Kerala budget for the year 2016-17 was presented on 12-2-2016 in the Legislative Assembly. The proposals of the Government of Kerala for the financial year 2016-17 will come into force from 1-4-2016. Being election year for the assembly, new proposals enhancing the rate of tax is not made by the present Government.

As part of e-governance programme, the submission of the returns under VAT and the payment of tax is made through the system and it is in force for the last few years. E-payment of advance tax and downloading of the statutory forms under CST has already been implemented.

• The Finance Bill has brought amendments in the following enactments.

1. The Kerala Stamp Act

2. The Kerala Land Tax Act

3. The Kerala General Sales Tax Act

4. The Kerala Motor Vehicles Taxation Act

5. The Kerala Tax on Luxuries Act

6. The Kerala Value Added Tax Act

7. The Kerala Surcharge on Taxes Act

The amendments to the following Acts are discussed:

1. The Kerala General Sales tax Act

2. The Kerala Surcharge on Taxes Act

3. The Kerala Tax on Luxuries Act, 1976

4. The Kerala Value Added Tax Act

The Kerala General Sales Tax Act (KGST)

KGST Act is presently applicable to petroleum dealers and foreign liquor, ganja and opium traders. Suitable amendments are being brought in, to enable dealers to file the same in electronic mode as well as to make online remittance of taxes and also generation of statutory forms.

The Kerala Surcharge on Taxes Act

New sub-section 1AA to Section 3 of the Act inserted whereby tax payable u/s. 6 of KVAT Act shall with respect to sale of water, soda, soft drinks, fruit juices and other beverages whether aerated or not intended for human consumption and sold in containers of plastic but excluding sold in such containers of and above 20 liters, be increased by a surcharge of 5% on the output tax due.

The Kerala Tax on Luxuries Act, 1976

A new proviso has been inserted not to levy luxury tax on hostels run directly by educational institutions and working women hostels run by religious and charitable institutions registered under the Travancore-Cochin Literary, Scientific and Charitable Societies Registration Act, 1955.

The Kerala Value Added Tax Act, 2003 (KVAT)

• All types of plastic carry bags including non-woven polypropylene bags – Rate of tax @ 20%.

• The exemption for sale of natural gas in any form is extended to 31-3-2017 from 31-3-2016.

• Sale of cardamom, at the point of auction, conducted at the auction centre holding a valid licence shall be exempted from tax.

• Cooked food manufactured by prisoners and sold by Kerala Prison and Correctional Services Department exempt from tax.

• Works contract of robotic or automated car parking systems, shall be 5%.

• Limit for presumptive tax enhanced to
Rs. 75 lakh from Rs. 60 lakh.

• In the case of works contract awarded by Government of Kerala, KWA and local authorities, compounding in the case of unexecuted work as on 31-3-2014, the contractor may continue to pay tax in respect of such works in accordance with the provisions of this clause as existed when he opted for compounding up to 31-3-2016.

• Section 25D special provision introduced for bakery dealers to settle arrears.

• Changes in schedule rates

• Sch I – 0%

• Braille printer

• Assistive devices for visually challenged light white cane, electronic cane

• Cement or concrete frames for doors and windows with/without MS Rod and MS Flat w.e.f 1-4-2005.

• Cleaning liquids for removing pesticides residue from vegetables manufactured by units using the technology developed by Kerala Agricultural University or other recognised institution.

• Earthern pots made from earth clay including flower pot, receptacles, statues and earthern oven.

• Sch III – 5%

• Mobile phone charger sold along with mobile phone in sealed pack w.e.f. 1-4-2005


• Once the dealer detects any omission or mistake in the monthly return filed, he shall file a revised return within 2 months. If there is any additional tax to be paid by such revision, it shall be paid with interest @ 3% per month plus penal interest at twice the rate.

• The registration under KVAT is made mandatory for C&F agents, transport agents and shipping agents.

• Entities doing e-commerce business will have to furnish details of goods movement into and outside the state. They will also have to take registration.

• The time limit for completion of assessment up to 2010-11 is now extended beyond 31-3-2016. Prescribed time limit as per the section is only five years. It is now 15 years after the introduction of VAT. The purpose of fixing time limit for completion of assessment is totally lost by such extensions at the whims and fancies of the department for their own inefficiency.

• Renewal of registration for the year 2016-17 has to be done on or before 30-4-2016.

o Application for renewal has to be made in Form 5. This is to be filed online. Dealers will have to renew the registration online and keep their registration live for the year 2016-17 before 30-4-2016.

o Renewal fee has to be paid online.


The renewal fee of VAT registration is as rates mentioned below:

• Dealers with registration under both KVAT and CST –
Rs. 3,000/-

• Dealers with registration under KVAT only and whose total turnover is upto
Rs. 25 lakh in 2015-16 – Rs. 500/-

• Dealers with registration under KVAT only and whose total turnover above
Rs. 25 lakh in 2015-16 – Rs. 1,000/-

Branch Registration renewal –
Rs. 150/- for each branch.

The annual return for the year 2015-16 will be self generated as per the monthly returns filed. Dealers can verify the turnover of their purchases and sales with their books of account and monthly returns filed. This will help dealers to revise their return if the need arises. The due date for generating and filing the annual return is 31-5-2016.

Time limit for filing revised return as per the provisions of the Act is two months. Any extensions beyond two months can the done only with the permission of the Dy. Commissioner of the respective district. Due to heavy requests for revision from the dealers for revision of the returns there is huge back log for issuing sanctions.

• Form 53 – Statement of closing stock inventory as on 31st March 2016. This is also to be e-filed within the due date of filing of annual return. Even for dealer’s who do not have closing stock, they are expected to file ‘nil’ stock statement.

• Claim for refund of input tax / excess amount remaining unadjusted at the end of the year shall be filed on or before 30-6-2016 in Form 21CC to the assessing authority along with closing stock inventory in Form 54.

Goa‘s per capital income at
Rs. 2,57,490/- (Rs. 21,450 per month) is the highest in India. And yet Goa since 2012-13 has experienced a slowdown in line with the general trend in India’s economy but made worse by the mining ban in the State which resulted in a revenue loss of
Rs. 1,300 crore per year. Due to which the State GSDP slowed down to 4.17 % in 2012-13. But green shoots are showing up in the economy and the State GSDP has picked up to around 8%.

Goa budget 2016 has focused on physical and social infrastructure. Despite State assembly elections round the corner in early 2017, the State fiscal deficit has been maintained below the ceiling of 3% prescribed by the Goa Fiscal Responsibility Budget Management Act. In fact the State Finance Minister who is also the Chief Minister of the State, Mr. Laxmikant Parsekar, has presented a revenue surplus budget for 2016-17 even after factoring for implementation of seventh pay commission for its 50,000 plus employees. The Gross State Domestic Product is expected to grow at approximately 10% to
Rs. 70,400 crore.

The tax proposals in the budget are broadly aligned towards moving to a GST regime.

The threshold turnover limit for compulsory registration under Goa VAT has been enhanced from
Rs. 5 lakh to Rs. 10 lakh. Similarly the turnover limit in case of importer or manufacturer has been increased from
Rs. 1 lakh to Rs. 5 lakh. This will provide relief to small businesses.

Goa VAT Act u/s. 10 does not provide for refund of excess Input tax credit except for exports. Instead it provides mechanism for carry forward of the excess ITC. It is proposed that a Scheme will be notified to adjust and refund excess ITC in varying proportions during the coming years and settle disputes relating to ITC to minimise legacy issues and reduce sudden financial impact when transiting to GST. This measure will also unlock funds blocked in working capital for dealers who have large carry forward Input tax credits.

On similar lines as a measure of transition to GST and in line with ease of doing business there is a new dispute settlement scheme proposed. This scheme will apply to disputed demands pending before various Courts and with Appellate Authorities. However cases involving non-payment of tax will not be covered under the scheme. This scheme will cover disputes under Goa VAT, Goa Entry tax, Goa Luxury tax and Goa Entertainment tax laws.

10% of disputed dues will now have to be deposited before preferring First appeal under Goa VAT Act. There is already a provision to deposit 50% of disputed dues before second appeal; Administrative Tribunal. This new proposal of 10% is on similar lines. However a large number of disputed dues are on account of demands arising due to non receipt of C forms. There was a need for exempting pre deposit of disputed dues in such cases which has not happened.

The budget has also tried to address one of the major impediments to manufacturing units operating out of Goa with regard to their claim of input tax credit against ‘Restricted tax Invoices’. Restricted trade invoices are issued by those units which are covered under the Goa VAT deferment cum NPV compulsory payment scheme 2005 whereby units were allowed to retain 75% of the Vat collected. The Commercial tax department has been restricting ITC on Restricted tax invoices for local purchases of raw materials, packing material etc made by manufacturing units in Goa where the finished product of those units is sold inter-State or stock transferred outside Goa. In the case of inter-State sales the ITC is restricted to the actual output tax payable and on stock transferred against Form F outside Goa, ITC is fully disallowed by wrongly interpreting clause 9 of Goa VAT deferment scheme 2005 which restricted ITC only if the goods were sold/transferred inter-State in the same form in which they were purchased. This has discouraged manufacturing units from purchasing from dealers located in Goa thus affecting both the local industry as well as the manufacturers. The budget proposes to rectify this anomaly.

To encourage setting up of new manufacturing units, start-ups and expansion of existing units, scheme under section 89A of the Goa VAT Act will be formulated to give incentives like VAT reimbursement etc. based on the capital investment, employment generation and procurement of raw materials locally.

Following amendments are made in VAT rates with effect from 1-4-2016 notification no.4/5/2005- Fin(R&C) (134) dated 30-3-2016.

Entry No.

Description of goods


Old rate

New rate


Aviation spirit, aviation turbine fuel and A.V. Gas. other than covered by entry 34 of Schedule “B”.





Motor spirit which is commonly known as petrol including ethanol blended petrol. –

(a) sold by public sector oil marketing companies to their authorized retail outlets within the State

(b) sold in the circumstances other than mentioned in clause (a) above







Regasified Liquefied Natural Gas





Motor Car sold by a registered dealer to defence personnel, subject to the fulfilment of conditions as may be notified by the Govt.

a) Whose cost is below Rs. 15 lakh b) Whose cost is
Rs. 15 lakh or above





Light motor vehicle costing Rs. 15.00 lakh or above. (below
Rs. 15 lakh continues @ 12.50%)




Two wheeler i.e., motor cycle or scooter, costing
Rs. 2.00 lakh or above (below Rs. 2 lakh continues @ 12.5%)




Country liquor in the form of cashew or palm feni, produced as a part of seasonal activity by local individuals commonly known as bhaticars, other than distillery and bottling units. (Country liquor as defined in the Goa Excise Duty Act, 1964 (Act 5 of 1964) other than that covered by Entry (72) of Schedule ‘D’ continues to be taxable at 5% under Entry 157 of schedule B)




Luxury tax rates as on 1-4-2016

By notification No.3 0/1/2006-Fin (R & C) (30) dated 30-3-2016, luxury tax rate is made applicable for room charges exceeding
Rs. 750/- as against Rs. 1,000/- earlier. The rates remain unchanged.


[See Sections 9(2) and 9A]

Serial No.

Turnover of Receipts

Rate of Tax





Where the charge for the luxury provided in a hotel is not exceeding
Rs. 750/- per room per day.



Where the charge for the luxury provided in a hotel is exceeding
Rs. 750/- but does not exceed Rs. 3,000/- per room per day.



Where the charge for the luxury provided in a hotel is exceeding
Rs. 3,000/- but does not exceed Rs. 5000/- per room per day.



Where the charge for the luxury provided in a hotel is exceeding
Rs. 5,000/- per room per day.



Where the hotel is a club or any other entity wherein luxury provided to its members/guests under time share agreement or any other similar system, and wherein the facility of availing residential accommodation by such members/guests during the given period in a year is allowed upon lump sum payment against his/her membership.

Ten paise in a rupee, with a deemed room receipt ofRs.
Rs. 2,000/- per room per day.


Where any room in a hotel or guest house registered under the Goa, Daman and Diu Registration of Tourist Trade Act, 1982 (Act 10 of 1982) are leased by the hotelier to any company or a person on monthly basis to provide accommodation either as rest house or guest house and the charge for such room exceeds
Rs. 750/- per day.


Luxury tax exemption in room rates during off season w.e.f. 1-4-2016: Exemption is granted in luxury tax rates @ 25% on applicable tax rate as against 60% exemption on applicable rates till 31-3-2016 during the period from 1st June to 30th September where the room rate per room per day is less than
Rs. 20,000/-, subject to conditions that tax is paid, returns filed within the time limit and that there are no outstanding dues or arrears at the time of claiming exemption.

Hence effective luxury tax rate from 1st June to 30th September 2016 will be 75% of applicable rates subject to said conditions.

And finally those planning to visit Goa to experience its thriving Casinos will now have to shell out more towards entry. Entertainment tax for entry fee in Casinos is increased from
Rs. 700/- per person to Rs. 1,000/- per person.

In conclusion, Goa budget 2016 is a well balanced budget giving a thrust to capital investment, skill development, employment generation, creation of infrastructure and resolution of substantive issues on Goa VAT.

1. Introduction

Sections 11 and 12 of the Income-tax Act provide for exemption to trusts or institutions in respect of income derived from property held under trust and voluntary contributions, subject to certain conditions. The income derived from property held under trust should be applied for the charitable purposes, and where such income cannot be applied during the previous year, it may be accumulated and invested in the modes prescribed and applied for such purposes in subsequent years as prescribed. If the accumulated income is not applied in accordance with the conditions provided in the said section within a specified time, then such income is deemed to be taxable income of the trust or the institution. Section 12AA provides for registration of the trust or institution which entitles them to get the benefit of sections 11 and 12. It also provides the circumstances under which the registration can be cancelled. Section 13 of the Act provides for the circumstances under which exemption under section 11 or 12 in respect of whole or part of income would not be available to a trust or institution.

2. Proposed New section 115TD

2.1 A new section 115TD has been proposed in the Finance Bill, 2016 for imposing a levy in the nature of an exit tax called additional income-tax, which will be attracted when any trust, society or the organisation is converted into a non-charitable organisation or gets merged with a non-charitable organisation or on transfer of assets of a charitable organisation on its dissolution to a non-charitable institution.

2.2 Tax at maximum marginal Rate : In case of conversion of trust or institution into a form not eligible for registration u/s. 12 AA or on merger into an entity not having similar objects and registered under section 12AA or on non-distribution of assets on dissolution to any charitable institution registered u/s. 12AA or approved under section 10(23C) within a period 12 months from dissolution, the accreted amount of income of assets of the trust or institution shall be taxable at maximum marginal rate of 30 per cent.

2.3 What is Accreted income : The accreted income means the amount by which the aggregate fair market value of the total assets of the trust or the institution, as on the specified date, exceeds the total liability of such trust or institution computed in accordance with the prescribed method of valuation. The asset and the liability of the charitable organisation which have been transferred to another charitable organisation within specified time will be excluded while calculating accreted income.

2.4 “specified date” means,—

(a) The date of conversion in a case where assets of the trust or institution are converted into any form which is not eligible for grant of registration under section 12AA;

(b) The date of merger in a case such trust or institution is merged with any entity other than an entity which is a trust or institution having objects similar to it and registered under section 12AA; or

(c) The date of dissolution in a case where such trust or institution failed to transfer upon dissolution all its assets to any other trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of section 10(23C), within a period of 12 months from the end of the month in which the dissolution takes place.

2.5 Time limit for payment of tax and persons responsible for payment:

Section 115TD provides that the principal officer or the trustee of the trust or the institution, as the case may be, and the trust or the institution shall also be liable to pay the tax on accreted income to the credit of the Central Government within 14 days from,—

(i) The date on which the order cancelling the registration is received by the trust or the institution in a case the registration granted to it under section 12AA has been cancelled;

(ii) The end of the previous year in a case the trust has adopted or undertaken modification of its objects which do not conform to the conditions of registration and it has not applied for fresh registration under section 12AA in the said previous year;

(iii) The date on which the order rejecting the application is received by the trust or the institution in a case the trust has filed application for fresh registration under section 12AA but the said application has been rejected;

(iv) The date of merger in a case such trust or institution is merged with any entity other than an entity which is a trust or institution having objects similar to it and registered under section 12AA; or

(v) The date on which the period of 12 months expires from the date of dissolution in a case where such trust or institution failed to transfer upon dissolution all its assets to any other trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of section 10(23C).

2.6 Persons responsible for payment or who may be deemed to be assessee in default

a) Section 115TD(4) provides that notwithstanding that no income-tax is payable by a trust or the institution on its total income computed in accordance with the provisions of this Act, the tax on the accreted income under section 115TD(1) shall be payable by such trust or the institution.

b) Section 115TD(5) provides that the principal officer or the trustee of the trust or the institution, as the case may be, and the trust or the institution shall also be liable to pay the tax on accreted income to the credit of the Central Government

c) Section 115TF(1) provides that if any principal officer or the trustee of the trust or the institution and the trust or the institution does not pay tax on accreted income in accordance with the provisions of section 115TD, then, he or it shall be deemed to be an assessee in default in respect of the amount of tax payable by him or it and all the provisions of the Income-tax Act for the collection and recovery of income-tax shall apply.

d) Section 115TF(2) provides that notwithstanding anything contained in section 115TF(1), in a case where the tax on accreted income is payable under the circumstances referred to in clause (c) of section 115TD(1), the person to whom any asset forming part of the computation of accreted income under sub-section (2) thereof has been transferred, shall be deemed to be an assessee in default in respect of such tax and interest thereon and all the provisions of the Income-tax Act for the collection and recovery of income-tax shall apply, provided that the liability of such person shall be limited to the extent to which the asset received by him is capable of meeting the liability.

2.7 Interest in case of failure of payment of tax

Section 115TE provides that where the principal officer or the trustee of the trust or the institution and the trust or the institution fails to pay the whole or any part of the tax on the accreted income referred to in section 115TD(1), within the time allowed under section 115TD(5) of that section, he or it shall be liable to pay simple interest at the rate of one per cent for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid.

2.8 Effective date for the new provisions

These amendments will take effect from 1st June, 2016. But as the accumulated or accreted income of the earlier years is also proposed to be taxed, practically it tantamount to tax retrospectively. It is in a sense also a case of double taxation as the income of the trust might have already suffered tax if the trust did not spent 85 per cent or 75 per cent of its income or failed in applying the income within one year in case option was exercised under Explanation (2) below section 11(1) or to the extent accumulated amount was not utilised within the specied period of accumulation u/s. 11(2).

The practical difficulty will arise in collection of tax if the assets are transferred from one entity to another and instead of liquid money in Bank account or fixed deposit the assets are in the form of immovable property. It would be better if the rate of tax is lowered and tax is collected in the form of TDS/TCS say @ 10 per cent on transfer of such assets or income. After all the recipient NGO is also engaged in social activities even if not registered under section 12AA. The reality of life is that NGOs play an important role in imparting medical, educational and relief to poor in our country and also carrying objects of general public utility, which supplement the welfare measures undertaken by the Government.

2.9 The action against Trust/Institution is continuing for many years

It may be noted that for last several years the benefits to the trusts have been curtailed or new restrictions imposed by the Central Government. Some such steps are as under :

a) The period for accumulation under section 11(2) used to be 10 years which was reduced to 5 years by the Finance Act, 2001 in respect of income accumulated or set apart on or after 1st April, 2001.

b) The statutory accumulation under section 11(1)(a) was permitted up to 25 per cent and the same was reduced to 15 per cent by the Finance Act, 2002 w.e.f. asst. year 2003-04.

c) The definition of charitable purpose under section 2(15) was tinkered with from time-to-time to restrict the benefit to the Trusts. For example section 2(15) was substituted by the Finance Act, 2008 with effect from asst. year 2009-10. A proviso was added to provide that the advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration irrespective of the nature of use or application or retention of income from such activity.

d) The 2nd proviso was inserted by the Finance Act, 2010 w.r.e.f. asst. year 2009-10 to provide the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is
Rs. 10 lakh (increased to Rs. 25 lakh with effect from asst. year 2012-13) or less in the previous year.

e) The 3rd proviso was inserted by the Finance Act, 2015 w.r.e.f. asst. year 2016-17 to provide that the advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration irrespective of the nature of use or application or retention of income from such activity, unless –

– Such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility and

– The aggregate receipt from such activities during the previous year do not exceed 20 per cent of the total receipts of the trust or the institution undertakingsuch activities of that previous year.

2.10 The Government need to review its policy

The Government need to review its policy in respect of the working of the charitable trusts or institutions in India. The fact should be kept in mind that the Government effort alone are not enough for meeting the enormous necessities of people in practical life. Therefore the Government should act as felicitator in functioning of the trusts and institutions. Wherever any violation is noticed, the Income Tax official should help in amending the function of such trust. If necessary, the officials may visit the trusts and render proper advice for streamlining the compliance by such trust. If required even the Commissioner of Income-tax may nominate its representative as a Trustee in such trust. The whole gamut of trusts need support of Income Tax department and the Central Government.

Law is the mechanism of the justice and the mechanical, the human component of this great machine is the natural justice. Natural justice is the soul of the machine of justice. Natural justice is the very foundation, upon which is based the dispensation of justice. Justice, to be true has to be arrived at by a process which must have been behind it, the sanction of good conscience, equity and fair play.

Concept of natural justice has undergone a great deal of change in recent years. Rules of natural justice are not rules embodied always expressly in a statute or in rules framed thereunder. They may be implied from the nature of the duty to be performed under a statute. What particular rule of natural justice should be implied and what its context should be in a given case, must depend to a great extent on the facts and circumstances of that case, the frame work of the statute under which the enquiry is held. The old distinction between a judicial act and an administrative act has withered away. Even an administrative order which involves civil consequences must be consistent with the rules of natural justice.

It is now well settled proposition that an Income Tax Officer, when he conducts enquiry and makes assessments under section 143 of the Income-tax Act, 1961 is not a court nor the proceedings before him are judicial proceedings in the strict sense of the term. The proceedings are deemed to be judicial proceedings only to the extent and for the purposes indicated in section 136 of the Act.

In fact the proceedings before the Income Tax Officers are quasi-judicial in nature. A quasi-judicial function comes in between administrative and judicial function. In other words, a quasi-judicial decision is one where there is a dispute and process involving the ascertainment possibly also legal argument, but where administrative action takes the place of the normal determination based on the evidence adduced under the relevant legal rules.

The Apex Court in Pannalal Binjraj v. Union of India, (1957) SCR 223 mandating the observance of the rules of natural justice in income tax proceedings held that the Income Tax authorities should follow the rules of natural justice and, where feasible, give notice of the intended transfer to the assessee concerned in order that he may represent his view of the matter and record the reasons of the transfer, however briefly, to enable the court to judge whether such transfer was
mala fide or discriminatory, if and when challenged.

In Mahadayal Premchandran v. Commercial Tax Officer, Calcutta, (1959) SCR 551, the procedure adopted by the Sales Tax Authorities was pronounced to be unfair and contrary to the principles of natural justice in that it had failed to afford to the appellant an opportunity of being heard. On these very principles the Income Tax Authorities were held to be judicial or quasi-judicial bodies in
Suraj Mall Mohta & Co. v. A. V. Visvanath Sastry, (1954) 26 ITR 2 (SC) and it was observed by the Supreme Court that under the provision of Section 37 (corresponding to section 131 of the Income-tax Act, 1961) the proceedings before the Income Tax Officer are judicial proceedings and all the incidents of such judicial proceedings have to be observed before the result is arrived at. In other words, assessee would have a right to inspect the records and all relevant documents before he is called upon to lead evidence in rebuttal. This right has not been taken away by any express provision of the Income-tax Act.

In M. Chockalingam and M. Meyyappan v. CIT, Madras, (1963) 48 ITR 34 (SC), Hidayatullah, J, speaking for the court observed that the authorities acting under the Income-tax Act have to act judicially and one of the requirements of judicial action is to give a fair hearing to a person before deciding against him.

It may be mentioned at this stage that the principles of natural justice are varied and cannot be imprisoned in a code or in set of rules, as the jurists say, they cannot be put into a “straitjacket formula”. However, the principles find expression mainly in two broad rules. So far as our Income-tax Law is concerned it may however, be noted that the first rule of a natural justice that no one shall be judge in his own cause is statutorily excluded, for the Income Tax Officer is required to act as judge in his own case. The Income Tax Officer is the assessing authority, he conducts investigation into the business affairs of the assessee, collects materials against the assessee and finally frames the assessment order in which such adverse materials are relied upon for making an assessment. This also applies to penalty proceedings. In some cases, he also conducts search and seizure under the Act and examines the assessee and his relatives or the other person in respect of seizure and other materials. Sections 143 and 144 provide for Income Tax Officer alone making the assessment. There is indication in section 143(3) and section 144 that the Income Tax Officer alone has to require the assessee to produce materials. As regards penalty matter too, the Income Tax Officer (and other authorities) is to gather the materials and to frame an order imposing penalty. In view of the specific provisions in the Income-tax Act, 1961, the first rule of natural justice cannot be said to be applicable.

The second rule is that no decision should be given against a party without affording reasonable opportunity of being heard or the rule as is expressed by the maxim ‘audi alteram partem’. The Act itself provides for an opportunity of being heard in express terms and this salutary principle is statutorily recognised under the Income Tax Laws. Examples of such statutory provisions are to be found in section 127 (1) and section 142(3) and various other sections of the 1961 Act. Beside the statutory recognition, there may arise the circumstances under which the taxing authorities are bound to follow the rules of natural justice by implication. In fact it can be said in all proceedings it would be the safest and most ideal to observe rules of natural justice except where the statutory provisions are clearly to the contrary. Further, vast discretionary powers are given to the various Income Tax Authorities under the Income tax Act, 1961. Such powers are to be exercised not capriciously but on judicial grounds and for substantial reason.

Taxation is the prerogative of the legislature. Article 265 of the Constitution declares that “no tax shall be levied or collected except by the authority of law”. Therefore, in view of the Article 265 read with Article 14 of the Constitution of India guaranteeing the right, equality, it is very much imperative that orders and decisions of the Income Tax Authorities are taken not only with due observance of the mandatory provisions of law, but the same are also taken by scrupulously following the principle of natural justice. The right to impose taxes and to determine the circumstances under which these would be done is the privilege of the legislative power. The administration of the tax laws is however, the responsibility of the executive. A legal attack on the tax laws cannot be made on the ground that the same is unjust or excessive. But the application of the law must be correct. It is matter of public interest that the tax- payers are protected against unlawful decisions and actions of the taxing authorities.

The principles of natural justice form an integral part of procedural fairness and justness, thereby excluding the scope of arbitrariness. Even though the right of hearing, which forms a part of the principles of natural justice, before an order is passed under some of the provisions of the Income-tax Act, 1961, is not specifically provided by the Act, compliance with at least the minimal rules of natural justice as expressed by the maxim ‘audi alteram partem’ is necessary. Recording of reasons, as well as their communication to the affected party is a must for a valid order. The various High Courts as well as the Supreme Court of India has consistently held in many cases that such a right forms an integral part of a proceeding under the provisions of the Income Tax Laws and the denial thereof would vitiate the entire proceeding, which is liable to be set aside. It has been held consistently that the rules of natural justice must be complied with by the appropriate authority by giving a fair and adequate opportunity of hearing to the affected party before an order involving civil consequences is passed under the Income Tax Laws.

Taxing statute provides three stages in the imposition of tax. First, there is a declaration of liability that is the part of the statute which determines that persons in respect of what property are liable. Next, there is assessment. Liability does not depend on assessment, which particularises the exact sum which a person has to pay. Lastly, comes the method of recovery of the taxes person does not voluntarily pay. The Income-tax Act, 1961 though contains various provisions embodying the principles of natural justice, yet there are certain areas where the non-compliance of the statutory provisions in its true spirit has been held to be violative of the principles of natural justice. Again there are certain provisions under the Income Tax Laws wherein, though no specific provisions have been made incorporating the principle of natural justice, yet these principles have been held to be a part of a proceeding initiated and concluded under the Income Tax Laws.

Rules of natural justice are embodied in the provision of service of notice on the party likely to be affected by a proceeding conducted and concluded under the provision of Income-tax Act, 1961. Notice is knowledge of facts which would lead a person to make enquiry.

‘Due process’ clause in the Constitution of the United States of America includes the concept of natural justice as substantively understood, but its procedural technique has been secured in the Administrative Procedure Act, 1946. The four essentials of due process concept are

1) Notice of hearing

2) Opportunity of hearing

3) Impartiality of Tribunal, and

4) Orderly course of procedure.

A notice of hearing is in fact, the prerequisite of the other three essentials, as it will be difficult for any person to avail himself of the opportunity of hearing or sticking to claim impartiality of a Tribunal or of the orderly course of procedure unless he knows that a hearing is going to take place.

Service of notice is a condition precedent for the making of an order of assessment by the authorities under the Income-tax Act, 1961. The assessee in law is entitled to rebut the material placed before him, if he so chooses and any material placed on record without notice to the assessee cannot be relied upon by the Revenue being violative of the principles of natural justice. The importance of issuing notice in income tax proceedings is so much so that even an order of rectification which has the effect of enhancing the income tax liability of an assessee becomes invalid in law, if passed without issuing a valid notice and affording opportunity of hearing.

Principles of natural justice demand a service of valid notice to the assessee before any adverse action is to be taken against the assessee by Income Tax Authorities.

If the Income Tax Officer desires to pass assessment under section 143(3), he must serve notice under section 143(2) on the assessee and the service of the notice to the representative to whom no authority to receive notice is given is not valid. The same is true about hearing notice to be given for appeal. Similarly, appeal cannot be decided ex parte.

Rules of natural justice are embodied in the provisions of service of notice in the Indian Income Tax laws. When these rules are not followed while serving notice on the assessee, there is the violation of the principle of natural justice and it is therefore now, trite law that rules of natural justice must be followed by Income Tax Authorities.

In a plethora of judicial pronouncements the Supreme Court has held that the tax authority is entrusted with the power to make assessment of tax liability of a person discharging quasi- judicial functions, and such officers are bound to observe the principle of natural justice in reaching their conclusion as regards the tax liability. This observation by the Apex Court makes it amply clear that assessing officer under the Income-tax Act, 1961, while making assessment, discharge quasi-judicial functions, and is bound to follow the principle of natural justice. A duty to act fairly, that is in consonance with the fundamental principle of substantive justice is generally implied upon them because the presumption is that in a democratic polity wedded to the rule of law, the State or the legislature doesn’t intend that in the exercise of their statutory powers, its functionaries should act unfairly and unjustly.

Brotherhood is the first and foremost thing that has been imprinted deep in my memory. Each member was unique, coming from different parts of the country, speaking different languages at home, educated in different institutions and having varied interests. Yet we were brothers in insisting that the Government does the right thing for its citizens. The camaraderie was so great that once Justice Fathima Beevi, a sitting judge of the Supreme Court, was visiting the place where I was posted and came directly to my home and went straight to the kitchen to ask for lunch disregarding all protocol. She said she felt more at home in the Tribunal, where she had worked earlier, than in any other institution with which she was associated.

Earnest desire to do the right thing. I had the privilege of sitting with more than 65 different Accountant Members and over my tenure of 20 years, and disposed of not less than one lakh cases, but only in three cases were there any dissent. Every one of us came to the same conclusion in our own reasoning which indicated that we were doing the right thing.

Sharing our knowledge. Everyone felt free to pick the brain of others whenever any interesting question of law arose in any case.

No hierarchy. Even the President was one among equals except that he had some administrative tasks.

The Revenue/Tax Bar is the most talented and the cream of the Advocates/Chartered Accountants in the country. Very rarely did we see any Advocate/Chartered Accountant being inadequately prepared or failing to think on his legs.

The Departmental Representatives were also equal to the job. Most of them were very fair in presenting the department view.

Bharat Darshan. I had the chance to sit in all the Benches throughout the country except Kashmir and Gujarat.

Work schedule and work life balance. Sittings in the morning and dictating orders in the afternoon meant that I never had to take any file home and could spend quality time with my family.

Broadening vision. Income tax cases are not confined to Income-tax Act but lead to questions relating to every other branch of law. In fact many important tenets of Hindu Law have been pronounced in Income-tax cases. Besides I came to know the cultural diversity of our country and how it affects commerce.

Excellent secretarial assistance. The stenos in the Tribunal are so good that rarely had I the need to correct any mistakes.

Even the peons are alert and intelligent. I was astonished in my early days when my peon brought to my attention a judgment of another Bench of the Tribunal on a point in an estate duty case which was most appropriate to the case that had been heard that morning. He had taken it from the Tribunal archives having remembered its relevance. Another was trained by a member so well that he rose to become an Assistant Registrar.

In the first ten years, there were more departmental appeals than assessees’ appeals as the Appellate Assistant Commissioners were good enough to understand the grievance and apply the Act correctly and most of the appeals were dismissed.

In the next ten years the situation changed and appeals were heard by Commissioner (Appeals) who were reluctant to rectify wrong assessments and so there were more appeals by the assessees and most of them were allowed.

The Reference system. Modelled on the British system, reference of a question of law to the High Court and deciding the matter in accordance with the opinion meant that the law was consistent and constantly updated. There was clear focus on the issues. The finding of the Tribunal on facts was final.

Consequent to the 42nd Amendment of the Constitution, and the substitution of reference by appeals, the Tribunal was degraded and the concept of justice was undermined. I had commented on this in my Ramamani Memorial Lecture titled ‘Corrupting the Constitution’.

The Tribunal was a pristine institution with members taken at a young age and trained on the job to see that tax is collected rightly, not a rupee more nor a rupee less. But recruitment policy which has changed to get people who are about to retire and who are interested in only a few more years of service and not doing any real work, has led to the decline of a great institution. It is twenty years since I left the Tribunal and I am sad to hear that institutional changes have not added stature to it.

Reform is required to restore the system. The Tribunal is concerned with the administration of tax law. It is really an error correction mechanism. The department whose errors are corrected may not be happy with the situation, but the remedy is to see that the department officers are trained to follow the orders of the Tribunal so that mistakes do not occur again, rather than take the matters up to Supreme Court in every case like a litigant.

Recent changes in the Act relating to resolution of disputes offend basic principles of natural justice and the doctrine of legitimate expectation.

It is time to recognise that administrative system requires a separate hierarchy of courts as in France with trained personnel and an administrative procedure code similar to CPC.

What is required is a correction system at the lowest level by the department itself and then by the Tribunal, independent of the department, final on facts and above that a reference, only on questions of law, which can be uniform throughout India. Such an efficient and effective system will reduce errors in the administration of income tax and bring confidence particularly to international commerce.

I wish the Platinum Jubilee celebrations all success and hope and trust that it will give an impetus to the transformation of the Tribunal into an institution as intended – a quick and effective mechanism for sustaining right assessments in taxation.

My affectionate and respected fellow members in the Federation and all other brothers and sisters in the profession.

Once again month after month, the President of the Federation through his communiqué is before all of you.

In the last edition of the Journal, the Chief Editor Dr. K. Shivaram in his editorial address briefed the Hon’ble members about the impact of issue of 3 notifications by the Government of India to be effective from 1-4-2016 excluding the senior advocates from the purview of reverse charge mechanism in respect of the provision of legal services by them and it is also stated by him that the Federation would do the needful to redress the grievance of senior members of the bar in an appropriate and apt manner.

Dear brothers and sisters of AIFTP family, it is to be brought to your notice that the Notification Nos. 9, 18 and 19 of 2016-ST dated 1-3-2016 denotifying the senior advocates from the exemption from payment of service tax on legal services provided by the individual advocates or firm of partnership of advocates and also removing the senior advocates from the operation reverse charge mechanism, were directed to be given effect from 1-4-2016. The three notifications were assailed in writ jurisdiction in the High Court of Judicature at Hyderabad for the State of Telangana and Andhra Pradesh in W.P. No. 10350/2016; in W.P. No. 291/2016 in the High Court of Judicature at Kolkata; Special Civil Application No. 4926/2016 in the High Court of Gujarat at Ahmedabad and W.P. (Civil) Nos. 2891 & 2892 of 2016 in the High Court of Delhi on the ground of discrimination, arbitrariness and hostile treatment violating Articles 14 and 19(1)(g) of the Constitution of India and also on the ground that the levy of service tax on the value of professional fee billed on advocates on record at whose behalf the legal services are rendered by him as Senior Advocate, in which case there would be double levy and payment of such service tax, once by the senior advocate before the stipulated date of succeeding month by filing the stipulated return and also by the service recipient through reverse charge mechanism and in such case the senior advocate would not be refunded the service tax paid by him notwithstanding, the non-receipt of the payment of the bill either in full or part by the Advocate on record. High Courts of Judicature at Ahmedabad, Kolkata and Delhi were pleased to order stay of operation of the notifications while the High Court of Judicature at Hyderabad ordered notice to the Union of India and others for reply.

Thus the effort of the Federation in the most desired area of professional interest is worth noticing and recognisable. We also hope that the Ministry of Finance would consider the issue for a fresh look and reversal action.

It is also to be noted that the Government of India finally prepared Memorandum of Procedure for appointment and transfer of Chief Justices and Judges of High Courts and it is hoped that the newly prepared MoP would enable the parties responsible for the appointment of judges to the higher judiciary to fill up the alarming number of vacancies of 465 in various High Courts as against the approved strength of 1056.

Thus it so appears that nearly 45% of the sanctioned strength of judges posts in various High Courts in the country have been vacant almost all for the past one year. In the words of the present Chief Justice of India, the pendency of cases in various forums in our country is around 3.20 crore and accordingly to the Hon’ble Chief Justice, another century will be required to clear the backlog of the pendency of the cases. The Federation in all optimism, hopes and expects, positively that at least 50% vacant position of judges in the High Courts would soon be filled up with the active assistance of the newly prepared MoP, Indian Bar and it is further hoped that in the process of appointing the judges to the High Courts due and appropriate place of legitimate importance would be evinced and shown towards one of the most important branches of law in today’s society namely the taxation law and would be given its due share for the well-being of the society, for, it is an indisputable fact that revenue is the backbone as well as heartbeat for the growth of any nation. Simply because, revenue is required and the States are starved for resources, it cannot be gainsaid that the revenue/fiscal can be whimsical or fanciful for impose or collection and the fiscal levy should always be within the permissible Constitutional contours but not otherwise.

We accordingly make a humble requisite representation to the Hon’ble President of India, Chief Justice of India, the Judiciary and finally the Union of India to recognise and realise the paramount importance for judges of efficacy and national integrity coupled with all merit to keep up the dignity, majesty and decorum of the Indian Judiciary which has got an unimpeachable and unshakeable reputation and image in the universe.

Finally as the National President of the Federation it is our bounden duty to work for the overall and unique welfare and growth of every professional brother and sister both within and outside the family of AIFTP and in a scenario of significant and drastic changes taking place at the National Level, time has come for all the institutes of professional interest to come together, imbibe together, work together, think together and finally march together for the overall benefit of one and all and it is earnestly hoped that the spirit behind this call and the object and purpose of the constructive role of the Federation as the elder brother is well-understood and appreciated.

One more request to all my professional brothers and sisters is to strengthen the voice of the professional fraternity namely the AIFTP journal and work for its ever-growing circulation.

Jai Hind

Dr. M. V. K. Moorthy
National President

Whether Is it necessary to have Income Computation and Disclosure Standards (Icds)?

Section 145(2) of the Income-tax Act, 1961 (the Act) authorises the Central Government to notify Income Computation and Disclosure Standards (ICDS) for the purposes of computation of income.

The CBDT has notified 10 amended ICDS vide notification dated September 29, 2016 applicable to assessment year 2017-18 and subsequent assessment years, to be followed by all assessees (other than an individual or an HUF who is not required to get his accounts of the previous year audited in accordance with the provisions of section 44AB of the Act) following the mercantile system of accounting, for the purposes of computation of income chargeable to income-tax under the head “Profits and gains of business or profession” or “Income from other sources.”

The basic principle of income-tax is to tax the real income and commercial profit of the assessee subject to certain specific allowance / disallowances. The accounts of the assessee are maintained on the basis of the Accounting Standards prescribed under the Companies Act and / or issued by The Institute of Chartered Accountants of India (ICAI). Therefore, the profit disclosed in the books of account maintained by the assessee adopting such Accounting Standards reflects the true commercial profit earned by the assessee. Generally, that should be accepted as income for the purpose of the Act, subject to certain necessary allowances and disallowances as per the Act.

ICDS is not adding any value and in fact, is bound to create uncertainty and deference in the conduct of business in India. It militates against the professed policy of the Government to simplify the taxation system. While amendments in the law, guidelines and standards are made with the intent to reducing litigation, it is feared that these notified ICDS will not achieve the intended objectives. It is apparent that with a huge divergence in the accounting prescribed under Ind AS regime, differences with Accounting Standards, overwriting of the law established through judicial precedents and coinage of new terminologies, there will be a substantial increase in unintended tax litigation. Again there will not be any significant
revenue benefit in the long run by enforcing ICDS.

It is totally unjust, unfair, unrealistic and very onerous to impose another set of standards i.e., ICDS on the assessees for the purpose of computation of total income. These ICDS in fact change the above basic principles and affect the computation of total income of assessees. Although it is stated that such ICDS are not meant for maintenance of books of account, if one peruses even the amended ICDS notified by the CBDT, it becomes clear that effectively such ICDS will have a direct bearing on the maintenance of books of account. As such, with these ICDS, effectively the assessee would be required to keep and maintain dual set of books of account to comply with the requirement of ICDS and / or will have to spend considerable amount of time, energy and manhours in preparing and reconciling income as per ICDS and the one computed as per books of account maintained as per the applicable Accounting Standards. This becomes clearer with the amendment made in Form 3CD (part of Tax Audit Report) in this respect.

Moreover, even though the preamble to ICDS states that the ICDS are not for the purpose of maintenance of books of account, the deviations from accepted accounting principles (such as different formula for capitalising general borrowing costs, non recognition of expected or marked-to-market (MTM) loss) would result in maintenance of separate books of account for tax purposes. Such maintenance of parallel set of books of account would be burdensome, require changes to existing IT systems and result in high cost of compliance.

Accounting Standards are applicable to all corporate and non-corporate entities. Whereas ICDS is applicable to all taxpayers following mercantile method of accounting (i.e., to all taxpayers other than those following the cash system of accounting).

Further, the amended Form 3CD requires a tax auditor to certify the adjustments to be made to the profit and loss in accordance with the provisions of ICDS. Before certification, a tax auditor would invariably require such parallel profit and loss account and balance sheet to be prepared, to ensure that all adjustments required on account of ICDS have been considered. This will result in substantial work for most businesses and may even result in the requirements of parallel MIS, one for the purposes of regular accounts, and the other for the purposes of ICDS.

At this juncture, it is to be noted that only 1% of the total population pays the Income tax as per the official Government published data, of which persons filing return of income on cash basis as well as persons filing return of income under the head “salaries” plus persons who are not liable to tax audit in the preceding previous year would go out of 1% of the said population. So, compliance with ICDS is an additional requirement, for few persons, will increase the compliance burden and cost in the hands of the taxpayers and would thus defeat the purpose of ICDS in terms of simplification of processes. Therefore, it is to be pondered, whether there would be any increase in revenue to the Government because, generally, in ICDS, there is pre-ponement of income.

In fact, Income tax Simplification Committee, set up by Ministry of Finance and chaired by Justice R. V. Easwar (Retd.) in its report containing first batch of recommendations has rightly made the following observations w.r.t. ICDS.

“Taxpayers are already grappling with regulatory changes of the Companies Act, 2013 Ind-AS and the proposed GST. Industry should be allowed more time to deal with another change of this nature. The Committee understands that the taxpayers feel that many of the provisions of the ICDS are capable of generating, a legal debate about which at present there is no clarity.

Further, multiple accounting methods, one for the books of account and other for tax purposes, creates confusion, interpretation issues, multiplicity of records and additional compliance burden which may outweigh the gains to be obtained by the application of ICDS. It has also been felt by the Committee that ICDS deals only with the method of accounting and at best it brings timing differences on recognition of expenditure or income as compared to the books of account. The Committee therefore feels that a fuller study of the implication of the ICDS is necessary before it is implemented”.

Recently, the Indian Accounting Standards (“Ind AS”) were notified by the Ministry of Corporate Affairs wherein companies may voluntarily adopt Ind AS for financial statements for accounting periods beginning on or after April 1, 2015 with the comparatives for the period ending March 31, 2015 or thereafter. Once a company opts to follow Ind AS, it will be required to follow the same for all the subsequent financial statements.

Further, there could be earlier judicial rulings which are based on the relevant provisions of the Act and as well as accounting standards, where the courts interpreted the law on the basis of such accounting standards. These judicial rulings would now have to be reconsidered in light of the requirements of ICDS, as the method of accounting is now subject to ICDS.

Thus, it would defeat the very purpose of ICDS of bringing certainty in tax and reduction of litigation.

Currently, profits reflected as per the normal accounting standards is accepted as a basis for determining taxable business income subject to specific provisions contained in Chapter IV-D of the Act. However ICDS does not recognise the universally-accepted principles of ‘prudence’ even though the same has been accepted by the courts for tax purposes. Non-recognition of the principle of prudence will lead to taxable profits being overstated. Also, such a deviation adopted by ICDS is bound to lead to litigation.

It is strongly felt that the revenue department has introduced section 145(2) and the ICDS, to reverse the impact of some of the decisions of the Supreme Court and various High Courts. In the revenue’s zeal to take some corrective action, a huge unproductive compliance burden without any substantial benefit to exchequer, has been imposed on the business community, which is certainly not helping in improving the
image of India as a favourable investment destination.

We, therefore, suggest that in the interest of making India a highly attractive place for doing business and for the furtherance of stated policies of the Government of ‘Make in India’ and ‘Ease of doing Business in India’, section 145(2) and the notified ICDS should be abolished.

H. N. Motiwalla

Joint Editor

In public interest, time and again, High Courts have passed strictures against tax administration for failure to follow the due process of law in the course of assessment, recovery and quasi-judicial – If directions of High Court are followed, it may be communicated by press release or by a circular – If not, then what remedial action has been taken?

Time and again, various High Courts have passed strictures against the Income-tax Department (the “Department”). Many a times, in public interest, High Courts have to give directions to the Department to prevent harassment to assessees. Few such instances are as follows:

In Arun Ganesh Jogdeo v. UOI (, the Bombay High Court directed the department to follow directions of Delhi High Court in Court on its own motion v. CIT (2013) 352 ITR 273 (Delhi) and to be vigilant and ensure that the mistakes in issuing notice under sections 244 and 245 as pointed out by the Petitioner do not occur. Department was also directed to set up a self-auditing vigilance cell to redress taxpayers’ grievances.

In Shakari Khand Udyog Mandal Ltd. v. ACIT (2015) 370 ITR 107 (Guj.)(HC), the Gujarat High Court laid down guidelines to streamline the procedure for reopening of assessment in the State of Gujarat. It is desired that CBDT should direct all Assessing Officers irrespective of the State to follow the guidelines of the Gujarat High Court.

In CIT v. State Bank of India (2015) 375 ITR 20 (Bom.) (HC), the Bombay High Court held that the Department cannot arbitrarily pick and choose which orders of the ITAT should be challenged in the High Court. If ITAT has followed an order which is not challenged by the Department, then an affidavit must be filed explaining the distinguishing features which warrants a different view in a subsequent case with identical facts.

In Pirmal Fund Management Pvt. Ltd. v. DCIT (Bom.) (HC), strictures were passed against high-handed and unfair approach of the AO in refusing to give an acknowledgement of stay application. The Chief CIT was directed to ensure such behaviour is not repeated. Department was directed to nominate another AO to hear stay application.

In A.T. Kearmey India Pvt. Ltd. v. ITO (2014) 363 ITR 172 (Delhi) (HC), the High Court warned the AO of contempt action for seeking to overreach ITAT’s stay order and directed the revenue to lift the attachment and ensure that the amounts recovered are deposited to the bank account of assessee. A copy of the order was also sent to the CBDT for information.

In CIT v. Reliance Infrastructure Ltd. (Bom.) (HC) (, the High Court summoned the senior officials of the Department and strictures were passed for “irresponsible conduct” of filing an appeal on a point which was admittedly covered against the department by a judgment of the Supreme Court.

In CIT v. Harinagar Sugar Mills Ltd. (2014) 226 Taxmann 190 (Bom.) (HC), the High Court did not condone a delay of 117 days in filing appeal and of 1,248 days in filing review petition. A copy of the order was forwarded to Chief Commissioner of Income-tax and to the Secretary Finance, Government of India for remedial action.

In Thermax Babcock & Wilcock Ltd. v. CIT (Bom.)(HC) (, the High Court laid down zero–tolerance policy over adjournments. It was held that appeals may be dismissed, heard ex-parte and/or costs imposed if counsels are not prepared. The copy of the order was forwarded to Joint Secretary, Department of Law & Judiciary, Government of India.

In CIT v. Kirloskar Oil Engineers Ltd. (2014) 364 ITR 88 (Bom.) (HC), the Department was given last opportunity and warned of heavy costs for wasting judicial time by filing appeals on covered matters.

In BBC World News Limited v. ADIT (2014) 362 ITR 577 (Delhi) (HC), proceedings of original records were not found. The High Court expressed alarm at the shoddy record keeping by the Department. Adverse remark was made because papers/documents on record were not serially numbered and indexed. A direction was given to keep proper records.

In UTI Mutual Fund v. ITO (2012) 345 ITR 71 (Bom.) (HC), referring to the judgment in KEC International v. B. R. Balakrishnan (2001) 251 ITR 158 (Bom.) (HC), the Court laid down the guidelines on how stay application should be dealtwith. In Rajasthani Sammelan Sarvoday Balika Vidyalaya and Anr. v. ADIT (2013) 350 ITR 349 (Bom.) (HC), the High Court cautioned the Department and directed it to follow the settled guidelines for recovery of tax.

In Directorate of Revenue v. Uttamchand (2016) (333) E.L.T. 80 (Delhi) (HC), strictures were passed against the Revenue for condemnable lethargic attitude in pursuing prosecution matters. Where the petition was filed after eight months of order of the Trial Court, no reason was given as to why the trial was protracted at the Trail Court stage for more than 24 years.

It may also be appreciated that in recent time even ITAT has also passed strictures against the revenue officials for filing an appeal before the Tribunal without application of mind and directed the CBDT to take note and remedial action. .

In Commissioner of Customs (Import) v. Do Best Infoway the CESTAT has commented adversely on the casual manner in which the matter was handled by the Adjudicating Authority and the Commissioner (Appeals). CESTAT has asked CBEC to issue appropriate guidelines to quasi judicial authorities to discharge their duties publicly keeping in view the spirit of the ratio laid down by Apex Court in the case of Gordhandas Bhanji (1952) AIR 16 SC. In response, the Central Board of Excise and Customs vide Instruction No. 390 dt. 13-4-2016 ( issued the guidelines to all quasi-Judicial officers, as regards the manner in which the proceedings should be conducted by the public authority. The timely action of the CBEC deserves to be appreciated. We hope similar circular will be issued by the CBDT. The question to be asked is what action has been taken against such officers who do not follow the basic principles of law, are they fit to discharge the function as quasi-judicial authority?

While the Judiciary can only pass orders to address grievances and to improve administration, there is no mechanism by which the Judiciary is able to oversee the implementation of its orders. Therefore, I think it is the duty of the Bar to ensure proper implementation of the orders. While the above are few recent cases wherein strictures have been passed against the Department or certain directions issued, there could be many more such orders. It is my humble appeal to all tax professionals to forward to the Federation, all such orders which could then be compiled and forwarded to the Hon’ble Finance Minister for remedial action. With the help of the Right to Information Act, the Federation and other professional organisations can play a proactive role in implementing the orders passed by High Courts.

It has been observed that even when the CBDT accepts the law laid down by various High Courts, the same is not communicated to the public at large. It is desired that the CBDT publishes a yearly circular or notification informing the taxpayers of the judgments accepted by the CBDT. This will help in reducing the litigation in various High Courts as well as assist taxpayers in planning their taxation issues.

In as early as in the year 1955, the CBDT vide Circular No. 14 (XL-35) dated 11th April, 1955, guided Assessing Officers as regards their duty to assist taxpayers in every reasonable way, particularly in the matter of claiming and securing reliefs. It is desirable that this instruction may be reiterated by the CBDT so as to assure tax payers of its commitment for fairness.

In the recent past, in order to reduce litigation, the CBDT has come out with instructions on various subjects such as taxability of surplus on sale of shares and securities as capital gains or as business income {[2016] 382 ITR (St.) 14}. Also, in order to address taxpayer grievances, the CBDT has also issued instructions for passing of rectification orders in writing and within the prescribed time limit {[2016] 382 ITR (St.) 16/ 17}. The CBDT deserves credit for such taxpayer initiatives.

Dr. K. Shivaram