Shivakantjha.org - National Tax Tribunal will do no good!
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
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 [http://laws.findlaw.com/7th/961659.html ].
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
How does it work in the UK?
I would illustrate how this works in the U.K. from a concrete case: Furniss
v. Dawson  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.