Commissioner of Income Tax vs Neyveli Lignite Corporation Ltd.

P.P.S. Janarthana Raja, J.—These appeals are filed u/s 260A of the Income Tax Act, 1961, by the revenue, against the order of the Income

Tax Appellate Tribunal, Bench ""B"", Chennai in I. T. A. Nos. 1763 and 1764(Mds)/2004 dated 7-6-2005, raising the following common

substantial question of law:

Whether, on the facts and circumstances of the case, the Tribunal was right in holding that for the purpose of computation of limitation to pass

order of revision by the Commissioner u/s 263, the date of dispatch of the order had to be taken into account and setting aside the revision

proceedings of the Commissioner of Income Tax u/s 263 ?

The present tax cases are filed against a public sector undertaking. When the matter came up on 18-6-2007, standing counsel appearing for the

revenue requested for adjournment to find out whether the revenue had obtained clearance from the High Powered Committee for prosecuting the

present appeals. Hence the matter was adjourned and taken up today. Even today, counsel is unable to state whether the revenue has filed

necessary application for obtaining clearance from the High Powered Committee, or not.

The Supreme Court, in the case of Oil and Natural Gas Commission v. CCE (1995) Supp 4 SCC 541 , held that when there is a dispute

between a Government department and a public sector undertaking, the matter should be referred to the High Powered Committee for clearance.

Further it was also held that no litigation shall come to the court or to a Tribunal without the matter having been first examined by the Committee

and its clearance for litigation. In the case of Mahanagar Telephone Nigam Ltd. Vs. Chairman, Central Board, Direct Taxes and Another, , the

Supreme Court held as follows (page 652):

Undoubtedly, the right to enforce a right in a court of law cannot be effaced. However, it must be remembered that courts are overburdened with a

large number of cases. The majority of such cases pertain to Government departments and/or public sector undertakings. As is stated in Chief

Conservator of Forests, Govt. of A.P. Vs. The Collector and Others, it was not contemplated by the framers of the Constitution or the CPC that

two departments of a State or Union of India and/or a department of the Government and a public sector undertaking fight a litigation in a court of

law. Such a course is detrimental to public interest as it entails avoidable wastage of public money and time. These are all limbs of the Government

and must act in co-ordination and not confrontation. The mechanism set up by this Court is not, as suggested by Mr. Andhyarujina, only to

conciliate between Government departments. It is also set up for purposes of ensuring that frivolous disputes do not come before courts without

clearance from the High Powered Committee. If it can, the High Powered Committee will resolve the dispute. If the dispute is not resolved the

Committee would undoubtedly give clearance. However, there could also be frivolous litigation proposed by a department of the Government or a

public sector undertaking. This could be prevented by the High Powered Committee. In such cases, there is no question of resolving the dispute.

The Committee only has to refuse permission to litigate. No right of the department/ public sector undertaking is affected in such a case. The

litigation being of a frivolous nature must not be brought to court. To be remembered that in almost all cases one or the other party will not be

happy with the decision of the High Powered Committee. The dissatisfied party will always claim that its rights are affected, when in fact, no right is

affected. The Committee is constituted of highly placed officers of the Government, who do not have an interest in the dispute, it is thus expected

that their decision will be fair and honest. Even if the department/ public sector undertaking finds the decision unpalatable, discipline requires that

they abide by it. Otherwise the whole purpose of this exercise will be lost and every party against whom the decision is given will claim that they

have been wronged and that their rights are affected. This should not be allowed to be done.

In this case this is absolutely what has happened. The appellants wanted to approach the court only against a show-cause notice. It is settled law

that against a show-cause notice litigation should not be encouraged. The decision of the High Powered Committee, set out hereinabove, merely

emphasizes the well settled position. It is an eminently fair and correct decision. The purpose of the decision was to prevent frivolous litigation. No

right of the appellants is being affected. It has been clarified that the appellants could move a court of law against an appealable order. By not

maintaining discipline and abiding by the decision the appellants have wasted public money and time of the courts. The clarificatory order, relied on

upon by Mr. Andhyaru-jina, clarifies in paragraph 5 as to what is to happen if clearance is not given by the Committee. It is set out that in the

absence of clearance the proceedings must not be proceeded with. This position is further clarified in Chief Conservator of Forests'' case (2003) 3

SCC 472 where again this Court has held that the decision taken by such a Committee is binding on all departments concerned and it is the stand

of the Government.

In view of this settled law, which is binding on us, we hold that as clearance has not been given to the appellants these proceedings cannot be

proceeded with. The High Court was wrong in dealing with the merits of the matter. We, therefore, do not examine whether the High Court was

right on the merits. The appeal accordingly stands disposed of with no order as to costs.

Applying the above principles, the present tax cases filed by the revenue are not maintainable. Accordingly, the tax cases are dismissed.

Consequently, M. P. No. 1 of 2007 in T. C. (A) No. 693 of 2007 is closed. No costs.

However, if the revenue obtains clearance from the High Powered Committee, the revenue is at liberty to move the matter to this Court for

reviving the above tax cases.