Revenue is party to all tax litigations. An issue has arose before the Courts as to whether Revenue can file appeal before higher or superior forums assailing the correctness of the order in one case and not doing so in another identical case. Can Revenue pick and choose while filing appeals. There is also another aspect which is the certainty in law. The Courts have taken a view that it would normally not be permissible to do so on the logic that the Revenue cannot pick and choose. However, the Supreme Court has held that such action can be taken if there is a ‘just cause’. These decisions are discussed below:
In the case of UOI v. Kaumudini Narayan Dalal [2001] 249 ITR 219 (SC) (3J), the Supreme Court observed that without a just cause the revenue cannot file the appeal in one case while deciding not to file an appeal in another case. This position was also accepted in CIT v. Shivsagar Estate [2002] 257 ITR 59 (SC) (3J).
The Supreme Court in the case of Hemlatha Gargya v. CIT [2003] 259 ITR 1, 128 Taxman 190 (2J) at para 12 explained the decision in Kaumudini Narayan Dalal’s case (supra) in following words:
The decisions of this Court in Kaumudini Narayan Dalal’s case (supra) and Satish Panalal Shah’s case (supra), do not, as contended by the assessees, hold that the Revenue can never challenge an interpretation which they have not chosen to do so earlier. First, it appears to us that the principle appears to be limited to decisions of the jurisdictional High Court. Additionally, the decisions make it clear that given “just cause”, the Department could challenge the interpretation subsequently. We accept the submission of the Revenue that in this case, the decisions of other High Courts holding to the contrary as well as the subsequent conflicting decision of the Punjab and Haryana High Court itself would come within the phrase “just cause”.
Berger Paints India Ltd. v. CIT [2004] 135 Taxman 586 (SC) (2J) – The SC observed as follows:
In view of the judgments of this Court in Union of India v. Kaumudini Narayan Dalal [2001] 249 ITR 219, CIT v. Narendra Doshi [2002] 254 ITR 606 and CIT v. Shivsagar Estate [2002] 257 ITR 59, the principle established is that if the revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, then it is not open to the revenue to challenge its correctness in the case of other assessees, without just cause.
CIT v Muthoot M. George Bankers (Delhi HC) (2007) 159 Taxman 22 – The Tribunal allowed the appeal of the Assessee stating that the issue raised in the case of this assessee is squarely covered in favour of the assessee and against the revenue by a decision of the Tribunal rendered on 21-9-2005 in the case of Muthoot Financiers v. Dy CIT [IT Appeal No. 1707 (Delhi) of 2002] and in the case of Muthoot Bankers v. Dy. CIT [IT Appeal No. 1708 (Delhi) of 2002]. The decision relied by the Tribunal were accepted by the Revenue. However, appeal was filed in Assessee case.
The HC held that there must be consistency in stand of revenue. They cannot pick and choose cases in which to file an appeal in some respect of some assessee and not to file in respect of other assessee in identical orders.
C.K. Gangadharan’s case v CIT (2008) 304 ITR 61 (SC) (3J) – The Assessee contended that when in some cases the revenue had not preferred an appeal, that would operate as a bar for the revenue to prefer an appeal in another case.
The SC held that if the assessee takes the stand that the revenue acted mala fide in not preferring appeal in one case and filing the appeal in other case, it has to establish mala fides. As a matter of fact, as rightly contended by the learned counsel for the revenue, there may be certain cases where because of the small amount of revenue involved, no appeal is filed. Policy decisions have been taken not to prefer appeal where the revenue involved is below a certain amount. Similarly, where the effect of the decision is revenue neutral there may not be any need for preferring the appeal. All these certainly provide the foundation for making a departure.
The SC held that merely because in some cases the revenue has not preferred an appeal, that does not operate as a bar for the revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or is for a pronouncement by the higher Court when divergent views are expressed by the Tribunals or the High Courts.
The contention of the Assessee was rejected.
CIT v. J.K. Charitable Trust [2008] 308 ITR 161 (SC) (3J) – Learned counsel for the assessee submitted that for several years no appeal has been filed even though the factual position is the same. Even no appeal was filed against the decision in other cases. It was further submitted that several other High Courts have taken a similar view and no appeal was preferred by the revenue against any of the judgments of the different High Courts.
Learned counsel for the revenue submitted that even though appeal has not been preferred in respect of some assessment years, that does not create a bar for the revenue filing an appeal for other assessment years. Reliance is placed on a decision of this Court in C.K. Gangadharan v. CIT [2008] 304 ITR 61 (SC).
The SC observed that the factual scenario is undisputed that for a large number of assessment years no appeal has been filed. The SC farmed a basic question as to whether the revenue can be precluded from filing an appeal even though in respect of some other years involving identical dispute no appeal is filed.
The SC observed that in C.K. Gangadharan’s case (supra) it was held that merely because in some cases revenue has not preferred an appeal that does not operate as a bar for the revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher court when divergent views are expressed by the different High Courts.
In this case, it is accepted by the learned counsel for the appellant-revenue that the fact situation in all the assessment years is same. According to him, if the fact situation changes then the revenue can certainly prefer an appeal notwithstanding the fact that for some years no appeal was preferred. This question is of academic interest in the present appeals as undisputedly the fact situation is the same. The appeals of Revenue were according dismissed.