2008 (7) TMI 11 - SC - Income Tax

Insurance appeal process clarified by High Court & Supreme Court order, emphasizing COD clearance for efficiency

The High Court held that appeals involving insurance companies assessed under the Income Tax Act must be referred to the Committee of Disputes within a ... HC dismissed revenue appeal (against deletion of additions by tribunal) on ground that dept. can’t file appeal without getting clearance from Committee of Disputes (COD) & held that same has to be done within a month - action of dept. can’t be said illegal merely for delay in approaching to COD - order of HC is set aside & directed to consider the question of desirability to proceed in the matter before it on receipt of the report from COD - COD has to consider the matter on merits Issues:Identical questions involving assessment of insurance companies under the Income Tax Act, 1961 and clearance from the Committee of Disputes for filing appeals.Analysis:In a series of appeals involving insurance companies assessed under the Income Tax Act, the issue revolved around whether the Department could file appeals without obtaining clearance from the Committee of Disputes (COD) as per the Supreme Court's order. The Commissioner of Income Tax (Appeals) upheld the assessments, but the Income Tax Appellate Tribunal (Tribunal) deleted the additions, accepting the insurance companies' stand. The High Court held that the matter must be referred to the COD within a month as per the Supreme Court's order in Oil and Natural Gas Commission v. Collector of Central Excise. The High Court emphasized the need to adhere to the time frame set by the Supreme Court.The appellant argued that there was no rigid time limit, and the Supreme Court only stressed the desirability of early action to avoid unnecessary litigation. The respondent highlighted cases where the COD declined permission, rendering appeals infructuous. The Supreme Court clarified that every court and tribunal must demand COD clearance before proceeding with disputes, and any filing without clearance should be referred to the COD within a month to suspend proceedings until the matter is resolved.Referring to previous judgments, the Supreme Court clarified the setup and function of the High Powered Committee for resolving disputes between the Union of India and Public Undertakings. It emphasized the urgency needed in approaching the COD, but delays should not render actions illegal. The concerned authorities must act urgently to prevent unnecessary backlog of appeals. The Court emphasized the need to test for indifference and lethargy and directed a consideration of the desirability to proceed based on the COD report.The Court allowed appeals to the extent that where permission was granted by the COD, the Court could examine the matter on merits. However, in cases of belated approach, the COD must consider the matter on its merits. The Court highlighted that decisions on whether to entertain matters due to delays must be based on the factual scenario of each case, without a fixed formula.In conclusion, the appeals were allowed, emphasizing the importance of timely action and consideration of merits based on the COD's decision. No costs were awarded in these cases.