Income Tax 01 Feb,2020
“Uncertainty” more dreadful, than even the most draconian law
Hemant O SharmaChartered Accountant
Pradeep AggarwalAdvocate Supreme Court
Gopal C MehtaAdvocate High Court

"Golden and straight mete wand of the law". . 

1. The efforts of the government in eliminating or for that matter reducing the harassment of the taxpayers at the hands of the department are praise-worthy.

2. It is submitted that there are sufficient and good number of laws, with equally good measures, including in the Income-Tax law, for the betterment and welfare of the society.

3. It bears a recall that Income-Tax law can be more crucifying, than even the more draconian criminal law.

4. It needs to be emphasized that the harshest of the provision of income tax law, when founded & also implemented on the principles of equity, fairness and justice cannot be disputed & also shall not furnish reason enough for it being dreadful, more particularly when the courts rescue the beleaguered assessees against the onslaughts of the department.

5. It is noteworthy that the "thing to fear the most" in income-tax proceedings, is the "uncertainty" in the interpretation & implementation of the simplest provision of the Income-Tax law.

6. While there can be no quarrel with the "golden and straight mete wand of the law" being implemented both in letter and spirit, it is only the "uncertain and crooked cord of discretion" with which the law is implemented that is the reason for worry, as referred to by Lord Tomlin.

Elimination of corrpution

7. Elimination of corruption can help infuse certainty in the interpretation of the tax laws which is the need of the hour. If there is certainty in the interpretation of the tax laws, it would lead to elimination of corruption.

8. Nevertheless, this Government needs to be complimented for its consistent, incessant and far-reaching efforts at reducing corruption.

Faceless Appeals – can it reduce uncertainty??

9. The Government has rightly introduced faceless appeals, like the faceless scrutiny.

10. The intention of the government to eliminate the taxpayer-department interface is not in doubt; but if implemented in the right earnest would help in reducing corruption.

11. It is understood that this Government has been legislating and also making policies to reduce avenues of litigation.

12. In this context it needs to be clearly understood that the provisions of the tax law are very complex and subject to changing interpretation on a daily basis. Even the courts differ and also form larger benches to interpret even the basic issues of income-tax.

13. In view of the above, justice cannot be expected to be delivered by the Assessing Officer, when left to himself in the interpretation of the law, more particularly when he is a revenue officer, though a quasi-judicial authority. Left to himself, his leanings towards the Revenue would be natural & pre-ordained, though not legislated to be so, more characteristically when he is aware that the vibrant judiciary will ultimately reverse the orders which are not in conformity with the law.

14. The caution of the Hon'ble PM in his speech at the inauguration of Delhi Economics Conclave 2015, bears a recall: "We are also taking several steps to serve the honest taxpayer better……… I have also instructed that the performance appraisal system, for Income Tax Officers be changed. The appraisal should reflect, whether or not the officer's orders and assessments have been upheld on appeal. This will deter corruption and also motivate officers to pass correct orders. When fully implemented, these changes, namely online scrutiny, and changes in performance appraisal have transformative potential."

15. The direction of the CBDT in "CBDT Strategy to ensure Quality in Assessment Work for 2016-17", is worth recalling:

(C) Quality of assessment:- The Pr.CIT/CIT should organize in-house conference / meeting at least one in every quarter wherein the Assessing Officers are to be guided about how the investigation is required to be carried out on various CASS issues. This may include issue wise and industry wise strategy / approach of investigation. First of such meeting should be held on or before 30 June 2016.

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The statement on strategy should ensure that within the limited time and resources the assessment orders framed by the AOs should be: (i) speaking orders, (ii) error-free from audit point of view, (iii) adhering to the principles of natural justice, (iv) having appropriate detailing and marshalling of facts and relevant legal provisions wherever additions / disallowances are being made, (v) be avoiding frivolous additions or disallowances leading to high pitched assessment."

16. Despite the very noble intent of the CBDT in ensuring quality assessments, so as to reconcile with the aforesaid direction of the Hon'ble PM, there does not seem to be any visible improvement in the quality of assessment orders, for which the blame lies fairly, squarely and undoubtedly on the Pr. CIT/CIT, more particularly when he is the head of the Range/CIT and ought to be therefore answerable & accountable for the conduct of his subordinates.

17. Absence of involvement of the Pr. CIT, inter alia, at the stage of assessment, preferring to remain secluded and oblivious of the assessment proceedings, it is submitted, results in the quality of assessment that it is today. The orders being passed, inter alia, without application of mind, in denial of principles of natural justice, incorrect assumption of facts and also incorrect assumption of law. Hence the necessity on the part of Government to promulgate "Vivad se Vishwas tak" schemes.

18. Necessity of certainty in tax laws - It is necessary, though it is a bit out of context, to point out the findings of Nick Robinson, a visiting faculty at the Centre for Policy Research: "that the Courts are becoming a lottery of uncertainty right up to the very top. Earlier this year, 14 former Supreme Court and High Court judges sent a letter to President, Pranab Mukherjee asking him to commute the death sentence of 13 convicts. Reason? They argued that the Supreme Court had not been following its own precedent, and if it had, these convicts would not have been given the death penalty. The fastest way to tackle the Supreme Court's notorious backlog and restore confidence in the decisions of the upper judiciary might not be to decide more cases, but to decide, fewer cases, with more certainty." It is important to emphasise the fact that such is also the necessity of certainty, even in interpretation of tax-laws.

19. Unfettered powers should not be conferred on the authorities - The Parliamentary Standing Committee on DTC, 2010, recommended "minimising scope of discretionary powers of department and circumscribing the same by way of clear-cut and unambiguous rules. Unfettered powers ought not to be conferred on authorities." At the same time it also recommended accountability of tax officials - protection against high-pitched assessments. It further stated that: "With a view to enforcing accountability of the Department, the unreasonable tax demands raised and adjudicated, if finally quashed at higher levels, should be adversely reflected in the career dossier of the concerned officials. Proper disciplinary action should be taken against such officials responsible for irrational assessments."