Appointments of advocates on Income Tax panel not equitable and without consideration of the issue of law involved visavis the experience of the Advocate – Bombay High Court
Case Law :
ITA No. 2287/2013
The Commissioner of Income Tax (Appellant) vs. M/s. TCL India Holdings Pvt.Ltd (Respondent)
Date of Judgment: 12th July 2016
Coram: Justice M. S. Sanklecha and Justice A. K. Menon
Brief Facts of the Case:
Interestingly, the present order of the High Court has been delivered at the stage of the admission of an appeal. The main reason for this order was due to the failure on the part of the Income Tax Department to bring to the notice of the Court that an appeal raising a similar issue had already been admitted, when subsequent appeals on the same issue came up for admission before a different Bench. This failure on the part of the Revenue such subsequent appeals had been dismissed by the High Court. However, when this appeal came up for the admission the Counsel of the Revenue brought this ambiguity to the notice of the Court.
The present appeal This appeal was filed by the Revenue raising questions with regard to transfer pricing adjustments. The Court noticed that a similar issue raised by the Revenue in Commissioner of Income Tax Vs. M/s. Tara Jewels Exports Pvt. Ltd. (Income Tax Appeal No.1814 of 2013) decided on 5th October, 2015 , Commissioner of Income Tax Vs. Goldstar Jewellery Design (P.)Ltd. (2016) 67 taxmann.com 86 (Bombay) and Commissioner of Income Tax Vs. Ratilal Becharlal & Sons (2016) 65 taxmann.com 155 (Bombay) was not admitted. However, the counsel for the Revenue invited attention to the order of the Court in Commissioner of Income Tax Vs. Global Jewellery Pvt. Ltd. (Income Tax Appeal No.1395 of 2013) where similar questions had been admitted on 16th April, 2015 for consideration. Thus this has led to a contradiction in the admission of an issue.
Important Excerpts from the Judgment:
It must be pointed out that the above order of admission in Global Jewellery Pvt. Ltd. (supra) was not pointed out to this Court while passing orders dismissing the Revenue’s appeals in M/s. Tara Jewels Exports Pvt. Ltd.(supra), Goldstar Jewellwery Design (P.)Ltd. and M/s. Ratilal Becharlal & Sons (supra). This despite the decision in Global Jewellery Pvt. Ltd.(supra) being available with the Revenue and its Counsel at the hearing of the Appeals filed by the Revenue in respect of M/s. Tara Jewels Exports Ltd. (supra), M/s. Goldstar Jewellery Design (supra) and M/s. Ratilal Becharlal & Sons (supra). We are unable to understand why the Revenue is not taking a consistent view and pointing out decisions in its favour in its subsequent appeals at the stage of admission especially when we have been informed in another context that a Commissioner (Judicial) has been appointed to oversee the litigation in Courts on behalf of the Revenue. It may be pointed out that the Revenue was represented by the same counsel in Global Jewellery Pvt. Ltd. (supra) and in M/s. Tara Jewels Exports Pvt. Ltd. (supra). Moreover the same counsel in M/s. Goldstar Jewellery Design (P.) Ltd. (supra) did not dispute that this issue is concluded against the Revenue by the decision in M/s. Tara Jewels Exports Pvt. Ltd. (supra).
We specifically asked the Counsel for the Revenue as to why he or the Assessing Officer did not at the admission hearing of Tara Jewels Exports (P) Ltd. (supra) and the subsequent cases, invite our attention to identical issue having been admitted earlier in M/s. Global Jewellery Pvt. Ltd. (supra). At this the response was that all the appeals arise from different Commissionerates and therefore the earlier order in case of M/s. Global Jewellery Pvt. Ltd. was not known to them. We were unable to understand the above submission which proceeds on the basis that each Commissionerate is a separate entity. All of them are a part of the Income Tax Department. It is this Income Tax department which is an entity in appeal before us in all the above cases. In the above view, it was felt that the Income Tax Department must have in place a system of keeping a record of questions of law which have been admitted or dismissed by this Court. This alone would enable a consistent stand being taken by the Revenue when a similar question arises before the same or different Bench of this Court. This is necessary to ensure that the law is applied equally to all.
Therefore, the Principal Chief Commissioner of Income Tax who is the head of all the Commissionerates at Mumbai was directed to place on record the steps being taken to ensure that a consistent view is taken by the Department. The Principal Chief Commissioner of Income Tax had filed an affidavit dated 5th May, 2016. Today, the learned Additional Solicitor General tenders an affidavit of one Mr. Purshotam Tripuri, Commissioner of Income Tax (Judicial) dated 11th July, 2016 indicating the steps being taken by the department to ensure that the Revenue is properly represented. In particular, it is pointed out that the Officers of the Revenue are being sensitized to maintain consistency in preferring appeals to this court. Further, it is stated that the ‘Legal Corner’ hyperlink on the www.incometaxmumbai.gov.in home page is functional since 10th June, 2016 and entries have been made therein with regard to the questions of law which had been admitted by this Court and/or which are finally decided. This according to the Revenue would make the Assessing Officer as well as the Revenue’s Counsel aware of the questions of law which have been admitted and / or dismissed, to enable them to assist the Court in subsequent appeals. We are certain that this website could be further improved upon on receiving suggestion from the users of the Legal Corner over a period of time. The suggestion made by Dr. Shivaram in para 3 of the affidavit dated 17th June, 2016 of the respondent – assessee should be considered by the Revenue and if found appropriate, could be incorporated in the website.
However, on browsing the site, it is evident that the activity of monitoring and updating the site has been outsourced to a private party. One key area that must be borne in mind is authenticity of the information uploaded and updated. If in future the requirements increase the software must be scalable and in any event must be compatible with system of the department. In the event of the third party service provider being different at any point in time, the data available on the site after the change of service provider cannot be put to risk of loss of content and/or authenticity. This will ensure a stable and dependable resource for research and representation. We trust the above concern would have been taken care of by the Revenue.
However, the above steps on the part of the Revenue would only partially address the issue of proper representation on behalf of the Revenue. This apprehension is expressed on the basis of the facts pointed out in the affidavit dated 5th May, 2006 of the Principal Chief Commissioner of Income Tax and also our experience. We are setting out what we perceive to be the problem and suggesting possible solutions, being fully aware that the State knows best to protect its interest. Nevertheless, we are making these suggestions in the hope that if representation on behalf of the Revenue improves, Justice would be served better, as the quality of our orders is entirely dependent upon the quality of the assistance rendered at the Bar.
The affidavit dated 5th May, 2006 filed by the Principal Chief Commissioner of Income Tax at para 6 indicates that the questions of law on which appeals are filed are framed by the Principal Commissioner of Income Tax. It therefore appears that the Advocates appearing for the Revenue merely reproduce the same without making any modifications. This is evidenced by the fact that on numerous occasions we have had the Advocate informing us that they have to press all the questions and no question could be excluded unless they obtain permission from the Commissioner of Income Tax. This would not happen if the Advocates were involved in framing the question of law and on discussions a considered view was taken at the time of filing the appeal itself. Further at times the question as framed does not bring out the controversy in an appropriate manner as it is not framed by a lawyer. In fact, we have had occasion to observe at times that the question of law are raised on merits of the issue and not on the issue of jurisdiction / method of arriving at the Arms Length Price (ALP) decided against the Revenue. Thus, rendering the entire exercise of filing of appeals a futile exercise (See Income Tax Appeal No.72 of 2014 and connected matters, order dated 27th June, 2016 and Income Tax Appeal No. 15 of 2015, order dated 11th July, 2016). The framing of a substantial question of law needs legal acumen and experience in drafting to bring out the controversy appropriately. Therefore, framing of question of law should be done by the counsel briefed to draft the appeal, no doubt with the aid/assistance of the Officers of the Revenue involved in the matter.
Further, the affidavit of the Principal Chief Commissioner of Income Tax also annexes instructions No.3/12 dated 11th April, 2011 issued by the CBDT to improve the quality of representation on behalf of the Revenue. The instructions set out the manner in which panel counsel are appointed by the Revenue i.e. issue of advertisements inviting applications from Advocates and screening from amongst the applicants by the Committee of Income Tax Officers headed by the Chief Commissioner of Income Tax. Thereafter it appears the CBDT issues an appointment order. The selection process and obligation of the State to appoint the most meritorious Advocate has been best brought out by the Apex Court in its recent Judgment in State of Punjab V. Brijeshwar Singh Chahal 2016(6) SCC 1 while dealing with the issue of appointment of law officers by the State Government…..
The above observations, we hope would be kept in mind while making appointments of Advocates on the Revenue’s panel. The issues which arise before this Court have at times huge tax implications and as the decision rendered in one case would have a bearing on all similar matters across the State, the importance of proper appointment is paramount. One possible way forward would be to also include the State’s law officers such as the Additional Solicitor General and Advocate General in the selection/screening panel. They would also be aware of the meritorious Advocates, who may not be inclined to make an application to be empaneled, but if invited, could be willing to accept the appointments. This would be more particularly so in respect of designated Senior Advocates. It is indeed sad, that the Revenue does not have a single designated Senior Advocate on its panel to represent its interest before this Court.
Further, the Instruction No.3/2012 dated 11th April, 2012 of the CBDT also sets out the parameters of performance of the counsel for renewal of his appointment, one of the criteria mentioned therein is the number of cases won by the Counsel for the Income Tax department. This can never be a measure of competence of an Advocate i.e. an officer of the Court. In fact, the quality of the Advocate would be best judged by his performance and not in the result of the litigation. This evaluation can take place only when the Advocate is seen in action. We find that when the Advocates appear before us, very rarely are the Assessing Officer or other Officers involved in the litigation present in Court. In case, they are present, they would be able to give feedback to the Commissioner of Income Tax which could be factored in while briefing him and / or renewing his engagement.
In fact it is because of present parameters of number of cases won, being the basis of renewal, that we have had occasions when Advocates persist in arguing matters which otherwise are covered, by seeking to make distinctions which do not exist. This also leads them to becoming mouthpiece of the department completely forgetting their obligation to the Court as its Officer.
There are a large number of appeals filed by the Revenue from the orders of the Income Tax Appellate Tribunal. However, we find that the distribution of work amongst the panel lawyers is not equitable and also without any consideration of the issue of law involved visavis the experience of the Advocate briefed. Moreover, we find that most matters are distributed amongst a few Advocates with the result we have occasions where a single Advocate appears in eight/nine matters a day. This indeed is expecting the moon from the panel Advocate. Resultantly, the preparation suffers, leading to inadequate performance. It would therefore be appropriate to have more number of Advocates on the panel and distribute work amongst them. This would at least give an opportunity to the Advocate to prepare properly for appropriate representation.
We hope the Revenue would consider our observations and make attempts to ensure that it is properly represented. This can only happen when meritorious Advocates are appointed. This would ensure that the Officers of the Revenue would value his advise as a learned man of experience and not treat him as an employee, merely because he is appointed at the instance of the Commissioner of Income Tax.
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