In Chamber of Tax Consultants v. Central Board of Direct Taxes, W.P. No. 3343-18/P.I.L. No. 144-18, released April 23, the High Court of Bombay declared invalid an incentive scheme that awarded additional performance credits to commissioners of income tax (appeals) for “quality appellate orders.”
The CBDT’s plan prescribed disposal targets for appeals pending before each commissioner of income tax (appeals) for fiscal 2018-2019, generally requiring each commissioner to dispose of a minimum of 550 appeals or achieve a minimum of 700 units during the year. Varying numerical “units” are awarded for disposed appeals. Under the plan, each commissioner of income tax (appeals) could claim an additional credit of two units for each quality appellate order passed, subject to the approval of the respective chief commissioner of income tax.
As set forth in the CBDT’s Central Action Plan for 2018-2019, quality orders include those that enhance the assessing officer’s tax demand; strengthen the assessing officer’s order, in the opinion of the respective chief commissioner of income tax; or levy penalties under section 271(1) of the Income Tax Act, 1961.
The court held that under Section 119(1) the CBDT's statutory power to issue administrative orders, instructions, and guidance does not authorize it to require income tax authorities to make a specific assessment or dispose of a case in a specific manner.
Referring to the decision, any directives by the CBDT which gives additional incentive for an order that the commissioner (appeals) may pass having regard to its implication, necessarily transgresses in the commissioner’s exercise of discretionary quasi-judicial powers.
The court noted that the CBDT has decided to withdraw the guidelines from the Central Action Plan for the upcoming year. According to the decision, the CBDT intends to modify the definition of quality cases to include all appeal orders, regardless of the prevailing party, that involve significant time to ascertain facts and reflect well-reasoned decisions — as determined by a supervising commissioner. However, the court stressed that the guidelines in their current form cannot have effect for the past financial year.
Further, the court rejected a separate challenge alleging in part that the CBDT imposed an impermissible time frame for disposal of appeals.
Source: ITA Online