Low tax effect- appeal dismissed by honourable Supreme Court – however, casual attitude of even senior officers and senior counsels is apparent- such approach is a cause of un-necessary litigation, wasteful expenditure and brain drain- it must be stopped

[CA DEV KUMAR KOTHARI]

Relevant links and references:

C.I.T., CENTRAL-1, CALCUTTA Versus M/s. HEMRAJ MAHABIR PRASAD LTD., CALCUTTA, 2016 (1) TMI 950 - SUPREME COURT OF INDIA

Instruction No. 2/2005 dated 24.10.2005 of the CBDT

Appeals before ITAT, High Courts and the Supreme Court:

Filing of appeals is considered as serious decision and it should not be taken lightly. Because by filing an appeal, the opposite party is also called upon to contest it and save his interest.

As per prescribed procedures filing of appeal is a decision taken at higher level. From lower level reports are received as to tax effect, recurrence, position in other years and other relevant aspects like judgments in other cases and their status which may have a bearing on appeal to be filed.

An appeal before ITAT is filed after detailed scrutiny, and with approval of CCIT and after consultation with counsels, if found necessary. Still we find that many frivolous appeals are filed by revenue.

Appeals before High Court and the Supreme Court are filed by CCIT/ CIT through standing counsels who are very senior advocates. Before filing an appeal, scrutiny and status report is prepares. Still we find that many appeals are filed without any merit. Cases have been noticed in which even before the Supreme Court, appeals are filed without proper examination and without determination of merit in filing of appeal.

Case of HEMRAJ MAHABIR PRASAD LTD (supra)

In this case pertaining  to Assessment Year 1991-1992 the tax effect is ₹ 8,84,860/-.  The Circular of CBDT in force at relevant time being Instruction No. 2/2005 dated 24.10.2005 was in force. As per this Circular of the CBDT, no appeals were to be filed where the tax effect was less than ₹ 10 lakhs.

Filing of appeal was, thus taken very casually by concerned tax authorities and counsels.

The casual approach is more evident when we notice statements of counsels of revenue and assessee. The Court has noted as follows:

        “ Mr. A. K. Sanghi, learned senior counsel appearing for the Department, however, submits that the reason for filing the appeal presumably was that the issue involved had the recurring effect”.

We find that for The Appellant/ revenue the following  five counsels appeared:

1.  Mr. A. K. Sanghi, Sr. Adv.,
2. Mr. T. M. Singh, Adv.,
3. Ms. Swarupama Chaturvedi, Adv.,
4.  Ms. Anil Katiyar, Adv.,
5. Mr. B. V. Balaram Das, Adv.

Thus in spite of  elaborate procedure adopted in filing of appeal, and attendance of five advocates, the Sr. counsel used the words  “   reason for filing the appeal presumably was that the issue involved had the recurring effect”.

Means the Sr. Counsels, even while appearing before the highest Court of land have unfortunately taken very casual approach.

This also means that at all level casual approach was adopted. This is not a rare case, it appears that in most of cases tax authorities and standing counsels adopt casual approach to somehow and any how file appeals.

Regarding submissions of counsels of assessee the Supreme Court has in order noted as follows:

             “… , we are informed by the learned counsel of the Respondent that except the present appeal, which pertains to the Assessment Year 1991-1992, an order of the Tribunal giving the same treatment has been accepted by the Department and no appeals were filed even in the High Court.”

Based on the statement of counsels of assessee the appeal of revenue was dismissed as follows:

         “ Keeping in view the aforesaid statement of the learned counsel for the Respondent, we dismiss the appeal on the ground of low tax effect only, leaving the question of law open.”

Thus the appeal was dismissed based on statement of the counsels of respondent/ assessee. Therefore, we find that the team of Senior counsels for revenue could not controvert the statement of the counsel of assessee. This again shows very casual approach adopted by counsels of revenue.

Fit case for awarding costs:

In view of factual aspects, the appeal should not have been filed by revenue. Once revenue has filed an appeal, the subject matter has become contingent. To safe guard from contingent liability tax payer / assessee ahs to make arrangements for proper representation before honourable Supreme Court. The respondent assessee engaged advocates, and   three advocates appeared namely:

1. Ms. Shashi M. Kapila, Adv., 
2.  Mr. Pravesh Sharma, Adv.,
3. Mr. Vikas Mehta, Adv.

Therefore, it was a fit case for awarding of costs in favour of respondent, however, honourable Supreme Court did not awarded any costs. Award of costs in such cases will go a long way in reducing un-necessary litigation.

Brain drain:

In this case  various learned authorities and judges had to spend time. Two judges of Calcutta High Court and two judges of the Supreme Court heard the matter. Before that Tribunal members heard the matter.

We find that five  + three  =  eight  senior counsels appeared before the Supreme Court to contest a case which should not have been filed at all.

Is it not brain –drain? This sort of brain drain should come to an end.

It is unfortunate that in our legal system, tax administration and general administration people find more power and money- in service and profession both. For this reason we find that there is lot of brain drain. We find scientists, engineers, even doctors joining civil services, legal and allied professions after studying specialized subjects fit for profession. There should be bar on people having acquired professional qualifications like engineer and  doctor and other professional courses from appearing or adopting other services where such qualification has no use at all. Just because they are intelligent, have better command over scoring subjects like science and mathematics they easily compete with other graduates and post graduates candidate   appearing for competitive examinations   for civil services, administrative services and also in MBA. Entry of such highly specially qualified people like doctor, engineer, and other professionals, in competitive examinations should be banned to avoid brain drain. This is important because after passing examinations what they do, is not at all related to their specialized knowledge.  One burning example of this is Shri Arvind Kejriwal- firstly qualified as an Engineer, then a MBA then a RAS officer and now Chief Minister of Delhi. Is it not a case of brain drain?