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The ordeal of multiple proceedings
July, 08th 2006


The I-T Department's approach to taxpayers must be one of assistance, not confrontation

The long-drawn process of enquiries and investigations puts the taxpayers through much hardship.

In the context of certain enquiries that are being made concerning a cine actor and his family members, some observations made by a spokesman of a political party and a senior officer of the Income-Tax Department raise issues which need to be pondered upon. Mr Abhishek Singhvi, an eminent lawyer, is reported to have said that the actorcan challenge the I-T notices in a court.

Mr H. Tulsiyan, the Chief Commissioner, Mumbai, without mentioning any name, has been quoted to having said that "...if notices have been issued to any one, the concerned person has to reply to them while the law will take its own course...the Department will proceed as per law."

There cannot be any difference in opinions as far as the abstract propositions mentioned are concerned. But then policy aspects in such matters cannot be ignored in deciding on the course of action concerning enquiries under the tax laws.

Certainly, every one has the right to approach the courts and the Tax Department, but the more important issues are whether (i) all taxpayers have the capacity and means to approach courts; and (ii) whether courts should be burdened with work which can be sorted out with cooperation between taxpayers and tax collectors. The objective has to be to see that the proceedings do not proliferate and taxpayers are not made to face the ordeal of multiple proceedings. This is possible when notices issued against them bring out the prima facie issues, and not ones that seek to wield unquestioned authority and power, calling for from any person, any record, document or information.

The courts too have expressed concern about the indiscriminate issue of notices from time-to-time. In the Hindustan Poles Corporation vs CCE (2006 196 ELT 400) case, relating to Central Excise and decided on March 27, 2006, the apex court observed thus:

"...The Revenue must make serious endeavour to ensure that all those who ought to pay excise duty must pay but in the process the Revenue must refrain from sending off indiscriminate show-cause notices without proper application of mind. This is absolutely necessary to curb unnecessary and avoidable litigation in courts, leading to unnecessary harassment and waste of time of all concerned, including the Tribunals and courts."

The suggestion to go to the courts, thus, needs to be seen in the background of these observations of the Supreme Court.

`According to law' is again a flexible phrase, which can have different connotations in the background of the facts of the cases. It is common knowledge that decisions of the Revenue on same issues vary. The Revenue authorities do not adopt a consistent and clear stand uniformly in all cases. The differences in views become the subject matter of attempt to distinguish the precedents or on the alleged grounds of new facts emerging to take different views saying that the principle of res judicata does not apply to income-tax proceedings.

The long-drawn process of enquiries and investigations and thereafter assessments, appeals, revisions, and so on, put the taxpayers through much hardship, which may not seem worthwhile even if they come out successful in the litigation.

Hence, the Revenue authorities cannot keep saying they will act in accordance with law interpreted in their own way and force taxpayers to get relief only through the appellate process or by writ petitions.

In the context of enquiries, these could be required to be made by persons (i) who are not taxpayers; and (ii) who are taxpayers and in whose cases enquiries become necessary because of new facts coming to knowledge.

In such situations, equity demands that the notices/enquiry letters should be speaking ones not seeking information in a general way, such as copies of bank accounts for six years, and so on. And in situations where these relate to time beyond limitation periods, the law, which permits enquiries beyond limitation periods, should be clearly quoted to give authenticity to the demand made.

Further, before issuing notices, it must be ensured that the information desired is not already there in the records of the tax departments. If possible, persons should be heard before issuing notices to appreciate their viewpoints. If these precautions are taken, there would be no cause for taxpayer grievance and criticism of the I-T Department.

In 2000, the Department published the `Vision 2005' document, , spelling out the values to be cherished, , such as dedication to duty and values, professionalism at work, attitude towards taxpayers (who were to be considered as the Department's clients) and fostering mutual confidence. If these values are consistently adhered to, controversies between taxpayers and tax collectors would vanish.

T. N. Pandey
(The author is a former chairman of the CBDT.)

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