Reasons not to believe

Dr abhishek singhvi Sun, 16 Apr 2017

Reasons not to believe

The passage of the Finance Bill 2017 creates history on various counts. Firstly, an ominous broad spectrum legislation encompassing diverse subjects way beyond the limited scope of Article 110 of the Constitution was masqueraded as a Money Bill. Secondly, hiding under cover of the special procedure reserved for passage of Money Bills, the government pushed the Bill by brute majority in the Lok Sabha ignoring the collective wisdom of the Rajya Sabha reflected in its several substantive amendments.

 Thirdly, the Bill introduces draconian provisions giving unfettered power to taxmen to search and seize without any real accountability. Fourthly, the Bill allows taxmen to clutch at much more than is required in name of tax compliance.

Fifthly, in a dystopian manner, the Bill converges unconnected Appellate Tribunals on an imagined synergy between unconnected universes (eg. airport regulatory appellate with telecom appellate). Sixthly, it introduces an overarching Section 179 which empowers the government to make rules for all terms of service, including appointment, salary and removal of members and chairpersons of Tribunals and Appellate Tribunals. This all powerful Section is made applicable to 20 odd tribunals, thereby subjecting substantive powers and privileges of tribunals to delegated rule making control of the executive.

Benjamin Franklin had famously said that nothing can be certain, except death and taxes. With multiple onslaughts on the taxpayer, including demonetization and now the Finance Bill, it seems that death by taxes and taxmen is the likelier scenario in this country.

Parliamentary subterfuge started by stringing non-Article 110 subjects on to a Money Bill, then adding tax terror provisions in direct contravention of law laid down by the Supreme Court, introducing the Bill in LS and following it up with a minor cosmetic debate while ignoring RS opinion completely.

Section 132 of the Income Tax Act provides search and seizure powers to the tax department only in case there is “reason to believe” that a person has undisclosed income or property. The Supreme Court has repeatedly held that the Section does not confer any arbitrary authority upon the revenue officers. Since a serious invasion of rights, freedoms and privacy of the tax payer is involved, the power must be exercised strictly in accordance with law and only for the purposes for which it is authorized (ITO vs Seth Brothers, 1969 SC). If the action is maliciously taken or power is exercised for collateral purposes or without application of mind or without honest and bona fide formation of opinion, it is liable to be struck down (M/s Spacewood Furnishers, 2015 SC).

How does any of this review get done if these “reasons to believe” cannot be disclosed officially before ITO, CIT (Appeals) or ITAT? Most bemusing and unsatisfactory is FM’s justification, viz that it exposes the informant to the assesses. How was this provision then operated satisfactorily for the last several decades?

Hardly a fraction of cases reach HC and above and hence nondisclosure becomes the norm. It does not protect informer identity; it immunizes reasons themselves from review since one cannot review that which is not disclosed!

If, on the other hand, courts, including departmental appellate bodies (but not the assesses) can see the reasons – something which the law and FM leave totally unclear – then the stated purpose of the government is largely defeated but the assesses is still unable to mount an effective challenge on what he cannot see. It will also increase HC and SC litigation considerably, merely to get to see and challenge these reasons, thereby defeating the very purpose of departmental inbuilt multilayered appeals which is the heart of the IT Act.

Last, certainly not the least, this change regarding disclosure applies with extraordinary retrospectively, from 1962. A lawyer FM would certainly know that he is enacting a certain-to-be-struckdown provision!

The new Section 132 also allows tax officers to attach provisionally any property belonging to the assesses, in addition to humongous existing confiscatory powers. Immediate attachment of bank accounts with protracted multilayered proceedings serpentine going on will sound the death knell for most assesses. Mark Twain’s famous quip as to the difference between a taxidermist and a tax collector being “the taxidermist takes only the skin” seems now to be legislatively enforced.

The provisions regulating Tribunal appointment and removal and pretence to reduce burden on courts is in the teeth of the apex court’s dictum in 2014 where (now) Chief Justice Khehar stated, in a Constitution Bench, that “one cannot lose sight of the fact that the Central Government will be a stakeholder in each and every appeal/case which would be filed … It cannot therefore be appropriate to allow the Central Government to play any role with reference to the places where the Benches would be set up, the composition and constitution of the Benches as also the transfer of members”. This is nothing short of abuse of the democratic process.

Under cover of saving expenses, FM has sought to club Tribunals with no connecting rationale or logical nexus. Which mental acrobat sees synergy between the National Highways Tribunal and the Airport Appellate Tribunal or between the Cyber Appellate Tribunal & the Telecom Disputes Appellate Tribunal? This clubbing of such strange bedfellows is most mystifying.

Maybe it’s just simple hubris. Or power intoxicated Dutch courage to keep pecking at the constitutional fabric which stitches all of us citizens (but apparently not this government) to the rule of law. 

The author is a Senior Advocate and Spokesperson in AICC