(i) of Chapter III of CAP would be modified to include all\nappeal orders passed by the CIT (A), whether decided in favour\nor against the revenue, where the supervisory Pr CCIT\/CCIT is\nof the view that the CIT(A) has devoted more time for\nascertaining the facts and passed exceptionally wellreasoned\nand speaking order by carefully applying mind to the facts of\nthe case and considering applicable judicial precedents.\u201d\n9. In the background of such facts, learned Senior Counsel\nMr.S.E. Dastur, for the Petitioners raised following contentions;\n(i) Any directives from the CBDT to the Appellate\nCommissioner to dispose of Appeals expeditiously, has\na possibility of miscarriage of justice. The assessee may\nnot get full opportunity of hearing if the Commissioner\n(Appeals) is under pressure to decide the Appeals\nwithin a time frame.\n(ii) The learned Counsel drew our attention to subsection\n(6A) of section 250 of the Income Tax Act, 1961 (for\nshort \u2018the Act\u2019);\nand he submitted that, this statutory provision also\ndoes not lay down a rigid time frame for disposal of an Appeal.\nUnder the impugned circular the CBDT has; (a) shortened the\ntime for disposal of the appeal and; (b) laid down a rigid time\nframe to decide the appeal which is wholly impermissible;\n(iii) Counsel further submitted that the prescription of\nhigher weightage for disposal of cases through quality orders, is\nwholly impermissible. This has every possibility of consciously or\nsubconsciously influencing the mind of the authority about the\nultimate outcome of the Appeal. Such directives have the scope\nof influencing the outcome of Appeal on merits;\n(iv) Learned Counsel submitted that there can be no\nadditional weightage to the orders, based on the contents or the\nsubject matter. He submitted that these directives issued by\nCBDT transgress the exercise of quasi judicial functions by the\nstatutory appellate authorities, which is impermissible. In this\nrespect our attention was drawn to section 119 of the Act, which\ncontains a provision that any instructions or providing directions\nthe CBDT may issue in exercise of such powers, shall not be so\nas to require any incometax\nauthority to pass an order in a\nparticular manner.\n10. In support of his contentions learned Counsel relied on\nfollowing decisions;\nIn case of P.K. Ghosh, IAS & Anr. Vs. J .G. Rajput,\nreported in (1995) 6 Supreme Court Cases 744, in which it was\nobserved as under;\n\u201c10. A basic postulate of the rule of law is that\n'justice should not only be done but it must also be seen\nto be done.' If there be a basis which cannot be treated as\nunreasonable for a litigant to except that his matter\nshould not be heard by a particular Judge and there is no\ncompelling necessity, such as the absence of an\nalternative, it is appropriate that the learned Judge\nshould rescue himself from the Bench hearing that\nmatter. This step is required to be taken by the learned\nJudge not because he is likely to be influenced in any\nmanner in doing justice in the cause, but because his\nhearing the matter is likely to give rise to a reasonable\napprehension in the mind of the litigant that the mind of\nthe learned Judge may\nbe subconsciously has\nbeen\ninfluenced by some extraneous factor in making the\ndecision, particularly if it happens to be in favour of the\nopposite party. Credibility in the functioning of the\njustice delivery system and the reasonable perception of\nthe affected parties are relevant considerations to ensure\nthe continuance of public confidence in the credibility\nand impartiality of the judiciary. This is necessary not\nonly for doing justice but also for ensuring that justice is\nseen to be done. \u201d\nIn case of Dedicated Health Care Services TPA\n(India) Pvt. Ltd. and others, Vs. Assistant Commissioner of\nIncomeTax\nand others, reported in (2010) 324 ITR 345\n(Bom), in which the Division bench by referring to section 119\nof the Act struck down a circular issued by the CBDT on the\nground that the same would interfere with the exercise of the\nquasijudicial\ndiscretion of the Assessing Officer.\n\n\n11. Learned Counsel Ms. Ritika Agarwal appearing for the\nPetitioner of the Public Interest Litigation in addition to\nadopting the arguments of Mr.Dastur further submitted that the\npolicy of the Government which transgresses the statutory\nlimits, should be struck down.\n12. On the other hand learned ASG Mr.Anil Singh opposed\nthe Petitions. He submitted that the targets for tax collection and\ndisposal of income tax appeals, would have no effect on a fair\nhearing that the assessee must get from the Commissioner\n(Appeals). These targets and parameters for judging the output\nof a Commissioner (Appeals) are well within the scope of\nCBDT's powers. Like any other organization, the CBDT also lays\ndown targets for tax collection. In order to judge the\nquantitative output of the appellate Commissioners, certain\ndisposal norms are set. No directives have been issued to dispose\nof any number or kind of Appeals within a rigid time frame, if\nthe same cannot be done having regard to the interest of justice.\nWith respect to Petitioners' later part of the challenge to\nadditional weightage for quality orders, Counsel pointed out\nthat the CBDT has reconsidered the issue and decided not to\nimplement the same henceforth. With respect to the orders\nalready passed, in any case, no harm or damage would be done\nto the Petitioners or any of the assesses in allowing such\nprovisions to be effected.\n13. Having heard learned Counsel for the parties and\nhaving perused documents on record, we may first consider the\nPetitioners' challenge to the first part of the circular. We have\nreproduced the relevant portion of the circular at length. Perusal\nof this portion would show that the CBDT has set out broad\ntargets for revenue collection projected over the different\nregions. Internal distribution between the regions has been\ncarried out on scientific basis. For any organization, setting of\ngoals and targets is neither impermissible nor unknown. Only\nbecause certain targets for tax collection are set out, would not\nrender the policy arbitrary or unreasonable. In the context of the\ndisposal norms to be met by the appellate Commissioner also,\nwe do not think that it is impermissible for any organization to\nset out certain output norms to judge the output performance of\nthe person concerned. In absence of any such norms, it may be\nextremely difficult to judge the quantitative performance of a\nperson concerned. Setting out of norms for disposal by the\nAppellate Commissioners, per say, therefore cannot be said to be\neither impermissible or beyond the scope of CBDT's powers.\nDisposal of appeals by the Commissioner is just one of the many\nparameters for judging his performance. Range of other factors\nsuch as the quality of the orders, his service record etc. would\nhis suitability for concern advancement. But to subject that\nquantitative output should not enter such consideration at all\nwould not be correct.\n14. In the context of the precise norms set by the CBDT for\ndisposal, firstly it has to be the decision of the organization to\nset out appropriate norms. The Court does not have the\nwherewithal to test such norms on the basis of reasonableness.\nWhen an expert body like CBDT sets out disposal norms for the\nCommissioner Appeals to achieve, it has the necessary expertise\nand wherewithal after taking into consideration all relevant\nfactors to come to a proper conclusion in this respect. The Court\nwould not substitute its wisdom for that of the CBDT, duly aided\nand advised by the experts in the field.\n15. With this preamble we may peruse the disposal norms\nmore minutely. These norms provide different units for disposal\nof the Appeals depending on; the age and the valuation. For\nexample the policy provides the category 'A' where the revenue\neffect is more than Rs.10 lakhs. The cases involving tax effect of\nmore than Rs.50 Crores upon disposal would receive 3 units. For\ncases between Rs.1 Crore and 50 Crores the disposal unit would\nbe two and for the rest, it would be one unit. The category 'B' is\ncases where the revenue effect is less than Rs.10 lakhs. Here the\npolicy trifurcates the cases between those filed before\n01\/04\/2015 and in the range of Rs.2 to 10 lakhs, those filed\nfrom 01\/04\/2015 to 31\/03\/2018 and the tax effect is between\nRs.2 to 10 lakhs and all case filed before 31\/03\/2018 where the\ntax effect is less than Rs.2 lakhs. Category 'C' are the cases where\nthe tax effect is less than Rs.10 lakhs and the Appeals are filed\nduring the financial year 20182019.\nThe Policy prescribes that\nindividual norm of disposal 550 Appeals or 700 units should be\nachieved, having regards to the number and categories of\nAppeals pending before such Commissioner, so as to attain\nmaximum output and optimum work allocation. The policy also\nmakes certain general prescriptions such as giving the higher\npriority to Appeals involving demand of less than Rs.2 lakhs and\nfiled upto 31\/03\/2018. Next priority would be given to disposal\nof Appeals involving demand of Rs.10 lakhs and above\nirrespective of the year of filing and the lowest priority would be\ngiven to Appeals filed during the financial year 20182019\ninvolving tax effect of less than Rs.10 lakhs.\n16. We do not think that these guidelines in any manner\nbreach the reasonableness or can be stated to be arbitrary or\nillegal. These guidelines are for general directives and\nprescriptions to on one hand enable the revenue to collect taxes\nwhich are otherwise due and on the other hand to assess the\nwork output of the Appellate Commissioners which in any\norganization is of considerable importance. We also do not think\nthat the guidelines have undertone of giving priority to the\nissues which concern the revenue more than the assessees. As\nnoted the directives include giving priority to old cases of small\nassessees. If the CBDT also recognizes that appeals involving\nhigh tax effect are most likely to be more voluminous, involving\ncomplex legal disputes, the prescription of higher units for\ndisposal of such cases, can neither be stated to be arbitrary nor\nunreasonable, nor can be seen as restricting the discretion of the\nAppellate Commissioner. We do not accept the suggestion that\nsuch guidelines or prescriptions could possibly result in denial of\nfair hearing to the assessees. Reference in the policy to\n\u201cunblock\u201d or \u201cunlock\u201d the revenue blocked cannot be read in\nisolation and must be understood in the larger context of the\nwhole document. Before the appellate Commissioner essentially\nthe assessees who are aggrieved by the orders of assessing\nofficers who would be in appeal. Pending such appeals stay of\nthe tax recovery would in many cases be granted conditionally\nor unconditionally. It is only after the appeal is decided by the\nCommissioner (Appeals) that further recovery of tax if so\nconfirmed can be made. Expression \u201cto unlock\u201d the revenue\nmust be understood in this background. The policy nowhere\nexpects the disputed tax demand would be confirmed whether\njustified or not. In a given case it may happen that upon disposal\nof the appeal, tax provisionally collected may become\nreturnable.\n17. In this context, we may also refer to subsection\n(6A)\nof section 250 of the Act, which reads as under;\n\u201cIn every appeal, the Commissioner (Appeals), where it is\npossible, may hear and decide appeal within a period of\none year from the end of the financial year in which such\nappeal is filed before him under subsection\n(1) of section\n246A.\u201d\nThis provision thus provides that the Commissioner\n(Appeals) where it is possible may hear and decide the Appeal\nwithin a period of one year from the end of financial year in\nwhich such Appeal is filed before him. This provision does not\nlay down any fix time limit for the Commissioner (Appeals) to\ndispose of the Appeals filed before him. It only requires that the\nAppeal be disposed of when it is possible, within a certain time\nframe. This however does not indicate that the guidelines issued\nby CBDT in the impugned plan, are contrary to subsection\n(6A)\nof section 250 the Act. What the CBDT has done is to lay down\nbroad guidelines for disposal of Appeals categorywise.\nThere is\nneither firm directives that certain class or kinds of Appeals must\nbe decided before a particular date, nor there is any negative\nimplication of a particular Commissioner (Appeals) not being\nable to do so. The guidelines of the CBDT in this respect\ntherefore must be seen as directory and not mandatory.\n18. Coming to the Petitioners' second limb of the\ngrievance, we may recall the policy provided for incentive for\nquality orders. This clause states that with a view to encourage\nquality work by Commissioner (Appeals) additional credit of 2\nunits shall be allowed for each quality appellate order passed.\nOfcourse subject to CCIT upon examination of the order finds of\ndeserving higher weightage.\nThe term quality cases is explained as those including\ncases where (\na) enhancement has been made,\n(b) order has been strengthened, in the\nopinion of the CCID, and\n(c) penalty under section 271(1) has been\nlevied by the CIT (A).\n19. All these contingencies necessarily point to\ncircumstances where the order passed by the Commissioner\n(Appeals) is in favour of the revenue. For example this policy\nrefers to the enhancement made by the Commissioner or a case\nwhere the Commissioner has levied penalty under section\n271(1) of the Act. This necessarily refers to enlargement of the\nassessee's liability before the Commissioner as compared to what\nmay have been determined by the Assessing Officer. In our\nopinion, such policy is wholly impermissible and invalid. Any\ndirectives by the CBDT which gives additional incentive for an\norder that the Commissioner (Appeals) may pass having regard\nto its implication, necessarily transgresses in the Commissioner's\nexercise of discretionary quasijudicial\npowers.\n20. It is well laid down through series of judgments in field\nof administrative law, interference or controlling of the\ndiscretion of a statutory authority in exercise of the powers from\nan outside agency or source, may even be superior authority, is\nwholly impermissible. This general principal of administrative\nlaw finds statutory embodiment in subsection\n(1) of Section\n119 of the Act. As is well known, under subsection\n(1) of\nsection 119, the Board has the power to issue orders and\ninstructions for proper administration of the Act. This provision\nreads as under;\n\u201c119. (1) The Board, may from time to time, issue such\norders and directions to other incometax\nauthorities as it may deem fit for the proper\nadministration of this Act, and such authorities\nand all other persons employed in the execution of\nthis Act shall observe and follow such orders,\ninstructions and directions of the Board.\u201d\n21. In terms of the provisions contained in subsection\n(1)\nof Section 119 of the Act, thus the Board may from time to time\nissue such orders, instructions and directions to other income\ntax authorities as it may deem fit, for proper administration of\nthe Act and such authorities shall observe and follow the orders,\ninstructions and directions of the board. While granting such\nwide powers to the CBDT under subsection\n(1) of section 119\nof the Act, the proviso thereto provides that no such orders,\ninstructions or directions shall be issued, so as to require any\nincome tax authority to make a particular assessment or to\ndispose of a particular case in a particular manner. In exercise of\nthese powers thus the CBDT cannot issue any instructions or\ndirections to any income tax authority to make a particular\nassessment or to dispose of a case in a particular manner.\n22. When the CBDT guidelines provide greater weightage\nfor disposal of an Appeal by the Appellate Commissioner in a\nparticular manner, this proviso of subsection\n(1) of section 119\nof the Act, would surely in a breached. It is neither possible nor\nnecessary to judge the actual effect of such guidelines on the\norders passed by the appellate authorities. Suffice it to record\nthat such guidelines have a propensity to influence the appellate\nCommissioners and be tempted to pass an order in a particular\nmanner so as to achieve a greater target of disposal. Any\ntemptation though in the guidelines referred to as incentives for\ndisposal of an Appeal in a particular manner, would not stand\nthe test of law.\n23. Under the circumstances the CBDT has now decided to\nwithdraw the guidelines for the coming year. In our opinion in\nits existing form for the past financial year also the same cannot\nbe allowed to have effect. We are conscious that the appellate\nCommissioners have already passed the orders. Correction of\nthese orders cannot be doubted en masse only because they\nwere passed under the shadow of the said policy. Nevertheless\nto allow the implementation of this policy, on the orders passed\nby the Appellate Commissioners even for the past financial year,\nwould amount to an illegal prescription to prevail and operate.\n24. In the result, the Petition is allowed in part;\n(i) The following portion of the impugned Action Plan of\nCBDT is set aside.\n\u201cIncentive for quality orders :\n(i) With a view to encourage quality work by CITs\n(A),additional credit of 2 units shall be allowed for\neach quality appellate order passed. The CIT (A)\nmay claim such credit by reporting such orders in\ntheir monthly DO letter to the CCIT concerned.\nQuality cases would include cases where (\na) enhancement has been made,\n(b) order has been strengthened, in the opinion\nof the CCID, and\n(c) penalty u\/s 271(1) has been levied by the\nCIT (A).\u201d\n(ii) The concerned CCIT shall examine any such\nappellate orders referred to him by the CIT (A),\ndecide whether any of the cases reported deserve\nthe additional credit and convey the same through\na DO letter to the CIT (A), which can be relied\nupon while claiming the credit at the year end.\u201d\n(ii) Both the Petitions are disposed of accordingly.\n(SARANG V. KOTWAL, J.) (AKIL KURESHI, J.)\n\n<\/p>\n","protected":false},"excerpt":{"rendered":"

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.<\/p>\n

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