The author slams the Government for trying to scuttle a settlement mechanism, designed to reform astray-taxpayers. He lauds the Bombay High Court for reading down the ill-conceived amendments and exhorts the Government to accept the same in the right spirit. The author also uses his rich experience to set out a road map for speedy disposal of settlement applications.
Income Tax Settlement Commission (ITSC) was formed on recommendation of Wanchoo Committee in the year 1976 for settlement of income tax cases. Having created an institution for reform of tax payer who has gone astray, constant effort of the executive was to scuttle its working. May be the idea, to settle rather than to dispute, was before its time in the year 1976; by Finance (No. 2) Act, 2009, provisions have been exacted for constitution of Dispute Resolution Panel.
By Finance Act 2007, a final death blow was dealt to the institution of ITSC by providing that in respect of applications filed before 1-6-2007, if an order of final settlement under section 245D(4) is not passed before 31-3-2008, than the proceedings before the ITSC shall abate and departmental officer shall dispose off the case.
The amendment had caused outrage and had been challenged all over the country before various Hon’ble High Courts and even before the Hon’ble Supreme Court. The Hon’ble Delhi High Court in Vatika Farms, (2009) 302 ITR 98, while admitting the petitions and granting stay against abatement, had passed a detailed judgment on the issue. Recently the Hon’ble Bombay High Court in Star Television News Ltd. (see www.itatonline.org) has finally disposed off the writ petitions by holding as follows:
i) date of 31.03.2008 for passing final orders is arbitrary;
ii) that except where the delay in passing the order is occasioned due to applicant, the proceedings shall not abate;
iii) ITSC shall decide each case as to whether delay is occasioned by applicant;
iv) ITSC to dispose off the cases by passing orders under section 245D(4).
The Hon’ble Bombay High Court has granted welcome relief to hundreds of applicants whose applications could not be disposed due to no fault of theirs. In reading down the provisions, the Hon’ble Bombay High Court has separated wheat from the chaff. While upholding action of the legislature of abatement of cases where applicant was non cooperative, the Hon’ble Court has given relief to assessee whose applications could not be disposed off due to no fault of theirs. The Hon’ble High Court has adopted a pragmatic and practical approach by not striking down the provisions as unconstitutional but at the same time has granted relief to bonafide applicants.
We whole heartedly welcome the judgment. It is now the responsibility of the applicants, the bar, the Government, the CBDT, and the ITSC, to dispose off the applications at the earliest so that revenue locked in cases before the ITSC is realized by the Government. We feel that if each party to the dispute dedicatedly discharges its duties, the pending cases can be disposed off in six months.
We, therefore suggest:-
(a) Duty of the applicant
The applicant has the most important role in early disposal of its cases. The process of settlement commences on applicant making the application and applicant should be forthright in completion of proceedings commenced at his instance.
1. The applicant should extend utmost cooperation and assist in early disposal of cases.
2. The applicant should come to ITSC with clean hands and make a full and true disclosure of its income. Its attempt should be to settle rather than dispute unnecessarily.
(b) Role of the Bar
A proactive and positive Bar can bring a sea change in functioning of any institution. 1. The applicants’ representative should assist and advise the applicant in making a full and true disclosure of its income. The representative should approach the case with a view to settle rather than to dispute as far as possible.
2. The representative has a responsibility not to seek adjournments without reasonable and unavoidable reason.
(c) Suggestions to the ITSC
1. In view of the judgment of Hon’ble Bombay High Court, the ITSC will have to decide in each case whether delay in passing the order was on account of applicant. It will have to devise a procedure, which is efficient, for identifying cases where delay occasioned due to applicant, so that balance cases can be taken up for disposal at the earliest.
2. Internal investigation reports are essential before the hearing is taken up. The ITSC can devise methodology to speed up process of preparing internal investigation reports.
3. Many a times hearing of a case is adjourned after commencement of the hearing, as need is felt to call for investigation report from the department under section 245D(3). It is suggested that at the stage of preparation of internal report itself, cases may be identified where further investigation report under section 245D(3) is called for and direct such investigation before fixation of cases for final hearing.
4. It is suggested that cases may be fixed up for final hearing only after all investigation reports are ready so that no time is wasted in hearing cases partly and than adjourning the cases.
5. It is suggested that cases which are ready for hearing may be fixed on the basis of date when application is filed and priority may be given to old cases.
6. Statistics show that only Principal Bench at Delhi and Additional Bench at Mumbai have large number of cases pending for disposal i.e. 1225 and 664 respectively (Source: AIFTP Journal Vol. 12 No. 3 at Page No. 10. Till the time the Government acts on suggestion of appointing additional Benches at the said two stations, Members at other two Benches being Kolkata and Chennai may be sent on tour to other two Benches. Alternatively, few cases from the two Benches at Delhi and Mumbai may be transferred to other Benches.
(d) Suggestions to the CBDT
1. The officers of the investigation wing of the ITSC are on deputation from the department. The CBDT may fill up vacancies for the post of investigation wing of ITSC and also of CIT(DRS).
2. The CBDT may also consider appointing additional officers in the said posts to speed up the process of settlement.
3. The CBDT may direct its field officers to complete investigation under section 245D(3) at the earliest.
4. The Department has to furnish information about payment of admitted taxes and interest thereon to the ITSC. It will also be called upon to furnish information as to whether delay in completion of the case was on account of the applicant. The CBDT may direct field officers to furnish such information to ITSC at the earliest so that cases where no dispute arises on said two grounds, can be identified for hearing by ITSC.
(e) Suggestions to the Government
1. The Government may consider appointing two additional benches, one each at Mumbai and Delhi at the earliest. The tenure of the Members of ITSC is only of two years, so the additional Benches may be discontinued after disposal of all old cases.
2. The Government may direct CBDT to be proactive and to ensure early completion of the cases.
It is now the collective responsibility of all the stakeholders to strive to complete pending cases at the earliest. The AIFTP offers to help in whatever manner possible to ensure early completion of all old cases.
See Also: Psst….Settlement Karne Ka Hai?
Dr. K. SHIVARAM
(Reproduced with permission from the AIFTP Journal – August 2009 issue)