The pendency of appeals at various judicial fora has been a grave concern for the taxpayers and tax administrators. The Government in recent times has taken steps to reduce the pendency by increasing the tax-effect thresholds for Revenue's appeals. The Finance Bill, 2022 introduced Section 158AB in furtherance of the Government's pursuit of minimising litigation.

Mr. Dharan Gandhi (Advocate) in his article, discusses the provisions of Section 158AB. He avers that on a theoretical note, the provisions are likely to have a positive impact and help achieve the desired objective. He writes that the existing Section 158AA meant for litigation management is rarely resorted to. Thus, he is sceptical about the fate of the newly proposed provisions. 

Mr. Gandhi highlights certain probable issues that may hamper the implementation of the avowed objective of litigation management. He discusses the issues such as delay in decision making by the Collegium of Commissioners, scope of proposed provisions regarding questions of facts, situation where Revenue does not prefer a Special Leave Petition before the Supreme Court, among others. He is of the view that it is important to take bold calls to ensure effective implementation of the provisions.

"Managing Litigation on Repetitive Issues - Issues & Scepticism..."

It is oft stated that “Justice delayed is justice denied”. The said phrase applies with equal force in so far as tax litigation is concerned.

Judiciary is overburdened with appeals filed under the Income-tax Act, 1961 (‘the Act’). Most of the appeals filed before the High Courts and the Supreme Court are by the Revenue Department. There is no consistent policy in filing of appeals. Many officers, out of abundant caution, file appeal against the orders of ITAT and High Courts, so as to avoid any internal scrutiny. As a result, many appeals have been filed before the Courts which are either repetitive in nature or involve a question of law which is already concluded by the Courts or is pending before such Courts. Many High Courts and even the Supreme Court have on umpteen occasions, come down heavily upon the Revenue Department for mindless filing of appeals.

There exists a section to avoid repetitive filing of appeals before the ITAT viz., section 158AA of the Act. The scope of the same is very limited. It applies where in case of an assessee, on an identical question of law, an appeal or a SLP is pending before the Apex Court which is filed by the Department against a ruling of the High Court in favour of the assessee. If these are the facts, then the PCIT or CIT concerned, may take a call to not file an appeal against the order of CIT(A) in favour of the same assessee on an identical question of law. Instead of filing of appeal to ITAT, the Department has to file a form with ITAT within the due date of filing of appeal. However, such a step is to be taken only if the concerned assessee consents to such a step.

The above provision was not used effectively by the Department. Now, the Finance Bill, 2022, proposes a new section viz., 158AB to replace the earlier section 158AA with effect from 1.4.2022.

The following are some of the material features of the proposed section 158AB:

• Decision under section 158AB is to be taken by a Collegium comprising of two or more CCIT or PCIT or CIT;
• Section 158AB is to apply when a question of law in a proposed appeal, is identical to question of law in case of the very same assessee or in case of any other assessee;
• Such question should be pending before the jurisdictional High Court u/s 260A of the Act or before the Supreme Court in an appeal u/s 261 of the Act or in a Special Leave Petition under Article 136 of the Constitution of India and such appeal/ petition has been filed by the Department;
• In the above given facts, the Collegium may decide and inform PCIT/ CIT concerned to not file an appeal to ITAT or HC against the order of CIT(A) or ITAT respectively, if the question of law is identical;
• On receipt of such communication from the Collegium, the PCIT/ CIT concerned shall direct the AO to file an application with ITAT or HC within the time limit to file appeal in the prescribed form and manner, instead of filing appeal;
• However, such an application is to be filed only if acceptance to this effect is received from the assessee concerned within 30 days from the date of communication to the Assessee;
• Further, if the question of law is decided by the High Court or the Supreme Court in favour of the Department, then appeal is to be filed within 60 days from the date of communication of such order to the PCIT/ CIT concerned in cases where an application has been made u/s 158AB of the Act.

The provision proposed is theoretically speaking a very positive provision which would reduce the pendency of cases and burden on the judiciary. However, in my view, there are some concerns in respect thereof, which would affect the success of such provisions, and the same are discussed hereunder:

• Section 158AB is modelled on section 158AA of the Act. Section 158AA of the Act was a hardly used provision. I feel, section 158AB will meet with the same fate.
• Section 158AB requires a Collegium of 2 CCIT/ PCIT/ CIT to take decision. Such system of Collegium is present in many other provisions as well like compounding of offences. Experience in this regard suggests that decisions of such Collegium are grossly delayed due to various reasons.
• Section 158AB is to apply only if an assessee consents to the proposal that the question of law is identical to the question of law either in his own case or in some other case. If no response is received from assessee in 30 days, then the Department shall proceed to file the appeal. Response to a communication u/s 158AB of the Act, is not a critical issue and the assessees may avoid or may ignore replying to such a communication. Further, an assessee may not agree that question is same as in case of some other assessee, otherwise the decision in that case would become binding, especially in a case where any deviations in facts, whether minor or substantial, are involved. Further, decision in case of other appeal which is pending may come after a long period of time, in which case, application u/s 158AB would be like a sword hanging on the head of the assessee. As a result, the assessee concerned, may might as well, think of letting department file an appeal and getting a disposal especially in a case, where the jurisdictional High Court is in favour and the appeal against such order is pending before the Supreme Court. The angle of low tax effect would also be considered in such a scenario.
• Section 158AB of the Act do not apply to question of facts.
• What will happen in a case, where on an identical issue the jurisdictional High Court has decided the issue against the revenue and no appeal is filed to the Supreme Court till such date when time limit to file appeal in case of assessee, expires. Section applies only in a case, where an appeal or a petition is pending before the High Court or Supreme Court. Therefore, in such a case, in all probability, appeal would be filed as section 158AB would not be applicable.
• Further, what if an application is filed u/s 158AB of the Act, as an appeal is pending before the jurisdictional High Court, and if such appeal is decided by the High Court against the Revenue. The Revenue may decide to go to the Supreme Court against such order. In such case, would the Revenue wait for the matter to be finally concluded by the Supreme Court before filing appeal in case of the assessee within 60 days of communication of such order? It appears that Revenue would wait as section 158AB(4) states that an appeal will be filed only after the “final outcome” is received.
• It appears that there is no requirement that the appeal or SLP should be admitted for final hearing. Even if an appeal/ petition is pending, section 158AB should apply.
• As already discussed earlier, an appeal is to be filed in case of an assessee, within 60 days of communication of order to the PCIT/ CIT. However, there will be some difficulty for the assessee to know as to when was the order communicated.

Though, such type of provisions are inserted in the statute book, however, the past shows that such provisions are hardly effective in managing litigation. Necessary it would be, to effectively administer the same and to take bold calls, so as to achieve the desired objectives!