Casual approach towards taxpayers must end

TAXING MATTERS

In taxing statutes, the law provides for deterrence against situations, where the assessees do not comply or attempt to contravene the provisions of the law imposing tax or evade or avoid payment of tax dues.

No law can be implemented if such contingencies are not visualised and stringent provisions are not incorporated for compliance.

Such provisions are in the form of penalties and prosecutions and are an integral part of law. Penalty proceedings are not criminal proceedings and the standard of proof for imposition of penalty is not as rigorous as that for prosecution. In a criminal charge, the prosecution has to prove the charge beyond reasonable doubt.

In penalty and prosecution proceedings, certain judicial norms have to be followed. One of these is timely disposal of such proceedings. The 1922 law did not prescribe any period for passing a penalty order.

Even then, it was held that there should not have been any inordinate delay in imposing penalty. The KP Narayana-ppa Setty and Company vs Commissioner of Income Tax, (1975) 100 ITR 17 (AP); the Ram Kishan Baldeo Prasad vs Commissioner of Income Tax, (1967) 65 ITR 491 (Allahabad); Mohd Atiq vs Income Tax Office, (1962) 46 ITR 452 (Allahabad) cases can be referred to.

In the Income Tax Office vs Bisheshwar Lal case, (1970) 76 ITR 653 (Allahabad), where penalty notice was issued after 12 years, it was held that there was an abuse of power and proceedings were quashed by issue of a writ (also see, the Krishna Bhatta vs Ag Income Tax Office case, (1981) 132 ITR 121 (Kerala).

But delay was to be judged on the merit of the situation. It was not an absolute rule that penalty proceedings could be considered invalid merely because of delays.

In the Commissioner of Income Tax vs Ajoydhya Prasad Gopi Nath case, (1977) 107 ITR 951 (Allahabad), penalty proceedings were started in 1956 and the penalty was levied in 1968.

According to the department, the assessee was indulging in dilatory tactics to delay the recovery proceedings.

The tribunal cancelled the penalty order without checking whether the delay was innocuous or it affected the levy of penalty because of any changed circumstances.

It was held by the high court that the tribunal was not justified in cancelling the levy of penalty without recording relevant findings and fixing responsibility for the delay and finding its effect on the penalty order.

The Bombay High Court in the Lalta Prasad Goenka vs Commissioner of Income Tax case, (1980) 122 ITR 399 (Bombay), said there could not be any general proposition that every delayed order of penalty must be invalid because of delay.

In the Income Tax Act 1961, vide Section 275, the limitation period for disposal of penalty proceedings had been prescribed. Hence, the issue relating to delays was no longer relevant for penalty proceedings, it said.

No time for starting prosecution and imposing punishment have been prescribed in the Income Tax Act, 1961.

It was said in the Nirmala Kapur vs Commissioner of Income Tax case, (1980) 122 ITR 473 (Punjab), the delay in starting the prosecution by itself could not invalidate the prosecution. If on the ground of lapse of time, one is to take a lenient view, then an accused may go scot free.

In the State of Maharashtra vs Natwarlal Damodardas Soni case, AIR (1980) SC 593 at 599, it was said a long delay in prosecution was a factor, which should, along with the other circumstances, be taken into account in mitigation of the sentence.

Recently, the Delhi High Court considered the issue of delay in a prosecution case under the Wealth Tax Act in the Usha Anand vs Asst Commissioner case, (2003) 133 Taxman 730 (Delhi).

In this case, the trial court, on the complaint filed by the income tax department, summoned the petitioner for the offences punishable under Section 35B/35C of the Wealth Tax Act and fixed the matter for pre-charge evidence.

Despite eight years, the department did not produce the pre-charge evidence. The assessee moved the high court, which expressed concern over the department's apathy concerning the prosecution case.

"The details of proceedings and dates given in paragraph 25 of the petition, tell a very sorry state and the infraction of the Fundamental Right of the accused enshrined in Article 21 of the Constitution, that every accused charged for a criminal offence is entitled for expeditious trial. For eight years the complainant has not been able to produce the pre-charge evidence nor has the trial court been able to procure the same. There can be no worst case of failure of justice.

"Merely because the complainant happens to be a government department, does not mean that it is immune from the provisions of procedural law as well as the Fundamental Rights of an accused. Complainant, being the government department, presumed that it is law unto itself and took the court for granted. Every complainant is equal before law and is governed by the procedure and provisions of the criminal procedure code. No government department, who files a complaint, could be allowed to go into specific slumber after filing the complaint and setting the machinery of court into motion," the court said.

Such situations indicate inefficient functioning, leading to undue strain on taxpayers and need to be avoided.