The editor-in-chief of All India Federation of Tax Practitioners in its journal for the month of March, 2015, much appreciates the Finance Bill, 2015 but, while concluding its pleasant comments, inter-alia, states as under:
“Amendments to the fiscal laws each year is a regular feature. But, the Federation is of the opinion that whatever may be the law, unless the provision of accountability is introduced in the Act, honest taxpayers will have to suffer at the sweet mercy of few adventurous tax officials, and, therefore, it is essential for the law makers as well as the federation to focus the attention on this vital issue till such time the success is achieved in this behalf.
Recently, an assessee brought to our notice that the returned income was loss of
Rs. 2 crores, and the Assessing Officer, for reasons best known to him converted the loss into profit and assessed at
Rs. 4 crores by treating entire cost of purchase of machinery as income, sister concern’s sales added as the income of the assessee.
One has to imagine the harassment meted out to the assessee by such unlawful actions of the Assessing Officer. This is mainly because albeit the entire addition is deleted by higher authorities, no question will be asked of the Assessing Officer concerned for making such illegal additions. So both escape from the scrutiny on the ground that they being public servants their actions are honestly done. Therefore, it is high time, all concerned with this deeply-rooted malady, must ponder over it and seek remedy in the matter. One will find a number of High Court judgments warning tax officials to follow the due process of law while rejecting stay applications, notwithstanding that the Apex Court as well as High Courts have prescribed guidelines on this issue. Sadly, some tax officials do not show any respect to the judgments of the higher Courts and nothing happens to them. In such a disgusting scenario, we earnestly appeal to the Government to take drastic steps to bring accountability in tax administration and advise tax officials to follow the culture of tax service.”
2. The above said suggestions of the All India Federation of Tax Practitioners are fully justified for the reasons given hereunder :
I. Accountability in Tax Admini-stration
(i) In addition to the reasons given in the introduction portion, reproduced above, two cases namely of M/s. P. S. Agencies1 and M/s. Gurcharan Singh & Sons recently came up before the Hon’ble Appellate Tribunal, VAT, Delhi, wherein the refund claims of the dealers were rejected, inter alia, observing that the cases had been examined by the department and on their advice the refunds had been rejected. A judgment of the Hon’ble Delhi High Court in the case of M/s. Sita Juneja & Associates2 was brought to the notice of the Hon’ble Tribunal, wherein it was held, relying on a judgment of the Hon’ble Supreme Court in the case of Orient Paper Mills Ltd. v. Union of India3 wherein it was held
“That a quasi-judicial power cannot be controlled by the directions issued by the Board. No authority, however high placed can control the decision of a judicial or a quasi-judicial authority that is the essence of our judicial system.”
The Hon’ble Tribunal was also apprised of the observations of the Hon’ble Supreme Court in Mahadayal Premchandra v. Commercial Tax Officer, Calcutta4 and Another which are as under:-
“That is the essence of our judicial system. There is no provision in the Act empowering the Board to issue directions to the assessing authorities or the appellate authority in the matter of deciding disputes between the persons who are called upon to pay duty and the department. It is true that the assessing authorities as well as the appellate authorities are judges in their own cause, yet when they are called upon to decide disputes arising under the Act they must act independently and impartially. They cannot be said to act independently if their judgment is controlled by the directions given by others. Then it is a misnomer to call their order as their judgments, they would essentially be the judgments of the authority that gave the directions and which authority had given those judgments without hearing the aggrieved party.”
In view of the above judgments the impugned orders passed by the authorities below were set-aside and appeals filed were accepted.
This shows how some of the honest tax payers are dragged to litigation – may be up to Appellate Tribunal stage. In this context the following observations of the Hon’ble Rajasthan High Court in Chiranji Lal Tak v. UOI5 are quite apposite: –
“Litigation is not a luxury and/or amusement of entertainment. It is not pleasure or pleasant to come to the Courts. Only when the Union or a State or its officers make it unavoidable, the litigants come up before the Court for redressal of their grievances or for enforcement of their legal or fundamental rights. The litigation is heavily costly…………”
(ii) The above apart, the Hon’ble Punjab & Haryana High Court has observed in its judgment in the case of Leader Engineering Works v. Commissioner of Income Tax, Amritsar II6, that Taxation Laws are technical. This implies that there should be a cadre of taxation officers of the department so that they do not commit mistakes of the type as mentioned above.
(iii) It may be recalled that when sales tax was introduced in the National Capital of Delhi w.e.f. 1-11-1951, there were examination Rules in force in the integrated taxation department which consisted of sales tax, entertainment tax, excise and registration which yield revenue to the Government. For appointment as Sales Tax Officer and Assistant Sales Tax Officer, an official had to qualify the departmental examination by higher standard and for appointment to the post of Sales Tax Inspector the requirement of qualifying the examination by lower standard was a must. The last departmental examination took place in the year 1967 and it can be said that during those days the Sales tax department was one of the most efficient departments under the Delhi Government.
(iv) Another advantage of the examination system was that junior officials who were aspirant for higher posts, could get a chance of promotion in the department much sooner than otherwise it would be possible. To take an example, the author of this article joined the department as a steno-typist in June 1952; promoted as a Stenographer through a test, then got his cadre changed as a Senior Clerk. In May 1960, took the departmental examination as a senior clerk and stood first in papers (i), (ii), (iv) & (vi) and in the aggregate. The then venerable Commissioner, Sales Tax, Shri V.R. Bapat IRS, the only Commissioner so far who served the Department for full five years from 1-6-1959 to 31-5-1964 issued him a demi official letter no. 1044/CST dated 15-7-1960 conveying his heartiest congratulations for securing the highest marks. This facilitated the path of progress and proved as an incentive to others. It was because of his qualifying the examination by higher standard that the author reached the status of Assistant Legal Advisor in the year 1975 and then Sales Tax Officer in February 1978; nay, on the request of a semi-Government department, proceeded on deputation as a Deputy Divisional Manager (law) and, retired as a Joint Divisional Manager from that semi Government of India department. It can be said that all this was possible only because of qualifying the departmental examination.
(v) Attention in this connection is invited to a judgment of the Hon’ble Supreme Court in the case of Bharat Sanchar Nigam Ltd. and Anr. v. Union of India and Another7 wherein it is observed that “the contents of legal concepts do not remain static. Courts must move with the times”. This aspect emphasizes all the more that officials employed to administer a fiscal statute should have experience, so that, they do not make mistakes of the type as made in the cases of M/s. P.S. Agencies and M/s. Gurcharan Singh & Sons, mentioned above.
(vi) Attention in this connection is further invited to the principle laid down by the Hon’ble Supreme Court in its judgment in Parashuram Pottery Works Co. Ltd. v. Income Tax Officer, Circle-I, Ward A, Rajkot8 which reads as under:
“It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce, repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activities.”
2. Culture of tax
The principles decided in the following judgments amply justify the need for culture of tax :-
Principle decided by the judgment
“A humane and considerate administration of the relevant provisions of the Income-tax Act would go a long way in allaying the apprehensions of the assessees and if that is done in the true spirit, no assessee will be in a position to charge the revenue with administering the provisions of the Act with ‘an evil eye’ and unequal hand”
“The taxing authorities exercise quasi-judicial powers and in doing so they must act in a fair and not a partisan manner. Although it is part of their duty to ensure that no tax which is legitimately due from an assessee should remain unrecovered, they must also at the same time not act in a manner as might indicate that scales are weighted against the assessee.”
“Tax planning within framework of law is legitimate.”
Punjab & Haryana High Court12
“It is a legitimate attempt on the part of the assessee to save money by following a legal method. If on account of a lacuna in the law or otherwise the assessee is able to avoid payment of tax within the letter of law, it cannot be said the action is void because it is intended to save payment of tax. So long as the law exists in its present form, the taxpayer is entitled to take its advantage. We find no ground to accept the contention that merely because the gift was made with the purpose of saving payment of wealth tax, it needs to be ignored.”
Orissa High Court13
“It has to be borne in mind that an assessee may be bad enough, but there is no reason why the assessing authorities must be worse and must not conform to the requirements of law in making a best judgment assessment. Observance of the rule of law is of vital importance and is compulsory not only for those who are to obey the law, but also for those who are to enforce the same.”
Allahabad High Court14
“Law does not take notice of trifles.”
“The order of the higher judicial authority should be followed by the sub-ordinate authority.”
Delhi High Court16
“The need for consistency of approach and uniformity in the exercise of judicial discretion respecting similar causes and the desirability to eliminate occasions for grievances of discriminatory treatment require that all similar matter should receive similar treatment.”
Gujarat High Court17
“Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department, for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rest with the assessees on whom it is imposed by law.”
“It is well settled that no man should suffer because of the fault of the Court or delay in the procedure. Broom has stated the maxim actus curiae neminem gravabit – an act of Court shall prejudice no man.”
1. 52 DSTC page J-64
2. 38 DSTC pages 60-74
3. (1978) 2 ELT (J-345)
4. AIR 1958 SC 667
5. (2001) 252 ITR 333-335 (Rajasthan)
6. (1980) 124 ITR 44 (P.& H.)
7. (2003) 145 STC 91 (para 44)
8. (1977) 106 ITR 1-10 (last para)
9. Pannalal Binjraj v. UOI (1957) 31 ITR 565-597
10. CIT West Bengal I v. Simon Carves Ltd. (1976) 105 ITR 212
11. Union of India & Ors. v. Playworld Electronics Pvt.Ltd. & Anr. (1990) 184 ITR 308
12. CGT v. Satya Nand Munjal (2002) 256 ITR 516-528
13. Larsen & Toubro Ltd. v. State of Orissa (1998) 111 STC 75-77 para 6
14. Dhigra Mechanical Works (1972) 29 STC 238 (1971) UPTC 821
15. Union of India v. Kamalakshi Finance Corp.Ltd. AIR 1992 SC 711
16. Deeksha Suri v. I.T.A.T. (Delhi) (1998) 232 ITR 395-396
17. Choksi Metal Refinery v. C.I.T. (1977) 107 ITR 63-71
18. Atma Ram Mittal v. Ishwar Singh Punia (1988) 4 SCC 284
H. L. Taneja