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Constitutional powers and Appeals to the Supreme Court

Chapter IV of Part V of the Constitution of India (the Constitution) deals with the Union Judiciary. Chapter IV starts with Article 124 and ends with Article 147.

Before we try to understand the provisions of appeal to the Hon’ble Supreme Court under the Income tax Act, 1961 (the Act) let us go through some of the very important provisions relating to constitutional powers of the Supreme Court.

For the enforcement of any of the Fundamental Rights, the Supreme Court shall have power to issue directions/orders/writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, [Refer Article 32 of the Constitution]

The Supreme Court has original jurisdiction. Original jurisdiction of the Supreme Court (i.e. first appellate authority) relates to any dispute involving any question of fact/law on which the existence /extent of a legal right depends between the Government of India vs State/States or State vs State as per Article 131.

Appellate jurisdiction of Supreme Court (i.e. appellate authority other than being first appellate authority) in appeals from High Court arises in following circumstances:-
i) in certain cases involving a substantial question of law as to the interpretation of the Constitution [Refer Article 132]
ii) in a civil proceeding and that the case involves a substantial question of law of general importance and that in the opinion of the High Court the said question needs to be decided by the Supreme Court [Refer Article 133].
iii) in a criminal proceeding and that the High Court has on appeal reversed an order of acquittal of an accused person and sentenced him to death or has withdrawn for trial before itself any case from any court subordinate to its authority and has in such trial convicted the accused person and sentenced him to death [Refer Article 134].

Every High Court if it deems fit so to do on its own motion and on oral application by the aggrieved party shall determine the question whether a certificate to prefer appeal before the Supreme Court to be given in respect of that case or not. [Refer Article 134A] Where the High Court refuses to certify a case to be fit for appeal to the Supreme Court, an application may be made under Article 136 of the Constitution seeking for special leave to appeal against the decision of the High Court.

The Supreme Court shall be a court of record and shall have all the powers of such a court including the power to punish for contempt of itself. [Refer Article 129] This power to punish for contempt is also for all Courts/Tribunals subordinate to it. [101 Taxman 382 (SC)] The law declared by the Supreme Court shall be binding on all courts within the territory of India. [Refer Article 141] The Supreme Court shall have all power to make any order for the purpose of securing the attendance of any person, the discovery/production of any documents, or the investigation or punishment of any contempt of itself. [Refer Article 142]

Article 136 deals with Special leave to appeal to the Supreme Court. Clause (1) of Article 136 says notwithstanding anything in this Chapter the Supreme Court in its discretion may grant special leave to appeal from any judgment/ decree/ determination/ sentence/ order in any cause/matter passed/made by any court/tribunal in the territory of India and clause (2) of the said Article says clause (1) shall not apply to any judgment/ decree/ determination/ sentence/ order in any cause/matter passed/made by any court/tribunal constituted by or under any law relating to the Armed Forces.

An aggrieved party may move the Supreme Court through special leave petition (SLP) but it cannot be equated with a right to appeal. It is an extraordinary, residual, discretionary privilege with which the Supreme Court is vested. This power will not be exercised unless it is shown that exceptional and special circumstances exist and substantial and grave injustice has been done. Judgment/order of the High Court continues to be final and binding even when the SLP is filed, when SLP is granted then the judgment/order is put in jeopardy though binding between parties unless specific order suspending the judgment is passed. Where SLP is rejected with reason, it might be taken as finality of the judgment of the High Court. Even if good grounds are exhibited in SLP, the Supreme Court can still in its discretion refuse to grant SLP as alternative remedy under Article 226/227 is available against the order of the Authority for Advance Rulings.

Now coming to the Income tax Act, 1961(the Act) an appeal shall lie to the Supreme Court from any judgment of the High Court in any case which the High Court certifies to be a fit one for appeal to the Supreme Court. [Refer section 261 of the Act]. The provisions of the Code of Civil Procedure, 1908, as they apply in the case of appeals from decrees of a High Court, shall apply relating to appeals to the Supreme Court. Where the judgment of the High Court is varied/reversed in the appeal, effect shall be given to the order of the Supreme Court in the manner provided in section 260 of the Act. [Refer section 262 of the Act]. The Supreme Court shall deliver its judgment on the question of law raised and a copy of the judgment shall be sent to Appellate Tribunal which shall pass orders to dispose of the case in conformity to such judgment. [Refer section 260 of the Act].

Section 260B of the Act requires that case before High Court to be heard by not less than two judges and the judges decide by majority. Where there is no majority, the point of law upon which they differ and the case shall then be heard upon that point only by one/more of the other judges of the High Court and decision taken by majority judges prevails. The significance of existence of the provision of section 260B of the Act is that, no appeal shall lie to the Supreme Court from the judgment, decree or final order of one Judge of a High Court in view provisions of Article 133(3) of the Constitution.

In view of provisions of section 268A of the Act, the CBDT may issue orders/ instructions/ directions to other income tax authorities fixing monetary limit for regulating filing of appeal/application for reference by any income tax authority.

The SLP/an appeal against the judgment of High Court has to be filed before Supreme Court within 90 days from the date of judgment/order of the High Court. In case an application for grant of certificate of fitness under section 261 of the Act is made, the limitation of file SLP/Civil Appeal is 60 days from the date of disposal of the application. The orders of the High Court can be downloaded from websites such as www.indiancourts.nic.in or www.courtnic.nic.in where link of all High Courts are provided and preparatory work relating to filing of SLP/appeal may be started without waiting for the certified copy of the order. Since various authorities/agency get involved in preparation of an SLP/appeal it is extremely important to get the work done within a timeline by each one involved in the matter. Any delay at one level will impact the time of subsequent level(s) similar to that of a relay race. The authorities/agency that normally get involved in the matter includes CIT>>CCIT>>DIT (L&R)>>Member (A&J), CBDT>>Advice Section of Ministry of Law>>Central Agency Section>>Law Officer>> Drafting Counsel >>Additional Solicitor General. Many a times the file shuttles between authorities for view/comment/vetting/ opinion/ approval before it reaches finality.

Where however the SLP is filed by the assessee and the Supreme Court directs issue of notice on the SLP filed by the assessee then the Registry of the Supreme Court serves the notice along with a copy of the SLP to the respondent CIT/other respondent officer directly. The CIT/such other respondent officer through his CIT should submit (i) a copy of the notice along with the paper book served by the Registry and (ii) Para wise comments on the SLP and (iii) a Vakalatnama duly executed in favour of Assistant Government Advocate, Central Agency Section, Ministry of Law to the DIT(L&R) within specified time.

An appeal to the High Court or the Supreme Court can be filed only on 'Substantial Questions of Law'. The expression 'substantial question of law' has not been defined anywhere in the Act. The Apex Court, [AIR 1962 SC 1314] and [273 ITR 50], has laid down the following tests to determine whether a 'substantial question of law' is involved or not:
a. Whether the issue directly or indirectly affects substantial rights of the parties?
b. Whether the question is of general public importance?
c. Whether it is an open question in the sense that the issue has not been settled by pronouncement of Supreme Court?
d. Whether the issue is not free from difficulty?
e. Whether it calls for a discussion for alternative views?
Perversity of facts also constitutes 'Substantial Question of Law' as it falls in (d) and (e) above. The Supreme Court [300 ITR 205] has laid down the attributes of perversity by holding that an order or finding is perverse on facts if it falls under any of the following categories:
(a) The finding is without any evidence.
(b) The finding is contrary to the evidence.
(c) There is no direct nexus between the conclusion of fact and primary fact upon which that conclusion is based?
(d) When an authority draws a conclusion which cannot be drawn by any reasonable person or authority on the material and facts placed before it.

The CIT can prefer appeal to the Supreme Court only in those income tax cases where “tax effect” exceeds Rs.25 lakhs. This monetary limit shall not apply to writ matters or in the case of other direct taxes or where “tax effect” is not quantifiable or not involved. The CIT may take decision to file appeal in such cases on merits of a particular case. Where however in a case, any provisions of the law (Act/Rule/CBDT’s Order/Notification/Instruction/Circular) is under challenge as regards to Constitutional validity/ultra vires, or Revenue Audit objection has been accepted by the Department, irrespective of the “tax effect” it has to be challenged. It has to be noted that where no appeal has been preferred for reason of “tax effect” being less than the specified monetary limit no inference should be drawn that the decisions rendered therein were acceptable to the Department. Therefore such cases do not have any precedent value.

129
srips1962 on May 09 2015 20:15:06

Very enlightening article. This has cleared many of my doubts. I have been involved in preparing SLP proposals for over a decade without knowledge of basic issues. I stand better placed now. Thanks Timir Haran Sir

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