Chapter XIV-A, which houses section 158AA and section 158AB, was inserted in the Income-tax Act, 1961 (‘Act’) by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984. At that time, this Chapter had only one section 158A.
Section 158A was inserted in the Act as a tool of litigation management with a view to avoiding such repetitive appeals and reference applications.
Section 158A of the Act provides that during the pendency of proceedings in the case of an assessee for an assessment year an assessee can submit a claim before the Assessing Officer or any appellate authority that a question of law arising in the instant case for the assessment year under consideration is identical with the question of law already pending in his own case before the High Court or Supreme Court for another assessment year and if the Assessing Officer or any appellate authority agrees to apply the final decision on the question of law in that earlier year to the present year, he will not agitate the same question of law once again for the present year before higher appellate authorities.
The Assessing Officer or any appellate authority before whom his case is pending can admit the claim of the assessee and as and when the decision on the question of law becomes final, they will apply the ratio of the decision of the High Court or Supreme Court for that earlier case to the relevant years case also.
There was no parallel provision for revenue to not file appeal for subsequent years where the Department is in appeal on the same question of law for an earlier year. As a result, appeals are filed by the revenue year after year on the same question of law until it is finally decided by the Supreme Court thus, multiplying litigation.
Consequently, the Finance Act, 2015 inserted section 158AA in the Act to provide that where any question of law arising in the case of an assessee for any assessment year is identical with a question of law arising in his case for another assessment year which is pending before the Supreme Court, in an appeal or in a special leave petition under Article 136 of the Constitution filed by the revenue, against the order of the High Court in favour of the assessee, the Assessing Officer may make an application to the Appellate Tribunal stating that an appeal on the question of law arising in the relevant case may be filed when the decision on the question of law becomes final in the earlier case.
Finance Bill, 2022 proposes to replace the existing section 158AA with a new and revamped section 158AB which is wider in coverage and applicability.
The aspect of litigation management is also touched upon by the Finance Minister in her Budget Speech in the following words-
“It has been observed that a lot of time and resources are consumed in filing of appeals which involve identical issues. Taking forward our policy of sound litigation management, I propose to provide that, if a question of law in the case of an assessee is identical to a question of law which is pending in appeal before the jurisdictional High Court or the Supreme Court in any case, the filing of further appeal in the case of this assessee by the department shall be deferred till such question of law is decided by the jurisdictional High Court or the Supreme Court. This will greatly help in reducing the repeated litigation between taxpayers and the department.”
Litigation management when in an appeal by revenue an identical question of law is pending before jurisdictional High Court or Supreme Court.
Section 158AA of the Act provides that where the Commissioner or Principal Commissioner is of the opinion that any question of law arising in the case of an assessee (relevant case) is identical with a question of law arising in his case for another assessment year (other case) which is pending in appeal before the Supreme Court against an order of High Court which was in favour of assessee, he may direct the Assessing Officer to make an application to the Appellate Tribunal stating that an appeal on the question of law in the relevant case may be filed when the decision on the question of law becomes final in the other case, subject to the acceptance of the same by the assessee.
If such a principle could be applied to cases where a question of law is common and where a decision of the jurisdictional High Court, on the same question of law is available, the filing of appeal in such cases can be avoided to reduce the amount of litigation.
Therefore, to provide a procedure when an appeal by revenue is pending on an identical question of law, it is proposed to insert a new section 158AB in the Act, to provide that where the collegium is of the opinion that any question of law arising in the case of an assessee for any assessment year (“relevant case”) is identical with a question of law already raised in his case or in the case of any other assessee for an assessment year, which is pending before the jurisdictional High Court under section 260A or the Supreme Court in an appeal under section 261 or in a special leave petition under article 136 of the Constitution, against the order of the Appellate Tribunal or the jurisdictional High Court, as the case may be, in favour of such assessee (“other case”), it may, decide and intimate the Commissioner or Principal Commissioner not to file any appeal, at this stage, to the Appellate Tribunal under sub-section (2) of section 253 or to the High Court under sub-section (2) of section 260A against the order of the Commissioner (appeals) or the Appellate Tribunal, as the case may be.
Further, the Commissioner or Principal Commissioner shall, on receipt of a communication from the collegium, direct the Assessing Officer to make an application to the Appellate Tribunal or jurisdictional High Court, as the case may be, in the prescribed form within sixty days from the date of receipt of the order of the Commissioner (Appeals) or within one hundred and twenty days from the date of receipt of the order of the Appellate Tribunal, as the case may be, stating that an appeal on the question of law arising in the relevant case may be filed when the decision on the question of law becomes final in the other case. The Commissioner or Principal Commissioner shall direct the Assessing Officer to make such an application only if an acceptance is received from the assessee to the effect that the question of law in the other case is identical to that arising in the relevant case, and in case no such acceptance is received, the Commissioner or Principal Commissioner shall proceed in accordance with the provisions contained in sub-section (2) of section 253 or in sub-section (2) of section 260A.
Furthermore, where the order of the Commissioner (Appeals) or the order of the Appellate Tribunal, as the case may be, in the relevant case is not in conformity with the final decision on the question of law in the other case as and when such order is received, the Commissioner or Principal Commissioner may direct the Assessing Officer to appeal to the Appellate Tribunal or the jurisdictional High Court, as the case may be, against such order.
It is also proposed that for the purposes of the proposed section, “collegium” shall comprise of two or more Chief Commissioners or Principal Commissioners or Commissioners of Income-tax, as specified by the Board in this regard.
With the introduction of section 158AB, a sunset clause is proposed to be inserted in sub-section (1) of section 158AA to provide that no direction shall be given under the said sub-section on or after 1 st April, 2022.
This amendment will take effect from 1 st April, 2022.
The provisions of the new proposed section 158AB are illustrated with the following illustration.
In order to illustrate the point, it may be supposed that a question of law (Q1)A1 has arisen in the case of an assessee (A1) and the A1 has received a favourable decision on Q1A1 from the Commissioner (Appeals). Further, in the case of another assessee (A2), where the Department’s appeal on an identical question of law (Q1)A2 is pending before the jurisdictional High Court or the Supreme Court and the collegium is of the opinion that Q1A1 and Q1A2 are identical questions of law. Then in this situation, provisions of proposed section 158AB can be invoked by Revenue to defer the filing of appeal for the decision on Q1A1 to the higher appellate authority in ITAT till a decision on Q1A2 is communicated to the Assessing Officer having jurisdiction over the assessee, A1. Such a decision on deferment will be subject to acceptance by assessee A1 that the question of law in his case Q1A1 is identical to Q1A2 in the case of assessee A2.
For this purpose, Clause 51 and Clause 52 of the Finance Bill, 2022 amends section 158AA and section 158AB of the Act.
Amendment of section 158AA.
51. In section 158AA of the Income-tax Act, in sub-section (1), the following proviso shall be inserted, namely:–
“Provided that no such direction shall be given on or after the 1st day of April, 2022.”.
Insertion of new section 158AB.
52. After section 158AA of the Income-tax Act, the following section shall be inserted, namely:–
Procedure where an identical question of law is pending before High Courts or Supreme Court.
‘158AB.(1) Notwithstanding anything contained in this Act, where the collegium is of the opinion that–
(a) any question of law arising in the case of an assessee for any assessment year (such case being herein referred to as the relevant case) is identical with a question of law arising,–
(i) in his case for any other assessment year; or
(ii) in the case of any other assessee for any assessment year; and
(b) such question is pending before the jurisdictional High Court under section 260A or the Supreme Court in an appeal under section 261 or in a special leave petition under article 136 of the Constitution, against the order of the Appellate Tribunal or the jurisdictional High Court, as the case may be, which is in favour of such assessee (such case being herein referred to as the other case),
the collegium may, decide and inform the Principal Commissioner or Commissioner not to file any appeal, at this stage, to the Appellate Tribunal under sub-section (2) of section 253 or to the jurisdictional High Court under sub-section (2) of section 260A in the relevant case against the order of the Commissioner (Appeals) or the Appellate Tribunal, as the case may be.
(2) The Principal Commissioner or the Commissioner shall, on receipt of a communication from the collegium under sub-section (1), direct the Assessing Officer to make an application to the Appellate Tribunal or the jurisdictional High Court, as the case may be, in such form as may be prescribed within a period of sixty days from the date of receipt of the order of the Commissioner (Appeals) or within a period of one hundred and twenty days from the date of receipt of the order of the Appellate Tribunal, as the case may be, stating that an appeal on the question of law arising in the relevant case may be filed when the decision on such question of law becomes final in the other case.
(3) The Principal Commissioner or Commissioner shall direct the Assessing Officer to make an application under sub-section (2) only if an acceptance is received from the assessee to the effect that the question of law in the other case is identical to that arising in the relevant case; and in case no such acceptance is received, the Principal Commissioner or Commissioner shall proceed in accordance with the provisions contained in sub-section (2) of section 253 or in sub-section (2) of section 260A.
(4) Where the order of the Commissioner (Appeals) or the order of the Appellate Tribunal, as the case may be, referred to in sub-section (1) is not in conformity with the final decision on the question of law in the other case, as and when such order is received, the Principal Commissioner or Commissioner may direct the Assessing Officer to appeal to the Appellate Tribunal or the jurisdictional High Court, as the case may be, against such order and save as otherwise provided in this section all other provisions of Part B of Chapter XX shall apply accordingly.
(5) Every appeal under sub-section (4) shall be filed within a period of sixty days from the date on which the order of the jurisdictional High Court or the Supreme Court in the other case is communicated, in accordance with the procedure specified by the Board in this behalf, to the Principal Commissioner or Commissioner.
Explanation.–For the purposes of this section, “collegium” means a collegium comprising of two or more Chief Commissioners or Principal Commissioners or Commissioners, as may be specified by the Board in this behalf.’.
Explaining the provisions of section 158AA and section 158AB
Clause 51 seeks to amend section 158AA of the Act relating to procedure when in an appeal by revenue an identical question of law is pending before Supreme Court.
It is proposed to insert a proviso in sub-section (1) in the said section to provide that no direction shall be given under this sub-section on or after the 1st day of April, 2022.
This amendment will take effect from 1st April, 2022.
Clause 52 seeks to insert a new section 158AB in the Act relating to procedure where an identical question of law is pending before the High Courts or Supreme Court.
Sub-section (1) of the proposed section seeks to provide that where a collegium of Chief Commissioners or Principal Commissioners or Commissioners is of the opinion that any question of law arising in the case of an assessee for any assessment year (“relevant case”) is identical with a question of law arising in his case or in the case of any other assessee for an assessment year, which is pending before the jurisdictional High Court under section 260A or the Supreme Court in an appeal under section 261 or in a special leave petition under article 136 of the Constitution, against the order of the Appellate Tribunal or the jurisdictional High Court, as the case may be, in favour of such assessee (“other case”), it may, decide and inform the Principal Commissioner or Commissioner not to file any appeal, at this stage, to the Appellate Tribunal under sub-section (2) of section 253 or to the jurisdictional High Court under sub-section (2) of section 260A against the order of the Commissioner (Appeals) or the Appellate Tribunal, as the case may be.
Sub-section (2) of the proposed section provides that the Principal Commissioner or Commissioner shall, on receipt of communication from the collegium, direct the Assessing Officer to make an application to the Appellate Tribunal or the jurisdictional High Court, as the case may be, in the prescribed form within a period of sixty days from the date of receipt of the order of the Commissioner (Appeals) or within one hundred and twenty days from the date of receipt of the order of the Appellate Tribunal, as the case may be, stating that an appeal on the question of law arising in the relevant case may be filed when the decision on the question of law becomes final in the other case.
Sub-section (3) of the proposed section provides that the Principal Commissioner or Commissioner shall direct the Assessing Officer to make such an application only if an acceptance is received from the assessee to the effect that the question of law in the other case is identical to that arising in the relevant case, and in case no such acceptance is received, the Principal Commissioner or Commissioner shall proceed in accordance with the provisions contained in sub-section (2) of section 253 or in sub-section (2) of section 260A.
Sub-section (4) of the proposed section provides that where the order of the Commissioner (Appeals) or the order of the Appellate Tribunal, as the case may be, in the relevant case is not in conformity with the final decision on the question of law in the other case as and when such order is received, the Principal Commissioner or Commissioner may direct the Assessing Officer to appeal to the Appellate Tribunal or the jurisdictional High Court, as the case may be, against such order and save as otherwise provided in this section all other provisions of Part B of Chapter XX shall apply accordingly.
Sub-section (5) of the proposed section provides that appeal in the relevant case shall be filed within a period of sixty days from the date on which the order of the jurisdictional High Court or the Supreme Court, in the other case, is communicated, in accordance with the procedure specified by the Board in this behalf, to the Principal Commissioner or Commissioner.
It is also proposed to define the expression “collegium” for the purposes of the proposed section to mean a collegium comprising of two or more Chief Commissioners, Principal Commissioners or Commissioners as may be specified by the Board.
This amendment will take effect from 1st April, 2022.
Note: Though section 158AA is made inoperative from 1st April, 2022, however, section 158A still exists in the statute.
In the nutshell, the comparatives between deleted Section 158AA and the newly introduced section 158AB are outlined below-
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