Awarding Cost of any appeal by the Income Tax Appellate Tribunal [Section 254(2B)]

Section 254(2B) gives discretion to the Tribunal in the matter of awarding of costs of any appeal. However, no rules have been laid down for the exercise of such power

Text of Section 254(2B)

^[1][(2B) The cost of any appeal to the Appellate Tribunal shall be at the discretion of that Tribunal.]

KEY NOTE

1.  Inserted by Finance Act, 1999 with effect from 01.06.1999

Section 254(2B) was inserted by Finance Act, 1999 with effect from 01.06.1999, which provides: “The cost of any appeal to the Appellate Tribunal shall be at the discretion of that Tribunal”.

Of course, law confers discretion on the Tribunal / Courts, but it cannot be exercised arbitrarily. As stated in Halsbury’s Laws of England, (para 15, Vol. 10, 4th Edn. (Reissue)

“This discretion must be exercised judicially; it must not be exercised arbitrarily but in accordance with reason and justice”. Decision in this regard must be based on reasons expressed in the judgment indicating that the enormous practical consequences resulting from such exercise have been considered.

The normal practice is that the Courts award costs on the litigating parties for defaults in the course of hearing of appeals and not on the persons who appear as representatives of such parties. The representatives can be hauled up for their personal misdemeanours by way of contempt by the authorities, who have power of punishment for contempt. Awarding of cost on the Department under s. 254(2B) due to various adversities caused by the Department without proper justification to the assessee, like :

(i)      refusal of admission of additional evidence under rule 46A though the remand report was called from the Assessing Officer.

(ii)     non-consideration of detailed submissions filed by the assessee and number of documents filed in the paper book.

(iii)    ignoring the non-advertence to the assessee’s explanations and submissions and passing a summary order rejecting the assessee's claims.

Assessee sought award for cost of filling instant appeal on account of revenues' negligence in misinterpreting nature of return, since appeal of assessee had been disposed under faceless regime, revenue could not be made responsible in said situation and thus, no cost could be granted to assessee

The assessee filed its original return of income for the assessment year 2019-20 on 30.10.2019. Thereafter the assessee revised the return on 15.01.2020, which was considered by the CPC as original return and accordingly, it denied the current year loss of Rs. 3,51,811/-. These losses comprised a bonus of Rs. 3,20,000 and interest of Rs. 31,811. On appeal, the Commissioner (Appeals) confirmed said order. On second appeal:

Assessee incurred cost to correct mistake undertaken by revenue in not understanding fact that return of income filed on 15.01.2020 was not original return but revised return - It prayed to this tribunal to award cost of filling this appeal. Since, appeal of assessee had been disposed under faceless regime contention that officer should be made responsible could not be accepted, where personal contact was avoided and therefore, no prejudice was caused to assessee. Judgement based on set of facts understood by CIT(A) while discharging duty, action might have caused some hardship to assessee due to error of judgement but that does not warrant levy of cost on Department. Therefore, there was no merit in argument of assessee to award cost. [In favour of revenue] (Related Assessment year : 2019-20) – [Khadi Grammodhyog Prathisthan v. Assistant Director of Income-tax, CPC (2024) 158 taxmann.com 517 (ITAT Jodhpur)]

Refuses levy of cost absent malafide, though CIT action caused hardship - Commissioner passed a revisional order setting aside assessment, said order being judicial/quasi judicial in nature, even if it was found non-sustainable later on, assessee's claim for awarding cost under section 254(2B) against said order was to be rejected

The issue raised by assessee relating to awarding of cost on the department under section 254(2B), no doubt, in the instant case, the assessee has relied on two decisions of the Bombay High Court and the Commissioner instead of deciding the issue himself restored the issue to the file of the Assessing Officer with a direction to re-examine the issue of claim of depreciation on fixed assets claimed by the assessee to the extent permissible under the Act. While doing so, he relied on the decision of the Supreme Court in the case of Rampyari Devi Sarogi v. CIT (1968) 67 ITR 84 (SC) where it has been held that since the assessee is getting an opportunity of being heard, no prejudice is caused to the assessee if the order is set-aside. Now the assessee has come up for awarding cost under section 254(2B). The identical ground was taken by the assessee in other appellate proceedings and the co-ordinate Bench of the Tribunal has rejected the claim of award of cost.

ITAT observed that “CIT has passed an order u/s.12AA(3) of the Act during the course of discharge of her duty as CIT. While discharging her duty, her action might have caused some hardship to the assessee due to error of judgement but that in our opinion does not warrant levy of cost on the department.”

ITAT referred to Supreme Court ruling in Pooran Mal v. Director of Inspection (Investigation) (1974) 93 ITR 505 (SC). In that case, it was observed that it caused serious invasion of the privacy of a person. But SC held that “even though the innocent is likely to be harassed by a raid for the purpose of search and seizure that cannot be helped”, noted ITAT. Further, ITAT noted that “In the instant case, there is no such action of search and seizure which causes serious invasion in the privacy of the person. The Commissioner was discharging her quasi-judicial duty. Further, there is nothing on record to suggest that the action of the CIT was malafide.” Also, ITAT distinguished the rulings relied by assessee on facts.

The various decisions reiled on assessee relate to levy of cost by the courts against adminstrative orders and not against judicial/quasi judicial orders. In this view of the matter and following the order in assessee's own case this ground of appeal raised by the assessee is dismissed. [In favour of revenue] (Related Assessment years : 2004-05, 2005-06 and 2008-09) – [Parkar Medical Foundation v. DCIT, Ratnagiri (2015) 153 ITD 297 : 55 taxmann.com 268 : [TS-469-ITAT-2014(PUN)] (ITAT Pune)]

Departmental Representative (DR) without filing an application in advance seeking adjournment of matter, remained absent on pretext of marriage ceremony of his nephew, since said attitude of DR caused obstruction of justice, a token cost of Rs. 500 was to be imposed on absentee DR

At time of hearing of revenue's appeals, Departmental Representative was not present - DR even failed to apply adjournment in advance and inform opposite parties who had come prepared from various outstations - Subsequently, DR appeared and explained his absence as being busy with marriage ceremony of his nephew - It was undisputed that marriage ceremony was fixed well in advance and due intimation was to be given if DR had to proceed on a planned leave. Since attitude of DR caused obstruction of justice, a token cost of Rs. 500 was to be imposed on absentee DR. (Related Assessment years : 2005-06 and 2008-09) – [ACIT, Faridabad v. Laksons Footwear (P) Ltd. (2014) 63 SOT 189 : (2013) 40 taxmann.com 140 (ITAT Delhi)]

ITAT imposes cost of Rs. 1000 on CIT(DR) deductible from salary for contemptuous actions, behaviour & utterances

Before we proceed with the adjudication of appeal, it is very crucial to dwell upon the unbecoming conduct of the ‘D’ Bench in-charge CIT (DR). When the Bench set for hearing at 10.30AM on 20.11.2013, to our surprise, none of the DR was present in the courtroom. It may be worthwhile to mention that about 33 appeals were fixed for hearing. With the current pendency an adjournment takes about 4 to 5 months' period for fixation of any appeal for next hearing in normal course. Thus the situation before us as it stood, neither any DR was present in the courtroom nor any application for adjournment from the revenue's side. We could not have allowed to crash the Bench, therefore, in public interest and interest of justice, Bench continued first with the adjournment applications filed by the assessees and thereafter to proceed with further hearing of the remaining appeals.

After adjournment motion this matter was called out. Since none of the DRs including the in-charge of the Bench CIT (DR) was present, the matter was passed it over and the Bench continued with proceedings of other cases.

At about 10.50 AM CIT(DR) entered the courtroom in a huff and gave a vague reason for his absence that he was held up some where. Observing that Shri D.K. Mishra is now present, this 263 matter, which was to be argued by him was called out.

Ld. Counsel for the assessee contended that the issue in question is squarely covered by ITAT order in its own case for Assessment year 2005-06 wherein the ITAT vide its order dated 13.04.2012 rendered in ITA no. 5023/Del/2011 has deleted the penalty levied under section 271(1)(c) of the Act on the same set of facts namely, in respect of claim of disputed rate of depreciation.

CIT(DR) straightway replied that he has not seen the file and not prepared the case. He was reminded that being CIT (DR), In-charge of the Bench it was not fair on his part to come late without intimation; do not read the file; not apply for the adjournment and make the whole process come to stand still. CIT(DR) then asked for more time to go through the file. In the interest of justice the Bench was kind enough to grant him time to go through the file. In the meanwhile the case of M/s Laksons Footwear P. Ltd. was also proceeded ex parte qua the department, as the Sr. DR was also not present and there was no adjournment application. It may be pertinent here to mention that vide order dated 20-11-2013 the Bench has expressed its displeasure towards the DR’s of “D” Bench. After reading the file, CIT(DR) offered himself for the arguments.

The merits of the appeal will be dealt in subsequent paras. After the assessee completed the arguments CIT(DR) replied to it. However, he wanted to cite the case laws whose names or citations neither he remembered nor had the copies of the citation. He contended that they will be filed in a day or two. It was pointed out to him that it is not fair on his part not to remember the cases, the exact citation and the proposition laid down by these judgments. It was not a fair way to argue that the case laws not remembered by him will be submitted subsequently. He was told that in this situation how the assessee's counsel will counter the case laws which are not being given, nor properly represented and cited. It will not be possible to allow him time to file list, gist and citations of case laws subsequent to hearing which are neither heard by us nor put up to assessee for reply thereon.

At this juncture CIT(DR) in a malicious and contemptuous manner alleged that the “Bench is hurrying the justice and burying the justice”. Such type of unprovoked utterances from a Commissioner of Income Tax, who is the “D” Bench incharge officer from the Revenue’s side came as a shock to the Bench and cannot be taken lightly. It appears that CIT(DR) is not aware of his responsibilities, court discipline, procedure and proper court mannerism. His accusation on the Bench that it was hurrying justice and burying the justice is totally irresponsible, contemptuous and malicious allegation and totally against the glaring facts and proceedings which happened in the open court.

Out of 33 appeals that were listed, the Bench had granted adjournments in 31 cases mainly at the request of the ld. D.R., though the half heartedly written adjournments were filed by the department at about 11.30 AM on that day, which itself was against the prescriptions of ITAT Rules 1963. This demonstrates that Bench was kind and tolerant to the department despite these glaring irregularities. On one hand Bench tried to help and redeem the objectionable situation in which the department was put by CIT(DR) i.e. being not present in the court room, not filing any adjournment applications and least of all not putting any representative to explain all these anomalies. On the other hand to cover up his fallacies Shri Mishra ventured to pounce on the court by making such false, malicious and contemptuous allegations.

CIT(DR) was told that it was not the Bench which was hurrying or burying the justice but it was he who was obstructing the process of dispensation of justice. At the first instance he comes late in the Bench, does not come prepared with the case files, makes the entire court room and litigants wait without justification. The Bench showing kindness and in the interest of justice passes over the matter, after coming the CIT (DR) without remorse, says that he was held up and not studied the files, some time may be given, which was also given. Thereafter he was not in a position to cite the case laws and wanted to press his insistence that he will name, cite and give the proposition of case laws later on. He was clearly told that it is not the Bench which was hurrying or burying the justice but rash and contemptuous conduct of Shri Mishra which was obstructing the sacrosanct object of dispensation of justice. His contemptuous behaviour was proposed to reprimanded and fit to be visited with cost and appropriate consequential action.

In view of the foregoing facts and circumstances we find CIT(DR)’s total behaviour as unfortunate, contemptuous and condemnable and deserves to be visited with appropriate action to inculcate sense of judicial discipline and awareness of responsibilities of duties and further to protect the dignity of the court, which stands offended by the contemptuous conduct of CIT(DR). CIT(DR) was then reminded that his allegations are unbecoming and may be visited with costs. Mr. Mishra did not say anything in reply.

After the Bench rose and retired to the Chamber of Sr. Member for discussion of the heard cases and signing of the judicial proceedings, CIT(DR) barged into the Chamber of Sr. Member without asking permission and threatened that the Bench has insulted him and that he is going to lodge complaint.

In order to pacify, he was offered to sit and have a cup of tea which the Members of the Bench were sharing. He did not show any response to this kind gesture being extended by the Members of the Bench. Looking at his hostile demeanour he was told that it was not permitted to enter in the Chamber of the Judges without intimation and hurl such threats of complaint to intimidate the bench. In our view his over all actions, behaviour and utterances amount to contempt of court. Any party to the litigation has no authority to enter the Judge's room without permissions and endeavour to intimidate and put up such threats.

In view of the entirety of facts and circumstances we have no hesitation but to impose costs of Rs. One thousand on the delinquent CIT (DR) which should be deducted from his salary. The Registry is directed to forward the copies of this order to CIT(DR)-I, CCIT In-charge; Chairman CBDT for record purpose and take appropriate action including placing the observations in his service record at their end.

Separate and appropriate action for initiating contempt of court proceeding will be taken in due course after giving CIT(DR) adequate opportunity of being heard. It may be further mentioned that despite Bench’s direction that no cognizance of case laws being filed by the ld. CIT(DR) subsequent to the hearing will be considered, the audacious CIT(DR) vide letter dated 21.11.2013 without permission has filed the case laws with the Bench Clerk. Same will not be considered as being in the defiance of the court's direction coupled with the fact that the assessee could not be heard on the same post closure of hearing. – [Lala Harbhagwan Das & Memorial & Dr. Prem Hospital (P) Ltd. v. CIT, Karnal (2014) 62 SOT 199 : 29 ITR(T) 316 : (2013) 40 taxmann.com 150 (ITAT Delhi)]

Assessing Officer and Commissioner (Appeals) were performing their statutory function, no cost could be imposed on department under section 253(2B) for difficulties faced by assessee on account of their action

Assessee prayed awarding of cost on department under section 254(2B) due to various adversities caused by department without proper justification to assessee. Since Assessing Officer and Commissioner (Appeals) were performing their statutory functions, no case for imposition of any cost was made out. [In favour of revenue] (Related Assessment years : 2002-03, 2003-04, 2005-06 and 2006-07) – [Russian Technology Centre (P) Ltd. v. DCIT (2013) 155 TTJ 316 : 145 ITD 88 : 37 taxmann.com 400 : 25 ITR(T) 521 (ITAT Delhi)]

Assessee contended for imposing suitable cost on revenue since it had been unnecessarily put to hardship and unnecessary litigation by raising demand exceeding Rs. 3 crore - As orders were passed by Assessing Officer while performing statutory duties, it was not fit case for levy of cost since he was doing his statutory duty while adjudicating matter - In instant case Commissioner (Appeals) had expressed only judicial opinion which might not be correct but that did not call for levy of cost

The ld. counsel of the assessee submitted that the assessee has been unnecessarily put to hardship by way of raising a demand in excess of Rs. 3.00 crore and unnecessary litigation by the Department. Therefore, suitable cost should be imposed on the revenue. On the other hand, the ld. DR for the revenue submitted that the Assessing Officer was doing his duty while adjudicating the matter and therefore, no cost should be imposed. Further no cost can be possibly imposed on the appellate authority. Therefore, this is not a fit case for levy of cost.

We have heard the rival submissions carefully and agree with the ld. DR for the revenue that the orders have been passed while performing the statutory duties by the Assessing Officer and therefore, it is not a fit case for levy of cost. The appellate authorities normally express their judicial opinion and therefore, opinion expressed by the ld. CIT(A) in this case also remains only a judicial opinion. His judicial opinion may not be correct but that does not call for levy of cost. Hence we decline to accept the request that the cost should be imposed on the revenue.

However, we would like to take this opportunity to bring to the notice of CBDT that after the procedure of Central processing of returns, many issues have come before various forums where unnecessary demands have been raised due to non-grant of TDS, wrong computation of income, adjustment of the previous year demand which have already been deleted by the jurisdictional assessing officer. Therefore, we would like to urge the CBDT to take up this matter urgently and establish proper coordination between the assessing authority and Central Processing Authority so that these problems are immediately solved and unnecessary litigation can be avoided. Copy of this order should be forwarded to the Chief Commissioner of Income-tax, Chandigarh and Chairman of CBDT for necessary action. [In favour of revenue] (Related Assessment year : 2009-10) – [Ambala Central Co-operative Bank Ltd. v. ITO, Ambala (2012) 52 SOT 233 : 21 taxmann.com 443 (ITAT Chandigarh)]

ITAT awards compensation to assessee under section 254(2B) for harassment by Income Tax authorities

Income Tax department had imposed penalty on the assessee for violation of theprovisions of section 269-SS and 269-T.  Assessee argued that penalty was levied despite circular issued by Chief Commissioner and three judgments of the Tribunal in favour of the assessee, which were ignored by Income Tax authorities.

Accepting arguments of the assessee, Pune bench of ITAT observed that assessee was subjected to harassment by Income Tax authorities, which was not warranted.  Accordingly, ITAT held that Income Tax department would be required to compensate assessee for harassment as per section 254 (2B). Accordingly, ITAT awarded compensation of Rs 5,000. [In favour of assessee] (Related Assessment year : 2006-07) – [Shramjivi Nagari Sahakari Pat Sanstha v. Additional Commissioner of I ncome-tax, Pune [TS-267-ITAT-2011(PUN)] – Date of  Judgement : 08.06.2011 (ITAT Pune)]