Dear members,
In the landmark decision delivered on 25th September 2014 in the matter of the National Tax Tribunals (NTT) Act, 2005, the five judges bench of the Supreme Court declared the NTT Act as unconstitutional mainly on the grounds that the basic structure of the Constitution will stand violated if while enacting the legislation pertaining to transfer of judicial power, the Parliament does not ensure that the newly created court/tribunal, conforms with the salient characteristics and standards, of the court sought to be substituted. And that the constitutional conventions, pertaining to constitutions styled on the Westminster model, will also stand breached, if while enacting the legislation pertaining to transfer of judicial power, conventions and salient characteristics of the court sought to be replaced, are not incorporated in the court/tribunal sought to be created.
In this decision, the Supreme Court also held that allowing Chartered Accountants to appear on behalf of a party before the NTT would be unacceptable in law. The Supreme Court has stated that in their understanding the Chartered Accountants would at best be specialist in understanding and explaining issues pertaining to accounts which fall purely in the realm of facts, whereas the determination at the hands of the NTT is shorn of factual disputes. It observed that the NTT has to decide only ‘substantial question of law’ arising from not only the income tax laws but also a wide range of family, trust, corporate and other laws. This decision draws support from a compilation of 96 different income-tax case laws that involve substantial questions of various laws. The Supreme Court found it difficult to appreciate the propriety of representation, on behalf of a party to an appeal, through a Chartered Accountant and unfortunately bracketed them with the Company Secretaries.
With due respect to the Supreme Court, these observations seem to be misplaced. The Hon’ble Mr. Justice R. V. Easwar, then Judge of Delhi High Court, in an address, has acclaimed the contribution of chartered accountants in shaping of the Income-tax Appellate Tribunal (ITAT), and I quote: ‘Several chartered accountants have worked as Members of the Tribunal in its long history of almost 72 years. There were some who became its President…
The Income-tax Act has entrusted a significant role to the chartered accountants. It has reposed immense confidence on them to certify the various claims for deductions…
…With their incisive analysis of the accounting aspect of the case, they have, if I may acknowledge with respect, admirably fulfilled the role expected of them. This is not to say that their judicial insights are any less than the judicial members. Over a period of years they also acquire a grip over the legal aspects of the case and they are second to none in conforming to the judicial norms and discipline in the discharge of their functions.’The expertise of Chartered Accountants has been recognised widely,and they are permitted to appear before not only the direct and indirect tax forums but also under other laws.With international taxation issues gaining prominence and evolution of specialised areas such as transfer pricing, a Chartered Accountant with his vigorous training and resulting expertise brings significant value tothe judicial process pertaining to the revenue matters.It is unfortunate that the highest court has not taken into consideration the pivotal role played by Chartered Accountants in ITAT as well as in their contribution in administration of tax and other laws.
Also, the Supreme Court has not addressed the core issues that plague the judicial redressal system, such as unfathomable delays and multiplicity of proceedings resulting from the existence of multiple appellate levels. The uncertainties and complexities in the judicial redressal system get further compounded by conflicting opinions at various appellate forums having independent jurisdiction across the country.
It is pertinent to note that the idea of the NTT was first mooted in 1955 by the first law commission chaired by Mr. M. C. Setalvad in 1955 and reiterated by the Wanchoo Committee in 1970 and by the C. C. Choksi Committee in 1977. The dilatory, cumbersome reference procedure which caused enormous delay in disposal of tax litigation was the main reason behind them making this recommendation. As an interim measure to the above recommendation, the Choksi Committee suggested, the desirability of constituting Special Tax Benches in High Courts to be comprised of judges with special knowledge of tax law to deal with the large number of pending tax cases.
In this decision, the Supreme Court has once again raised concerns about the growing tribunalisation of justice and rightly so. As per one count, over 100 tribunals have been setup to date by the Central and various State Governments.The Report of the Arrears Committee (1989-90), popularly known as the Malimath Committee Report, stated that the overall picture regarding the tribunalisation of justice in our country is not satisfactory.These concerns remain valid even today.
The NTT and other decisions such as in the matters of 2G and Coalgate also raise concerns about legislative and regulatory capabilities of the legislature and the executive. Commenting on the Companies Act, 2013, Justice A. K. Sikri lamented that this legislation exposes the lack of expertise in legislative draftmaking. He also said that indeterminate laws make the courts struggle to find the intent of legislature where 90 % of the parliamentarians don’t even know when the law comes, what is the law and the same is not even debated.
The BJP in its election manifesto has promised a wide range of measures to ensure justice which is prompt and accessible.It is high time the Government undertakes these comprehensive legal reforms promptly and not restrict itself to cleaning only outdated laws.
Prime Minister Modi launched the ‘Make in India’ initiative to boost our manufacturing sector and aims to improve India’s rank from 135 to 50 in ‘Ease of Business’ ranking. He is sensitising his team and his bureaucracy to not create unnecessary barriers to business and spur positivity and inspire confidence among manufacturers. In this backdrop, it appears that transforming the rigid and mechanical bureaucracy seasoned over decades will be an uphill task. The recent experience with the CBDT where it prolonged extending the due date for filing of the return of income despite a large number of representations until pressurised through various High Courts decisions, is a case in point.
At a recently held Advanced FEMA Conference, organised jointly by the BCAS and the Chamber of Tax Consultants, the Chief Guest Mr. G. Padmanabhan, the Executive Director of the Reserve Bank of India (RBI), accepted that the FEMA regulations have become too complex and require a comprehensive review. The Conference provided an opportunity for participants, many from outstation, to raise their difficulties with concerned officials from the RBI directly and expert analysis from the excellent faculty.
The much deserved extension and ensuing season of festivals give us an opportunity to take a break from the routine of multi-tasking and rushing from one deadline to another and instead spend quality time with our loved ones. Let us embrace these celebrations with open hearts and relearn how to enjoy life.
Wishing you all a happy and joyous Deepavali!
With warm regards,
