Commissioner of Income Tax vs Subhash Kohli

Pursuant to our order dated 25-10-2007, Mr. Rajneesh Kumar, CIT (Judicial) is present in court.

Ms. P.L. Bansal, learned Senior Standing Counsel for the revenue says that a comprehensive review has been undertaken by all the Commissioners in Delhi with a view to reduce the number of appeals filed in this court. The matter has also been discussed with the concerned Member of the Central Board of Direct Taxes (''CBDT'') as" well as the Chairman of the CBDT. The result of the comprehensive review and discussion is a document dated 15-11-2007 which has been handed over to us in court today.

We have perused the document and have discussed the matter with the Commissioner as well as with learned counsel and we find that the suggested measures to reduce litigation in this court are incapable of being meaningfully given effect to.

All that is stated in the document dated 15-11-2007 is, in sum and substance, that the extant instructions of the CBDT namely Instruction No. 2 of 2005 as modified by Instruction No. 5 of 2007 should be strictly adhered to. The opinion of the learned Senior Standing Counsel should be taken with regard to the advisability of filing an appeal, which we are told is already in vogue. We may note that Ms. P.L. Bansal, learned Senior Standing Counsel has earlier informed us on more than one occasion that the opinion of the Standing Counsel is not necessarily accepted by the revenue and often rejected. In other words, the document dated 15-11-2007 does not take us any further from the existing position which has resulted in the revenue flooding this court with appeals, many of which are frivolous.

We are of the view that cases, such as the present one where tax effect is nil, ought not to be even processed and filed but the document dated 15-11-2007 does not prevent this. There is no check whatsoever (real or otherwise) that either the CBDT or the Commissioners of Income Tax have imposed upon the revenue to file an appeal u/s 260A of the Income Tax Act, 1961. Therefore, frivolous appeals having little or no tax effect can continue to be filed.

We may mention that as per the statement handed over by Mr. Rajneesh Kumar, as many as 467 appeals have been filed in this court between April and September this year (that is six months) out of which 103 appeals are below the tax limit laid down by the CBDT in its instructions referred to above, in other words, almost 20 per cent of the litigation generated by the revenue in this court is unwarranted and frivolous.

On being asked, Mr. Rajneesh Kumar informed us that the revenue from collection of Income Tax from Delhi is roughly about Rs. 25,000 crores per year while the revenue involved in these frivolous cases is only about Rs. 1 crore. In other words, to recover Rs. 1 crore, the Income Tax department is filing more than 200 appeals (20 per cent of its litigation.) which are frivolous. To recover, on an average Rs. 50,000 per case, the revenue is not only taking up its own time but also taking up the time of the court so that more important cases having a much larger tax effect cannot be dealt with because of the sheer volume of cases generated by the Income Tax department. Ex facie, the policy of the Income Tax department is counter-productive and detrimental to the interests of the revenue.

On an earlier occasion in some other case, we had mentioned that the number of cases filed by the Income Tax department in this High Court is roughly five times more than the entire litigation generated by the Government of India, MCD, DDA and other statutory authorities and public sector undertakings.

From the discussion that we have had today with Mr. Rajneesh Kumar and Ms. P.L. Bansal, learned Senior Standing Counsel, it is clear that the Income Tax department has no intention of reducing its litigation in this court.

Learned counsel for the revenue states that some further comprehensive instructions will be prepared by the CBDT taking into consideration the observations made by this court in this case and the contents of this order. Lets hope so.