The Hindu Business Line : When in doubt

The decision to remand seems to be a combination of safe play coupled with allowing the lower authorities another opportunity to see the facts afresh

R. Anand

Bridge is a fascinating card game and avid bridge players follow a popular dictum when they defend a trump contract — when in doubt lead the trump. More often than not this is a successful play to defeat the contract. What has this got to do with tax proceedings? When a tax appeal reaches the Tribunal it is the last leg of the journey on arguing matters on facts. Missing the bus here means the assessee has nowhere else to go as High Courts decide only questions of l aw. It is in this context that presentation and dissection of facts at the Tribunal stage becomes so important. Sometimes the Bench does resort to the easy route of remanding the matter back to the assessing officer (AO) to look the facts afresh. Should this be an exception or a rule is a question that is crying for an answer.

An interesting matter on remanding by the Tribunal came up for consideration for a Third Member decision in the Zuari Leasing and Finance Corpn Ltd vs Income tax officer (2008 112 ITD 205 Delhi TM) case

Facts, decision

The asessee-company was engaged in the business of leasing and hire purchase of equipment, financing, bill discounting, loan placement, etc. It had written off certain sum as bad debt. The AO disallowed the bad debt claimed on the grounds that no books of account had been produced for verification of accounts of those debtors and that no details had been filed as to when those amounts were outstanding.

The Commissioner (Appeals) allowed part of claim. On appeal, the Accountant Member of the Tribunal held that the matter should be restored to the file of the AO to consider evidence filed by the assessee.

The Judicial Member, however, considered the matter on merits and held that the requirements of Section 36(2) of the Income-Tax Act, 1961 were satisfied. Consequently, bad debts were allowable. As there was difference of opinion between the Members of Tribunal, the matter was referred to the Third Member.

The Third Member held that there was no basis to remand the matter back to the AO and the Bench should have decided the issue on merits.

The Member made interesting observations: “It is clear from above that primary power, rather obligation of the Tribunal, is to dispose of the appeal on merits. The incidental power to remand, is only an exception and should be sparingly used when it is not possible to dispose of the appeal for want of relevant evidence, lack of finding or investigation warranted by the circumstances of the case.

“Remand in a casual manner and for the sake of remand only or as a short cut, is totally prohibited. It has to be borne in mind that litigants in our country have to wait for long to have fruit of legal action and expect the Tribunal to decide on merit. It is, therefore, all the more necessary that matter should be decided on merit without allowing one of the parties before the Tribunal to have another inning, particularly when such party had full opportunity to establish its case.

“Unnecessary remands, when relevant evidence is on record, belies litigant’s legitimate expectations and is to be deprecated. Having regard to aforesaid principle, it is necessary to look into records to see whether there is sufficient material on record to dispose of the issue on merit and there is no need to remand the issue to provide a fresh inning to the revenue.”

These observations are critical and come at a time when litigation is proving costly and time consuming.

Provisions, analysis

Section 254 of the Act requires the Appellate Tribunal to pass such orders as it thinks fit after giving both parties to the appeal an opportunity of being heard. One of the ways of passing an order is to remand the matter to the lower authorities.

The power to remand is contained in Rule 208 of the Income-Tax (Appellate Tribunal) Rules 1963 which refers to the circumstances in which the Tribunal can remand an issue to the lower authorities.

The said rule states that where the Tribunal is of the opinion that the case should be remanded, it may remand it to the authority from whose order the appeal has been referred or to the income-tax officer, with such directions as the Tribunal may think fit. While the law and the rules do provide the mechanism to exercise the power of remand the key question is how frequently and in what circumstances should this be resorted to.

While the Members on the Bench may take a unified stand on the issue of remand here is a case where there was a difference of opinion among the Members on the decision to remand itself. In Coca Coal India vs ITAT (2007 290 ITR 464) the Mumbai High Court held that the expression “pass such orders as it thinks fit” in Section 254 is though wide enough to include the power of remand, such power can be exercised only if it is necessary to decide the issues which are the subject matter of the appeal.

In M. G. Shahani and Co (Delhi) Ltd vs Collector of Central Excise (1994 73 ELT3 SC) the apex court held that “the Tribunal has adopted an easy course of remanding the matter to the Collector when it could have decided the same.

The remand was superfluous when the parties have argued the matter at length and relevant material for decision was available on record. The CEGAT should have itself analysed the evidence and given a factual conclusion.” The subject of remand cannot be understood better than the thoughts expressed by the highest court of the land.

Reverting to the game of bridge, the question of remand is not merely one of law but one of doubt. With so many varied nature of cases to be decided by the Tribunal, to what extent can be Bench be pouring over facts which in all fairness should have been presented and discussed before the lower authorities.

When a doubt arises as to whether to decide or to remand the matter, for the sake of speed and safety, there is a tendency to go for the latter route to expedite disposal. The defender of a contract leads the trump purely as a safe play and to avoid criticism from his partner.

The decision to remand seems to be a combination of safe play coupled with allowing the lower authorities another opportunity to see the facts afresh. In today’s fast changing scenario litigation has become a cross-border affair. Should the Tribunals be still deciding on matters relating to remand or focus on more critical substantive issues?

(The author is Partner, Global Tax and Advisory Services, Ernst & Young.)

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