Settled legal position -pending appeals on covered matters must be withdrawn by revenue to save time of Courts, public money and avoid un-necessary harassment of tax payers. Settled legal position must be followed and rectification as per settled legal position must be made to avoid un-necessary and lingering of litigation and to expedite justice as per law.

[CA DEV KUMAR KOTHARI]

Links and references:

PR. COMMISSIONER OF INCOME TAX, VADODRA VERSUS M/S BELL GRANITE CERAMICS LTD 2018 (8) TMI 764 - SUPREME COURT OF INDIA

Petition(s) for Special Leave to Appeal (C) No(s). 12107/2016 Dated: - 10 August 2018

Legal position had earlier settled vide:

COMMISSIONER OF INCOME TAX, KOLKATA VERSUS M/S CALCUTTA EXPORT COMPANY 2018 (5) TMI 356 - SUPREME COURT Civil Appeal Nos. 4339-4340 of 2018 (Arising out of Special Leave Petiton (C) Nos. 24362-24363 of 2013  Dated: - 24 April 2018.

Rectification permissible as per changed legal position by larger bench judgment of SC: 

LAKSHMI SUGAR MILLS CO. LTD. AND ORS. VERSUS COMMISSIONER OF INCOME TAX & ANR. 2012 (6) TMI 39 - DELHI HIGH COURT W.P.(C) 470/2011 Dated: - 30 May 2012.

Covered matters in which legal position has been settled:

Covered matters in which legal position has been settled by way of judgment of the Supreme Court or by way of judgment of High Court or Tribunal that has attained finality because revenue has accepted the same and has not preferred appeal before Higher Court –  (a) Before Tribunal against order of CIT(A) (b) before High Court in case of judgment of Tribunal and (c) before the  Supreme Court in case of judgment of High Court, as the case may be.

Settled legal position must be honoured:

When an issue has already been settled, the revenue should not prefer further appeals on similar issue to avoid un-necessary litigation

When appeal has been filed, and later on legal position has been settled the revenue can make application for withdrawal of appeal or convey the Court about settled legal position and for not pressing the appeal on that issue.

When an issue has been settled by subsequent clarification issued by CBDT, the revenue authorities can pass rectification orders in accordance with settled legal position, to avoid lingering of litigation.

When an issue has been settled, additions and disallowances on same issue should not be made in a routine and loose manner by just pleading different facts and circumstances, when in fact there is no such difference.

Recent judgment of the Supreme Court:

In the case of Bell granite (supra.) the honourable Supreme Court considered that

“The issue raised in this special leave petition is covered against the Revenue in the judgment rendered by this Court on 24.04.2018 in Commissioner of Income Tax Kolkata XII v. Calcutta Export Company, reported in 2018 (6) SCALE 597.

The special leave petition is, accordingly, dismissed.

Pending application(s), if any, shall stand disposed of.

The issue was on curative or explanatory or clarification by amendments having retrospective effect. On this core issue there is settled legal position. Therefore, first of all on each and every amendment, there should not be dispute as to whether it is clarificatory and retrospective or prospective.

Furthermore when legal position for particular provision was also settled, there should not be further litigation.

In this case judgment of the Supreme Court was rendered on 24.04.18 in which large number of appeals were decided including leading case of Calcutta Export Co.

Again similar matter was heard by the Supreme Court in case of Bell Granite 10.08.18.

We find that several counsels had appeared before the Supreme Court entailing large amount of fees.

Petition to withdraw appeal could save public money:

A petition by revenue, to the effect that the issue in appeal has been settled so appeal of revenue be considered as WITHDRAWN, could have save public money and lot of time of honourable judges.

  Even order based on earlier ruling of Supreme Court can be rectified

If a larger bench of the Supreme Court over rules earlier ruling:

In case of Supreme Court, a larger bench will be considered higher forum. A division Bench consists two judges, larger bench consists of three or more judges. Therefore, a judgment passed by division bench, if over ruled by a large bench , then the law declared by larger bench shall be law, Accordingly  rectification can be made based on law declared by larger bench of the Supreme Court.

A situation to this effect arose in case of  LAKSHMI SUGAR (supra.). In that case rectification by Tribunal of its order was held valid as it was rectified based on law declared by a subsequent judgment of large bench of the Supreme Court in case of Gold Coin, whereas originally order was passed following judgment in case of Virtual Soft System Ltd which was over ruled by large bench of the Supreme Court.

Provision to follow order of higher authority in force for time being:

Provision to mandatorily follow order of higher authority or Court with further provision to allow rectification in case order presently followed is reversed by further higher court or authority can also save lot of time of tax authorities, litigation and public money.

Provision for rectification based on settled legal position for time being:

A provision to allow rectification based of settle legal position can avoid lot of litigation and save lot of public money.  

For example, there should be provision that the AO shall follow order of CIT(A) ( in any other year or in case of any other assesse on similar issue)  even if it is contested by revenue. Further that in case order of CIT(A) is reversed by  Tribunal, then the order earlier passed based on order of CIT(A) shall be rectifiable based on order of tribunal and so on.

Suggested provision:

Provision on the following lines can be made in different laws according to various authorities and courts concerned with the law.

Provision to follow order or judgment of higher authority or Court:

Any authority or Court, shall follow order of any higher or superior authority or Court, which is in force at the time of passing the order, even if it is disputed by revenue.

Rectification based on order of higher authority or Court:

An  order which was passed based on earlier order of any higher authority or Court will be rectifiable if subsequently further higher authority or court reverses the order that was  followed earlier.

A rectification of order passed by any authority or Court will be permissible to make the order  in conformity with latest legal position, as declared by further  higher  authority or Court as prevailing at the time of passing order of  rectification.

A time limit of four years from the date of passing of latest order of higher authority or Court , which if to be followed shall apply for passing rectification order by tax authority.

An assesse  shall be  allowed to file rectification petition within six years from the date of order or judgment based on which he seeks rectification of earlier or original order. Once a rectification petition is filed, the tax authority shall pass rectification order within a period of one year from the submission of rectification petition.

Such a provision shall go a long way in effective assessment and appeal procedures in case of tax laws and in system of timely delivery of justice in case of any law.

Such provision  shall also save revenue from its lapses because any relief allowed earlier can be withdrawn, if as per subsequent judgment of higher Court it is not allowable.