The Commissioner of Income Tax-10 vs Synchem Chemicals (I) Ltd.

This is an appeal by the Revenue from the order dated 13th February, 2013 passed by the Income Tax Appellate Tribunal (Tribunal). The relevant Assessment Year is A. Y. 2004-05.

The Revenue urges the following questions of law for our consideration:-

"(a) Whether on the facts and in the circumstance of the case and in law, the Tribunal was correct in upholding the decision of the CIT(A) regarding the computation of capital gains?

(b) Whether on the facts and in the circumstance of the case and in law, the Tribunal was correct in concurring with the CIT(A) that only the date of the first holding i.e. the date of acquisition of shares as stock in trade and not the subsequent period of holding as capital asset is to be accepted?

(c) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in ignoring the fact that for the computation of capital gains, the date of the transfer of an asset is important to distinguish between long term and short term capital assets for the purposes of taxation"?

The appeal was heard for sometime on 29th September, 2015 when we passed the following order:-

" After the matter was heard for some time, it was noticed that the impugned order of the Tribunal has inter alia followed its decision in the case ACIT vs. Bright Star Investment Pvt. Ltd.(2008) 24 SOT 288 ". Mr. Pinto, learned Counsel for the Revenue states that the issue arising herein is identical to the issue which arose for consideration before the Tribunal in Bright Star Investment (P) Ltd. (supra). However, when we asked Mr. Pinto as to whether the Revenue has filed any appeal against the decision of the Tribunal in Bright Star Investment (P) Ltd. (supra), and if so, the fate of the appeal, Mr. Pinto informed us that he has not been able to find out as to whether or not any appeal has been filed and seeks time to enquire about the same.

We have, on numerous occasions in various orders had observed that whenever the Tribunal has followed its own earlier order, then when an appeal is filed by the Revenue from a subsequent order (following its earlier order), then the appeal before this Court must set out whether or not an appeal has been filed against its earlier order and its fate. Moreover, if no appeal has been filed against the earlier order which has been relied upon in passing the impugned order, then the reason which has led the Revenue to file an appeal in respect of this particular order must be set out i.e. the need to take a different view than that taken earlier. If the above exercise has not been done in the appeal memo, it should be carried out by filing an affidavit before the appeal is heard for admission. However, inspite of our repeated requests, we find that the learned Counsel for the Revenue do not undertake this exercise. This exercise would not only expedite disposal but also ensure consistency and certainty. This is particularly so as if the appeal from the earlier order has been admitted/dismissed then the impugned order following the same would also require admission/dismissal. This would ensure consistency of approach and certainty of law to all concerned i.e. the officers of Revenue and the tax payers. We hope that henceforth the learned Counsel for the Revenue would do the basic homework to assist the Court in disposing of matters.

We are making it clear that in case the Revenue does not do this basic exercise, we may be compelled to draw an inference that the earlier order has been accepted by the Revenue and thus the subsequent order would need to be upheld. This would result in our dismissing the Revenue''s appeal.

However, as a last chance to enable Mr. Pinto to find out the status of the order of the Tribunal in Bright Star Investment (P) Ltd. (supra), at his request, we adjourn the hearing. However, we make it clear that in case no appeal has been filed, an affidavit of the Officer concerned with the appeal would be filed indicating the reasons why the Revenue has chosen to file an appeal against the impugned order when the same merely follows / applies the earlier order of the Tribunal (Bright Star Investment (P) Ltd. (supra)) which has been accepted by the Revenue.

A copy of the affidavit which is to be filed by the Revenue, will be furnished to the respondent prior to 13 October 2015. At the request of Mr. Pinto, learned Counsel for the Revenue, stand over to 13 October 2015.

From the above, it is evident that:-

(a) The impugned order of the Tribunal has dismissed the Revenue''s appeal by inter alia following its own order in ACIT v/s. Bright Star Investment (P) Ltd. 24 SOT 288 (Mum);

(b) The learned Counsel appearing for the Revenue states that the issue arising in this case is identical to the issue which arose for the consideration before the Tribunal in Bright Star Investment (P) Ltd., (supra);

(c) The learned Counsel appearing for the Revenue took time to find out whether or not any appeal has been filed in the case of Bright Star Investment (supra);

(d) It was made clear that in case no appeal is filed to this Court in case of Bright Star Investment (supra), then the Officer concerned would file an affidavit. The affidavit of the Officer would indicate the reasons why the Revenue has chosen to file an appeal in this case when it merely follows its order in Bright Star Investment (supra) and no appeal therefrom has been filed; and

(e) It was made clear that in case, no appeal is filed in case of Bright Star Investment (supra) and the Revenue does not put on record the reasons why the present appeal is warranted, we would proceed on the basis that the earlier order has been accepted and would dismiss the present appeal.

Today when the appeal was called out, Mr. Pinto, learned Counsel appearing for the Revenue states that the Officers of the department are unable to inform him whether or not an appeal has been filed from the order in the Bright Star Investment (supra). We are unable to appreciate the above submission. The appeal, if any, filed in respect of Bright Star Investment (supra), would have been filed by the Income Tax Department. The Officer instructing Mr. Pinto are also a part of the Income Tax Department. The necessary information with regard to appeal being filed or not has to be within the knowledge of the department. Further, in case no appeal has been filed and the Officer concerned was of the view that the facts of the present case warrant filing of an appeal, then he could have filed an affidavit, indicating the reasons for the same. However, it appears that Revenue is not willing to share a basic fact within its knowledge viz: whether any appeal has been filed from the order of the Tribunal in Bright Star Investment (supra) or not. Further, it also does not wish to file any affidavit indicating reasons warranting filing of an appeal against the impugned order, when no appeal is filed against the earlier order.

However, Mr. Pinto, the learned Counsel appearing for the Revenue does not seek any further time to find out the exact position. However, he seeks to argue that the issues arising in Bright Star Investment (supra) is distinct/ different from that arising in this case. We pointed to him his statement as recorded in the earlier order dated 29th September, 2015 (dictated in Court) wherein he states that the issue in the two cases are identical. No explanation is offered for this volta face. Thus, we did not hear him on the above aspect, particularly when no affidavit is filed by the Officer of the department justifying the basis for the Revenue to take up a different stand from one taken by the Revenue in respect of the order of the Tribunal in Bright Star Investment (supra).

One of the basic feature of Rule of Law is certainty of law and uniform application of law amongst all the assessees i.e. equal treatment. Thus, where the Tribunal has taken a view on a legal issue and the Revenue has in turn either accepted it or challenged it in a higher forum, then where a subsequent order of the Tribunal follows the earlier order of the Tribunal, then the assessee must be treated in the same manner in which the assessee in the earlier case has been treated. However, there could be valid reasons for the Revenue to take a different view in this case, then that taken in the earlier case, then the reasons for the same must be set out in the memo of appeal or at least before the hearing in an affidavit filed by the Officer of the Revenue before the Court. The State cannot act arbitrarily to pick and chose the orders from which appeals would be filed.

In fact we have time and again in numerous orders (see ACIT vs. Bright Star Investment Pvt. Ltd.(2008) 24 SOT 288 , ACIT vs. Bright Star Investment Pvt. Ltd.(2008) 24 SOT 288 , ACIT vs. Bright Star Investment Pvt. Ltd.(2008) 24 SOT 288 and ACIT vs. Bright Star Investment Pvt. Ltd.(2008) 24 SOT 288 ) had emphasized the need for equal treatment at the hands of the State. In the circumstance, we had requested the State that in case the order being challenged before the Court has merely followed its earlier order and the Revenue has accepted the same by not filing an appeal, then the Officer concerned must justify the filing of the appeal in this case either in its appeal memo or by filing a separate affidavit. However, to our dismay, no action is taken by the Revenue as is evident from the attitude of the Revenue to our above directions in this case. In fact, copies of some of the earlier orders were communicated not only to the Chief Commissioner of Income Tax but also to the Central Board of Direct Taxes but to no avail.

We are conscious of the fact that where the order of the Tribunal make a reference to an earlier order and thereafter on interpretation applies it to the facts of the case before it, then an affidavit need not be filed. In such cases, the Counsel could make submission why the decision would not apply. However, where the impugned order of the Tribunal relies upon its earlier order in another matter and merely follows it by stating that the facts are identical, then in such cases it would be appropriate that where an appeal is filed from the subsequent order, the memo of appeal should mention whether any appeal has been preferred from the earlier order and if not i.e. it is accepted, then the reason for pursuing the impugned order in appeal before this Court must be indicated. In the absence of it being so recorded in the appeal memo, the Officer should file an affidavit indicating the above facts. As pointed out in our earlier orders, appeals are filed by the Revenue many times without proper application of mind. All this leads to uncertainty and arbitrariness which is an antithesis to the Rule of Law.

In the circumstances of the present case, we are constrained to dismiss the appeal on the inference that the earlier order of the Tribunal in Bright Star Investment (supra) has been accepted by the Revenue. This for the reason that as the Officer of the Revenue has not filed any affidavit pointing out the reasons why the impugned order is being challenged in the face of no appeal in the case of Bright Star Investment (supra). Thus, we see no reason to interfere with the impugned order. Accordingly, we dismiss the appeal.

However, the dismissal is with a caveat, that in case any appeal has been filed by the Revenue from order of the Tribunal in Bright Star Investment (supra), liberty is granted to the Revenue to move this Court for recall of this order. It is made clear that we have not examined the merits of the appellant-revenue''s case.

Thus, Appeal dismissed. No order as to costs.