From the Editor-in-Chief
 

CONCEPT OF PROMISSORY ESTOPPEL MUST BE MADE APPLICABLE TO TAXATION LAW-RETROSPECTIVE AMENDMENTS IS THE MAIN CAUSE OF INSTABILITY IN TAX LAW.

  1. Finance Bill, 2007 has many proposals that are to be made operative with retrospective effect. There are 84 clauses in the Bill, of which 73 relates to Income Tax, 11 to Wealth Tax. It is to be noted that 30% of the provisions are to operate retrospectively. The trend in past decade appears to be that to overcome a decision of the Apex Court which is in favour of the assessee, the law is amended. Instead of respecting the decision of the Supreme Court the Government amends the law retrospectively to undo what the judiciary has done. Earlier the Government would amend the law only when the Apex Court delivered the judgment in favour of the assessee. But now, even when High Courts decides in favour of the assessee, the Government amends the law. Recently the amendment are made to overcome the decisions of the Income Tax Appellate Tribunal.
     

  2. Shri N. A. Palkhivala in the year, 1991, in his article titled “The Maddening Instability of Income Tax Law”, on the occasion of the Golden Jubilee of the Income Tax Appellate Tribunal stated as under: “Today the Income- tax Act, 1961 is a national disgrace. There is no other instance in Indian jurisprudence of an Act mutilated by more than 3300 amendments in less than
    thirty years”. Today Income-tax Act 1961, has suffered more than 5600 amendments.
     

  3. From the paper reports we understand that the Government is in the process of finalization of new Income Tax Code drafted by the committee set up by the Board. It is very unfortunate that not a single professional has been made part of the committee. The committee did not interact with the professionals. The professionals dealing with the tax matters would have
    contributed objectively for better taxation policy.
     

  4. One of the objects of the Federation is to make representation for better tax law and administration, hence, following conceptual suggestions are made for better tax law and administration.

  1. Bring accountability in tax administration

    Some of the officers make additions, being fully aware that additions will be deleted. Similarly, some of the First Appellate Authorities also confirm the additions knowing fully well that the additions will be deleted. Statistics show that 85% of additions made by the assessing officers are deleted by the Tribunal, which is final fact finding authority. This type of unproductive work can be reduced to minimum, if accountability is brought in the tax administration.
     

  2. Major amendments in Tax Laws should be made only once in five Years

    The Finance Bill of each year should deal with the rates of taxation and certain clarification or simplification may be made. But major amendments should be made only once in five years.
     

  3. Independent Committee to suggest amendments in Tax Laws

    There has to be an independent Committee consisting of representatives from profession, tax administration, tax payers, judiciary, etc. to go into details of various suggestions received from various bodies. After examining in detail, they should suggest amendments which should be made public for debate. Only thereafter the amendments are introduced. If this process is followed we are sure 90% of litigation will be reduced automatically. Further the time, money and energy of tax collectors and assessee can be utilized for more productive purposes.
     

  4. Tax evaders and corrupt officials must be kept away from public functions of Government and professionals

    We know department conducts survey or search against the alleged tax evaders. After a few days one finds the alleged tax evader sharing the dais with ministers and top Government officials. It is the duty of the ministers and Government officials before sharing the dais with the persons to verify at least whether any search action has been conducted against him by any of the tax authorities. If yes what is the result. Similarly we find when an action is taken against a corrupt official the paper carries big news, but the final result of the same is not reported any where. CBDT should publish such information at least once in a year and send in to the various professional organizations for publication in the dedicated journal.
     

  5. Concept of promissory estoppel

    We are aware that the principle of promissory estoppel is not applicable to Government, however, considering political scenario, development of economy and inflow of investment in India, at least in fiscal laws, the concept of promissory estoppel should be introduced, which will bring stability in tax law.
     

  6. Transparency in legislation

    We observe that there is no concept of transparency in legislation. Before passing the legislation it is the duty of the Government to send the draft legislation to the various bar associations for their view. Once view is received the draft legislation can be introduced in the form of Bill. However, we find the Government first introduces the bill and when criticism is received tries to amend the law. One classic example is amendment introduced in the National Tribunal Ordinance. The Government hurriedly promulgated the National Tax Tribunal Ordinance on 16-10-2003. When the ordinance was challenged the National Tax Tribunal Bill, 2004 was introduced on 18-11-2004 and referred to Parliament Standing Committee, personnel, public grievances, law and justice for their suggestion and report. The committee presented the report on 2-8-2005. Committee strongly objected to the proposed National Tax Tribunal. Inspite of unfavourable report from the Parliament Committee, the Bill was passed and National Tax Tribunal Act, 2005 received the assent of the President on 20-12-2005. When the Act was challenged and stay was granted by various High Courts, the Government made an application to transfer all the matters to Apex Court. Before the Apex Court, the Government has filed an affidavit in the Court. The Court was not satisfied with the affidavit, the Court directed the Government to bring amendment in laws accordance with whatever stated in the affidavit and any other point which Government desire to consider. Based on the affidavit the National Tax Tribunal Ordinance, 2007 was promulgated. The Government once again introduced the National Tax Tribunal (Amendment) Bill, 2007 (2007) Taxman 284 (St.). If the Government would have interacted with the Bar Council of India and the Petitioners, the Government would have benefited and there could have been some workable solutions which could have saved the tax-payers money and object would have been achieved to reduce the pendency in various High Courts. We fail to understand why Government is hesitating to have a dialogue with the persons who are affected by the legislation?

  1. Federation always believed that it is the duty of the Association to make suggestion objectively. Hence, the above suggestions are made in the interest of tax-payers for better tax law and tax administration. We hope Government will look into our suggestion.

    Dr. K. Shivaram
    Editor-in-Chief