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Report No. 115

2.9. It would thus appear at a glance that the numerous stages of appeals statutorily prescribed, inheres an in-built potentiality for delay in finalising assessment proceedings.

2.10. There is one additional reason for the delay in disposal of tax proceedings and accumulation of work not only in the High Court but especially in the Supreme Court. The Benches of Appellate Tribunal hold sittings in all the States. Against the decision of the Appellate Tribunal, as stated herein before, an application for reference to the High Court having jurisdiction over the Appellate Tribunal, can be made. Each High Court hears the reference and disposes it of in the light of its own understanding of the relevant law. High Courts are known to differ frequently from each other.

The discomfiture suffered by Members of the I.T.A.T. because of this situation is really agonising. Members of the Appellate Tribunal are liable to be transferred. When a Member sits in a bench in one State, the bench in that State is bound to decide in conformity with the law laid down by the High Court of that State. On his transfer when he is posted in another State, he is bound to decide the same point in conformity with law laid by the high Court of that other State. And if the two High Courts differ, he has to decide the same point in a contradictory manner with no regard for his own view. Certainly this would cause discomfiture.

2.11. This undesirable situation can be demonstrably established by reference to the functioning of Appellate Tribunal bench at Delhi. Couple of benches of the Appellate Tribunal hold sittings in Delhi. Different benches are assigned jurisdiction over different areas. Some benches have jurisdiction over Delhi Metropolitan area. One bench has jurisdiction over Madhya Pradesh. Another bench has jurisdiction over part of Uttar Pradesh. One bench has jurisdiction over part of Madhya Pradesh and part of Uttar Pradesh. Now, when an appeal comes before the last mentioned bench, if the appeal is from Madhya Pradesh, the decision of the M.P. High Court would be binding on the bench. If the same bench is hearing an appeal from Uttar Pradesh, the decision of Allahabad High Court would be binding on it and the two decisions may be irreconcilably contradictory. If on the same point there is decision of Delhi Court, the Appellate Tribunal is not bound by it though holding the sitting at Delhi.

This introduces a sort of functional disintegration in the application of law. The situation is attributable to a glaring lacuna in the Income-tax law in that till the matter reaches the Supreme Court, there is no intermediate judicial authority which can develop an all-India perspective with regard to the interpretation of various provisions of Direct Tax Laws. Conceptually, the Supreme Court was broadly to concern itself with constitutional questions or questions of law of general public importance. It was not to be a body for reconciling dissent between High Courts on trivial questions of law. Today it has to perform that role. When there is a difference of opinion between two High Courts, even on a minor point, the Supreme Court grants special leave to appeal for asking. A need was, therefore, felt for a long time for a body having an all India jurisdiction but at a stage lower than the Supreme Court.

2.12. Wanchoo Committee toyed with the idea of abolishing reference procedure and in its place to set up a tax court. It did not pursue the proposal further for the fear of extensive amendments needed to give effect to it. The 12th Report of the First Law Commission deals with the Income Tax Act. At that time, the Income-tax Act of 1922 was on the statute book. Dealing with the topic relevant to this Report, the commission observed that the 'existing system of appeals to the Appellate Tribunal and thereafter a reference of the High Court on a question of law either under section 66(1) or under section 66(2) of the Income-tax Act of 1922 is very cumbersome and causes unnecessary delay in the disposal of appeals so as to finalise the assessment.1

It recommended the abolition of the Appellate Tribunal and in substitution of it, recommended an appeal to the High Court from the orders of the Appellate Assistant Commissioner, both on question of facts as well as law.2 While enacting Income-tax Act, 1961, it appears that recommendation for abolition of the Appellate Tribunal itself was not accepted. The appellate Tribunal was retained simultaneously retaining the procedure of reference.

1.LCI, Twelfth Report, para. 90.

2. LCI, Twelfth Report, para. 6.

2.13. In June, 1977, the Government of India constituted what is styled as the Direct Tax Law Committee, popularly known as Choksi Committee. In its report, while dealing with the Appellate Tribunal, the Committee recommended that section 252 of the Income Tax Act should be deleted and a separate statute should be enacted to deal with the constitution and composition of the Appellate Tribunal.1 While examining the procedure of reference, the Committee took notice of the dilatory, cumbersome reference procedure which caused enormous delay in disposal of tax litigation and recommended its abolition. The Committee recommended the setting up of a Central Tax Court with all-India jurisdiction to deal with tax litigation to the exclusion of the High Courts.2 It also recommended that the proposed Central Tax Court should have benches located at important centres.

It further recommended that the persons to be inducted to man the Central Tax Court should be from amongst the persons who are High Court Judges or who are eligible to be appointed as High Court Judges. It further recommended that in the matter of conditions of service, scales of pay and other privileges, Judges of the Central Tax Court should be on par with the High Court Judges.3 It therefore recommended that the proposed Central Tax Court should be entrusted with jurisdiction to decide questions of constitutional validity of the provisions of the Tax laws or of the rules framed thereunder.4

As the proposed Central Tax Court will be a creature of a statute, it may be handicapped in dealing with the question of constitutionality of a tax statute or rules made thereunder. The then prevailing situation called for a radical change in the structure of court system dealing with tax laws. That recommendation is still not implemented. In the interregnum the situation has worsened. The pendency for the year 1984-85 may be set out for comparison with the situation presented before Choksi Committee.


Opening balance


Total for Disposal








High Courts:

(a) Reference application u/s 256(2) (cases where ITAT declines to refer)






(b) Cases u/s 260 (admitted references)






(c) Petitions u/s 261 (Certificate for appeal to SC)






(d) Writs







Supreme Court:

(a) Appeals u/s 261 (filed on certificate of High Court)






(b) Special Leave Petitions (where High Court declines to refer or in other cases)






(c) Writs







Pendency of tax appeals/petitions in the Supreme Court of Indian as on 30-6-1986

Tax appeals


Oldest pending appeal is of 1912.

Constitutional Tax matters


Oldest pending writ petition is of 1970.

1. Direct Tax Laws Committee Final Report, Chapter 6, para 11-6.7, (1978).

2. Ibid, para. 11-6.15.

3. Ibid, para 11-6.17.

4. Ibid, para II-6.18

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