In National Petroleum Construction Company Vs. DIT in ITA Nos. 143, 144, 533/2013 and 795/2014, the Delhi High Court in its order dt. 13.08.2015, dt. 20.08.2015 and 28.09.2015 directed the Income Tax Department to formulate and implement a standard operating procedure on the following three issues:

(i) Issue No.1:- A mechanism should be put in place for immediate and seamless transfer of cases from one standing counsel to another so that unnecessary adjournments are not sought by the counsels on the ground of lack of formal order of allocation, want of instructions or papers. The lTD to ensure that in none of the matters there is a situation where (a) there is no one appearing for the lTD (b) even if they are, they have neither instructions nor papers. It will be responsibility of the lTD to ensure that the standing counsel who have been assigned the cases have the complete records. It should not be an excuse for Standing Counsel of the lTD to take adjournment on the ground that they have no instructions or that they do not have the case papers.

Pursuant to the solemn promise made by Prime Minister Narendra Modi that a mechanism would be set up to ensure that Assessing Officers are accountable for the unreasonable additions that they make in the assessment order, the CBDT has issued Instruction No. 17/2015 dated 09.11.2015 in which it has admitted that the tendency of the AOs to frame high-pitched and unreasonable assessment orders reflects harassment of taxpayers and leads to generation of unproductive work for the Department.

The CBDT has consequently set up a committee of high-ranking officials which will examine whether there is a prima-facie case of high-pitched assessment, non-observance of principles of natural justice, non-application of mind , gross negligence or lack of involvement of assessing officer. The Committee would ascertain whether the addition made in assessment order are not backed by any sound reason or logic, the provisions of law have grossly been misinterpreted or obvious and well established facts on records have out rightly been ignored. The Committee would also take into consideration whether the principles of natural justice have been followed by the assessing officer. If it is established that unreasonable and high-pitched additions have been made by the assessing officer, a report would be sent to the Pr. CCIT by the Local Committee who will then take suitable administrative action against the Assessing Officer. Further, the departmental position as determined by the Local Committee in such cases would be appropriately presented before the Appellate Authorities so that litigation is curtailed.

It is common experience that Assessing Officers have the tendency to make huge additions and disallowances on frivolous grounds and raise huge tax demands. Coercive measures are adopted to recover the said demands. This causes immense hardship to honest taxpayers.

There are two reasons for the modus operandi of the Assessing Officers. The first is that the CBDT has/ had a policy of rewarding officers with plum postings and promotions based on the tax collected by them (see Collect Taxes; Get Promotion & Choice Posting: CBDT Chief). The second is that some unscrupulous officers get an excuse to demand bribes from the taxpayers (see Chief CIT Used Strong-Arm Techniques To Extort Bribe From Hapless Taxpayers: CBI Report).

The Ministry of Finance has issued a Notification dated 29.10.2015 in which it is stated that where the variation between the arm’s length price determined under section 92C and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed one percent of the latter in respect of wholesale trading and three percent of the latter in all other cases, the price at which the international transaction or specified domestic transaction has actually been undertaken shall be deemed to be the arm’s length price for Assessment Year 2015-2016