Failing to ensure proper filing, Income Tax dept loses 272 appeals

In a recent order, the Delhi High Court has dismissed 272 appeals waiting since 2012 for the I-T department to cure their defects and re-file so that the cases could come up for hearing.

Written by Utkarsh Anand | New Delhi | Published: June 28, 2016 2:09:05 am
Income Tax department, Income Tax loss, filing Income Tax, tax enforcement, Airports Authority of India, Central Board of Direct Taxes, Central board of direct taxes, India tax, direct tax, tax collected at source, Economy news, Tax collection in India, latest news, business news Currently over 200 defective appeals are pending in the HC since 2013 and if the I-T department re-files them, the court would deal with them on a case-to-case basis to decide whether to condone delay in those case.

ALL AT ONCE, the Income-Tax department has lost around 300 cases with tax effect worth hundreds of crores. The cases have been buried forever with the I-T department opting not to put up a fight just because it failed to do the least — file cases without defects such as missing pages, illegible script, wrong font, lack of stamps, proper handing over of case records and similar errors.

At a time when the government is pushing for a stricter tax enforcement regime with an objective to broaden its taxpayer base, the I-T department’s failure to ensure proper filing of 272 appeals — mostly with tax liability exceeding Rs 20 lakh — has resulted into their permanent closure and loss of possible revenue for the public exchequer.

According to the documents accessed by The Indian Express, cases against the Airports Authority of India and Microsoft Regional Sales Corporation, the department claimed, alone had tax effects of Rs 297 crore and Rs 392 crore, respectively. Further, a total of 595 defective appeals, including 272 pending adjudication in the Delhi High Court, account for a liability of around Rs 4,471 crore.

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In a recent order, the Delhi High Court has dismissed 272 appeals waiting since 2012 for the I-T department to cure their defects and re-file so that the cases could come up for hearing. The High Court declined to condone what is called as “the extraordinary delay” in appropriately filing the cases. The court further directed its registry to make sure these appeals are not listed for hearing ever again. For other defective appeals pending post 2012, the court has set a deadline for the I-T department to re-file them if the latter is interested in fighting those cases.

ddfThe documents show that the I-T department had filed appeals against public and private entities like Microsoft Regional Sales Corporation, Airports Authority of India (AAI), Bharti Cellular Ltd, Vodafone Essar Mobile, Birlasoft India, Nokia India, HCL Corporation, DSL Software, Casio India, Ambience Projects & Infra, Steel Authority of India, Mesco Pharma, Indian Railways Financial Corporation, Nestle India, Pepsico India Holding and Sahara Airlines.

The appeals claimed tax effect of Rs 297 crore against the AAI while a batch of 10 appeals moved against the Microsoft Corporation’s arm had a total tax effect of Rs 392 crore. Although in many cases, the I-T department did not bother to mention the tax effect, which is mandatory for getting the cases listed for hearing, several cases, at least 20 more had tax effects of over Rs 1 crore.

According to the tax department, other cases with high stakes included Nokia India with tax effect of more than Rs 23 crore, National Agricultural Cooperative Marketing Federation of India with over Rs 14.6 crore and City Financial Consumer Finance having tax effect of Rs 18.4 crore.

Irked over the “standard reasons” offered by the I-T department in all the 272 cases to explain for delay in suitably filing the appeals, a bench led by Justice S Muralidhar trashed all the appeals in a recent order.

“Although the counsel for the Revenue urges that they would like to persuade the Court to consider these appeals by condoning the delay, the Court is of the view that a delay of more than three years in re-filing of the appeal cannot, by any stretch of imagination, be accepted particularly in view of the standard reasons offered for the delay in such re-filing,” said the bench. It added that “the Registry will ensure that there is no re-filing of the said appeals.”

The issue had come up during a hearing last year when the HC noted that a large number of appeals by the I-T department since 2012 had been lying in a heap of defective cases and nobody cared to re-file them after correcting the errors. Further, there were several cases that had not been handed over to the counsel representing the department although a dedicated judicial cell, managed by a deputy commissioner of Income Tax and supervised by the Commissioner of Income Tax (CIT) was in place.

Subsequently, an explanation was sought from the secretary (revenue) in the Union finance ministry, following which the ministry apprised the court of formulating a new standard operating procedure (SOP) to ensure cases are handled properly. The I-T department assured the bench that henceforth rules and practice directions concerning filing of cases in the HC shall be followed.

Even as it directed the I-T department to follow a strict timeline for filing the cases after curing all the defects, the bench also sought to know the exact number of faulty appeals pending in the HC.

At this, the court was informed there were more than 1,000 defective appeals, out of which 149 cases had tax effect of less than Rs 20 lakh. In accordance with a circular of the Central Board of Direct Taxes (CBDT), the department agreed to give a quietus to 149 cases by not pressing for their adjudication. Taking on record the circular, the court dismissed these appeals straightaway.

Currently over 200 defective appeals are pending in the HC since 2013 and if the I-T department re-files them, the court would deal with them on a case-to-case basis to decide whether to condone delay in those case.

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