The Income Tax judicial process in India starts with the Commissioner of Income Tax (Appeals), CIT(A) for short, followed by the Income Tax Appellate Tribunal, High Courts and finally the Supreme Court. The taxpayer, when aggrieved by the order of the tax officer, is granted a right to file an appeal before CIT (A). The CIT (A), being a quasi-judicial authority, is expected to function with an impartial, independent and unbiased approach.
Recently, the Central Board of Direct Taxes (CBDT) released its Central Action Plan for 2018-19 (Central Action Plan). While it retains the broad structure of Central Action Plan 2017-18, special emphasis has been laid down on one of the chapters relating to ‘Litigation Management’, which sets the target for speedy disposal of appeals pending and providing incentives to CIT(A) for ‘Quality Orders’ passed.
The ‘Quality Orders’ as defined by the CBDT in its Central Action Plan would include cases where enhancement has been made by the CIT(A) or where the order under appeal has been strengthened by the CIT(A) or penalty under section 271(1) has been levied. As per the targets set by CBDT in the Central Action Plan, each individual CIT (A) shall be expected to dispose a minimum of 550 appeals or achieve a minimum of 700 units during the financial year. For passing such ‘Quality orders’, the CIT (A) shall be given additional credit of two units for each quality order.
Further, appellate orders passed by the CIT(A) would be evaluated by the jurisdictional Chief Commissioner of Income Tax (CCIT) as to whether these deserve any additional credit or not. It appears that with this the CBDT has altogether changed the definition of quality orders. The CIT (A), in order to dispose of the appeals as per the targets set and to earn more credit units, instead of adjudicating appeals in a fair, judicious and unbiased manner, would be more interested in strengthening the tax officer’s order and/or dismissing such appeals. The CIT (A) may also indulge in making enquiries from the taxpayers for making enhancement, thus leading to increase in resentment and loss of faith in the judicial structure.
Though the evaluation of performance of CIT(A) may be essential for administrative reasons, the parameters set out should not be dependent on the number of appeals dismissed or the orders of the tax officers strengthened or enhanced. It may be worthwhile to highlight that the apex court has also dealt with the powers and duties of a quasi-judicial authority and repeatedly held that there can be no interference of any superior authority in the judicial work of a quasi-judicial authority. Even the Income Tax Act precludes the CBDT to issue any order, instruction or direction to CIT(A) in the exercise of appellate functions.
Although the ruling government promised tax friendly policies and eradication of the tax terrorism image of the revenue authorities, the aforesaid direction in the said Central Action Plan seems contrary to the approach. Thus, it becomes imperative that the CBDT’s move for incentivising the quality orders be reconsidered. Though the same may be fair for managing the disposal of litigations, it may adversely impact the taxpayer’s faith in the judicial system resulting in major impediments towards creating an environment of tax certainty.