- National Tax Tribunal will do no good!

Dear Netizen,

SO much hopeless have become some of the pillars of our Great Democracy that ordinary citizens of India have developed a 'sense of resignation' towards every wrong they see being committed by them and tend to treat it as a fait accompli! However, here is an ordinary but distinguished citizen who has written an erudite letter to the Prime Minister and Finance Minister drawing their attention towards the futility of certain policy moves announced recently.

While making an attempt to prove that how unsound is the idea of setting up a National Tax Tribunal, the author, who is a retired Chief Commissioner of Income Tax and a well known advocate of Supreme Court, has tried to, in Part I and Part II, deal with what would be a mere instance of Brownian motion, besides a futile harking back to the Emergency when it was deliberated to whittle down the High Court's jurisdiction to turn it, in the long-run, a mere court of residuary jurisdiction.

In Part III, he deals with certain aspects of our economic management in sad forgetfulness of the Gandhian talisman which the Father of the Nation prescribed as a sovereign corrective remedy.

And Part IV deals with how to set up an efficacious institution of an ombudsman capable of rising up to our expectations. The last section refers to certain fundamental laws of our existential grammar to which economic management is no exception. It ends with a variant on Lord Nelson's call to the fleet given when all was just about to be lost in the battle of Trafalgar.

We are also passing through critical and testing times when our critical vigilance is not only the price of liberty but is the very price of our existence as a nation. You are requested not only to make out what the words say through their collocations but also what is suggested even through the blank spaces of silence.You would surely agree that the ship of democracy cannot survive without Hope; but Hope cannot remain steadfast without courage and imagination on the part of our common citizenry.


National Tax Tribunal will do no good!

By Shiva Kant Jha

Dear Shri Jaswant Singhji,

I am writing this letter as an ordinary citizen of this great Republic of India to our own Finance Minister. I feel this credential is good enough though I think it worthwhile to mention that I belong to a family of freedom fighters in the cause of India's struggle for independence. I too had my share of sufferings during the Quit India Movement, and the British retaliation that followed it. These credentials of this humble self were appreciated by Hon'ble Delhi High Court in recognizing my locus standi in a PIL which I had filed against the Union of India and the CBDT. This PIL was fully allowed and the Court recorded in its judgment rare appreciation for the “noble work” which I had done. Other trappings and trimmings, which as a rolling stone I have gathered over years, are set out in the letter.

I read some of your ideas which you expressed in the recently held Conference of the Chief Commissioners and the Directors General of Income-tax. Some of your ideas, as reported in the press, made me reflect over. Whilst you must have got the benefit of advice from persons far abler than me, yet I have considered it fit to write to you this letter so that the public issues of vital importance are appreciated with thoroughness they deserve. Constraints of space would inhibit me from going in technical and statistical details. Besides, you may feel while reading this letter that things not said in so many words are more expressive in the spaces of silence.

National Tax Tribunal : An unsound idea

THE idea of setting up of a National Tax Tribunal is an old concept which did not find favour for several reasons some of which are shortly stated thus:

The Income-tax Appellate Tribunal is itself a national tribunal with benches all over the country. When an institution operates as an appellate authority having national jurisdiction it cannot operate on a Procrustean bed: differences of views are natural. The system at work tries to minimize them. Such differences are not always bad. They are often good as they highlight new facets in the issues involved. And it is good for the administration of law and justice. Judicial decision-making involves several indeterminate factors: personal, technical, and teleological. This is my view based on my seven years of experience when I functioned as the Department's Representative before the Tribunal. And I have not been led to revise my view after seeing closely how the High Courts and the Supreme Court work. These so as humans, when all is said, are themselves indeterminate equation.

Both the Income-tax Appellate Tribunal and the High Courts have developed ways to minimize the number of divergent decisions on similar issues. No better model is right now conceivable in our context unless we locate all the Benches of the Income-tax Appellate Tribunal at the same location as it is in the case of the US Tax Court; or we can afford to follow the pattern of the French Conseil d'Etat which is a sort of exclusive club housed in the Palais-Royal adjoining Louvre across the ru de Rivoli. As this sort of centralization is neither fair nor feasible, the Department cannot do much in the matter. Issues under appeals can be bunched, and the Income-tax Appellate Tribunal or the High Courts can be moved for early disposal of such issues. The Departmental Representatives should be specially selected. They should be equipped with the technology to have quick access to the decisions being delivered by the benches of the Income-tax Appellate Tribunal at different places in the country. We must remember that the judges are often no good unless properly assisted.

If the idea is to set up a tribunal under Part XIV-A of the Constitution of India, it is not worth doing. Part XIV-A was inserted in the Constitution by the Constitution (Forty-second Amendment) Act, with effect from 3.1.1977. It was conceived as integral to the strategy evolved during the infamous Emergency to emaciate the High Courts of the various dimensions of its jurisdiction with an obvious design to make the great courts, the successors of the King's Bench, merely the courts of residuary jurisdiction. You may re-read for light paras 5.47 and 5.48 of the Shah Commission Report showing that on July 25, 1975 the locking up of the High Court had been considered. Let us not take a stride on a path advancing towards goals so ignoble.

As we are fast becoming a mere copy-cat (and quite often Peter Pan too ) we would like, perhaps, to have a tax court on the model of the U.S Tax Court. But shall we be able to build a Tax Court on the U.S. pattern? I do not think so. The U.S. Tax Court is established by the Congress under Article I of the U.S. Constitution, and is a Federal Court of Record having established sound traditions. It is composed of 19 judges appointed by the President of the U.S.A. and is located at 400 Second Street, N.W., Washington, D.C. 20217 but the judges travel nationwide to conduct cases in various designated cities. Its decisions are subjected to an appellate control by the United States Court of Appeals which, in turn, divided in several Circuits, and then a further appellate control by the U.S. Supreme Court. To illustrate, the 7TH Circuit Court disposed of appeal from the U.S. Tax Court in Northern Indiana Public Service Company v. Commissioner of Internal Revenue [ ]. In Knetsch v. United States 364 U.S. 361 (1960) the U.S. Supreme Court affirmed the Tax Court's decision against the tax-payer. Your National Tax Tribunal is surely not going to be a replication of the U.S.Tax Court. In the United Kingdom the pattern of appellate control is almost the same. Section 56 of the Taxes Management Act 1970 provides :

‘(1 ) Immediately after the determination of an appeal by the Commissioners, the appellant or the Inspector or other officer of the Board, if dissatisfied with the determination as being erroneous in point of law, may declare his dissatisfaction to the Commissioners who heard the appeal.

(2) The appellant or the Inspector or other officer of the Board, as the case may be, having declared his dissatisfaction, may, within thirty days after the determination, by notice in writing addressed to the clerk to the Commissioners, require the Commissioners to state and sign a case for the opinion of the High Court thereon…'

How does it work in the UK?

I would illustrate how this works in the U.K. from a concrete case: Furniss v. Dawson [1984] 1 All ER 350 H.L.] In this case the Crown appealed with the leave of the Court of Appeal against the decision of that court dismissing an appeal by the Crown from the judgment of Vinelott J. dismissing an appeal by the Crown by way of case stated from a decision of the Commissioners for Special Purposes of Income-tax Act allowing appeals by the tax-payers.

In India we follow basically the pattern of judicial control as in the U.K. The Commissioners of Special Purposes resemble our Income-tax Appellate Tribunal. Before the changes brought about by the Finance (NO 2) Act, 1998 with effect from 1.10.1998 our Income-tax Appellate Tribunal stated a case and referred questions of law for answer. After this change the High Court has acquired jurisdiction to decide appeals on a substantial question of law. The change was effected without good reasons. This has done no good to the tax administration. In tax jurisprudence the protocol of reference is better than the protocol of appeal (an excellent work to show how it is so is by A.T. Markose's book on the judicial control of the administrative actions). At best it was a Brownian motion. Let not by setting up a National Tax Tribunal commit a folly of producing one more instance of Brownian motion.

Why not, if something more than Brownian motion is to be made, constitute a court under Art. 247 of the Constitution of India? This Article runs thus:

“ Notwithstanding anything in this Chapter, Parliament may by law provide for the establishment of additional courts for the better administration of laws made by Parliament or of any existing laws with respect to a matter enumerated in the Union List.”

Many are not even aware of this. H.M. Seervai in his celebrated three volume Commentary on the Constitution of India does not notice it. Dr Basu has not a single word on it. Let us explore the wisdom of this Article. If we are out to do something new, why not set up a court as contemplated by Art 247? This Article corresponds to S.101 of the British North America Act 1867. And this Article grants a specific power though the power to legislate on a subject itself implies power to set up courts to administer law relating to that subject. (Peacock v. Newton Society [(1943) 67 CLR 25]

On fundamental juristic principles a National Tax Tribunal cannot be a substitute for the High Court. A tribunal is an authority of limited jurisdiction whereas the High Court is a court of unlimited jurisdiction [Grafton Isaacs v. Emery Robertson , (1985, 1 AC 97)]. Besides, the High Court has jurisdiction to do complete justice [B.C Chaturvedi v. Union of India : (1955) 6 SCC 750 ; Shushil Kumar Modi v. State of Bihar, 1996 (1) PLJR, p 574)] The present global world, with limitless possibilities on account of strides in science, esp. information technology, needs a court of unlimited jurisdiction (as is the High Court) to respond to the new problems for solving for which new juristic criteria may have to be evolved. We are in a phase in which we must seek instruction from what Judge Manfred Lachs of the International Court of Justice said:

“Whenever law is confronted with facts of nature or technology, its solution must rely on criteria derived from them. For law is intended to resolve problems posed by such facts and it is herein that the link between law and the realities of life is manifest. It is not legal theory which provides answers to such problems; all it does to select and adapt the one which best serves its purposes, and integrate it within the framework of law.”

The High Courts, as a Common Law court, are most appropriate to respond to the new challenges as they alone can show the creativity of common law.[ Lord Devlin L. J. observed in Ingram v. Little (1960) 3 All ER. 332, p. 351 : “The true spirit of the common law is to override theoretical distinctions when they stand in the way of doing practical justice.” ]. They have a rich tradition of creativity and independence. You would agree that we are living in a phase when many good traditions are crumbling, and hardly any good tradition is being made. - Links on Shivakantjha - Links on Shivakantjha

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