By TIOL News Service

MUMBAI, APRIL 27, 2018: THE ISSUE IS - Whether if the counsel for the Revenue continues to argue on certain issues without taking proper Instructions from Revenue which has already closed the case, amounts to harassment of taxpayer. YES IS THE ANSWER.

Facts of the case:

The assessee Company filed return for relevant AY. During assessment AO held that technical know how being an intangible asset, the fee for obtaining the same was a capital expenditure. The assessee claimed sale tax exemption benefit, which was disallowed. The matter on appeal reached before the Tribunal. The Tribunal treated the technical assistance fees as revenue expenditure and restored the issue of taxability of the sale tax exemption benefit to the file of the AO for deciding afresh. Aggrieved Revenue filed appeal before the High Court. The Court inquired the Revenue regarding the status of the matter remanded back for reconsideration. The counsel for the Revenue, on instructions from the AO informed that no effect had been given to the impugned order of the Tribunal and the matter was still pending with the AO.

The assessee disputed this stand of Revenue and submitted a copy of the order passed by the AO giving effect to the impugned order of Tribunal on the issue remanded. The Court enquired counsel of Revenue as to why he shared wrong information about the status of issue remanded. He replied that AO had specifically informed him that no order had been passed consequent to the impugned order. The court directed the AO to file an affidavit pointing out the circumstances which led to his giving incorrect fact to the Counsel for the Revenue leading to unnecessary waste of time and effort. The Joint CIT submitted affidavit and pointed out that there was a misunderstanding on the part of its Counsel on instructions received from the AO. It was further submitted that the Revenue would be more careful in respect of statements made in Court. ASG requests that this matter be treated as closed.

High Court held that,

++ it has been experienced that some Counsel for the Revenue, time and again argue matters only for the sake of arguing even when the issue stands concluded or without taking proper instructions in respect of facts as existing i.e. post the passing of the impugned order of the Tribunal. If this conduct is permitted at the bar, then it would become a practice for an Advocate to make a statement, on instructions and thereafter, when the events do not turn out as desired by litigants, the Advocate will turn around and state that he had misunderstood his client. This cannot be a norm. Therefore, the message now needs to be sent, loud and clear that the Advocate must be more careful whilst making statement on instructions, as the same are accepted by the Court, without question;

++ in present case, the Counsel is appearing for the State. The responsibility of an Advocate appearing for the State is much greater to ensure that justice is done and common people/ citizens are not harassed. This conduct on the part of the Revenue's Counsel of not taking proper instructions and arguing matters as they perceive a debatable point involved, does lead to undue harassment of the tax payers;

++ many of an Advocates are fresh entrants to the bar and in due course, learn the standard expected of an Advocate. However, many of them are refusing to learn. Therefore, the CBDT could consider holding of a training programme, where leading Advocates could address the domain expert on the ethics, obligation and standard expected of Advocates before they start representing the State. This is only a suggestion and it is entirely for the CBDT to take appropriate steps to ensure that the Revenue is properly represented to serve the greater cause of justice and fair play;

++ the CBDT should lay down a standard procedure in respect of manner in which the Departmental Officer/ AO assist the Counsel for the Revenue while promoting/ protecting Revenue's cause. It has been found in most cases, atleast during the final hearing, Revenue's Counsel were left to fend for themselves and that even papers at times were borrowed from the other side or taken from the Court Records. If the mind set of the Revenue Officer changes and they attend to the case diligently till it is disposed of, only then would it be ensured that the State is properly represented. ASG and the Registry was directed to forward a copy of order to the Chairman, CBDT. It was expected that the ASG to interact and advice the CBDT in respect of the issues referred to enable proper representation by the Advocates on behalf of the Revenue.

(See 2018-TIOL-793-HC-MUM-IT)