To Appeal or To Writ?
High Court Terrain
Income Tax is a field of law which sees one of the heaviest volumes of litigation in India. In order to extract the most relevant insights from a humongous data set like this, categorisation becomes a very important tool. We decided to categorise the tax litigation at the High Courts in India at the most basic level – What type of cases are making it to the penultimate judicial forums of the country? Demarcating on the basis of HC jurisdiction left us with two distinct categories:
- Appeals (including references and the like)
- Writ petitions
A closer analysis of the data from these two types of cases revealed a story which follows.
A Tale by Numbers
We took a look at the litigation numbers for the High Courts in the last 3 years (2016, 2017 and 2018). The general trend across the country showed that for every 100 tax cases, around 94 are appeals and 6 are Writs.
As can be seen from the data above, Delhi HC is one of the most writ friendly courts in matters of Tax in the nation, with almost 17% of its total tax cases being Writs. This is a full 11% more than the national average. No other court had a deviation of more than 3% from the national average in terms of number of writs.
To Writ, Or Not to Writ?
The graphical analysis above reveals that sections extracted for Tax Appeals dealt mostly with substantive provisions of the income tax act (suggesting that most appeals were filed on merits), the Writ Petitions show a marked tilt towards procedural sections being the main bone of contention. Apart from MAT, most writs deal with procedural issues of refund and scrutiny assessment (including issue of notice).
Lessons from History
Most cited cases at the HCs in Tax Appeals
PCIT vs. Softbrands (2018, Karnataka High Court)“Any inclusion or exclusion of comparables per se cannot be treated as a question of law unless it is demonstrated to the Court that the Tribunal or any other lower authority took into account irrelevant consideration or excluded relevant factors in the ALP determination that impact significantly.”
Citations: 300+, Last Cited in: 2018, Subject: Transfer Pricing
CIT vs. Tata Elxsi (2011, Karnatak High Court)“When the statute prescribes a formula and in the said formula, ‘export turnover’ is defined, and when the ‘total turnover’ includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover.”
Citations: 180+, Last Cited in: 2018, Subject: Export Turnover
Most cited cases at the HCs inWrit matters
PCIT vs. Nikki Drugs and Chemicals (2015, Delhi HC)“The controversy whether it is necessary for the assessing officer of the searched person to record his satisfaction that the assets/documents seized belong to the assessee other than the searched person is no longer res integra. It is settled that recording of such satisfaction is sine qua non for commencing any proceedings under Section 153C of the Act.”
Citations: 20+, Last Cited in: 2018, Subject: Search & Seizure
CIT vs. Usha International (2012, Delhi HC)“Thus if a subject matter, entry or claim/deduction is not examined by an Assessing Officer, it cannot be presumed that he must have examined the claim/deduction or the entry, and therefore, it is the case of change of opinion . When at the first instance, in the original assessment proceedings, no opinion is formed, principle of change of opinion cannot and does not apply.”
Citations: 12+, Last Cited in: 2019, Subject: Reopening of Assessment
When to Writ? – Courts Say
As we saw in the in data analysis above, Writs are mostly preferred if the assessee wants to challenge a seemingly egregious error on part of the Revenue or a highly perverse finding by the authorities.
The HCs have distilled out quite clearly the principles regarding when a writ can be preferred in a matter, as against availing remedies available in the normal course of proceedings. Here are a few examples –
Dev Bhoomi Industries vs. CIT, Himachal Pradesh HCA Writ Court should not entertain the writ petition and it is only in rare cases where the ordinary process of law appears inefficacious that the Writ Court may interfere even when other remedies are available.
Dev Bhoomi Industries vs. CIT, Himachal Pradesh HCWhere the assessee challenges order of the Tribunal in an appeal as well as in writ petition simultaneously, in such circumstances, the writ petition would not be maintainable.
Virbhadra Singh vs. DCIT, Himachal Pradesh HCRestriction of not entertaining a writ petition, when an efficacious and alternate remedy is available, is self imposed.
Tata Steel Lld. vs. Union Of India, Jharkhand HCA writ petition can be held to be maintainable even if an alternative remedy is available to an aggrieved party where the court or the tribunal lacks inherent jurisdiction or for enforcement of a fundamental right; or if there had been a violation of a principle of natural justice; or where vires of the Act were in question.
The most immediate attraction of choosing the writ route lies in the fact that through the intervention of a writ court, a potential adverse assessment can be forestalled even at the notice stage. However, a writ court is unlikely to admit a challenge which requires the court to consider disputed facts and evidence needed for determination of applicability of a substantive charging section. Further, the analysis above indicates that Delhi High Court receives a higher number of tax related writ petitions compared to the other High Courts. The difference in number could be due to fact that tax lawyers feel more encouraged to move tax related writs in Delhi High Court because the judges of that court, given the territorial jurisdiction over the capital, encounter significant number of writ petitions in general. Do reach out to Riverus at firstname.lastname@example.org if you wish to find out tailor made legal data points which could help you in the specific facts of your case.
Also Read: Case study: PCIT vs. NRA Iron and Steel