By Surya Prakash B. S.
The judiciary is in focus. Some judges are facing immense public scrutiny. And amidst the entire din on the personalities in the judiciary, one feels that the focus on the decision making process of the Courts is being drowned out. An empirical data based approach to a Constitutional question adopted by the Delhi High Court some months back is interesting to note in this context (CIT vs. Maruti Suzuki)
There is much to commend about such an approach by Courts when dealing with situations that affect a large number of taxpayers, with provisions that have been in operation for some time.
However, such a purely ‘consequentialist’ approach is not without its detractors. For such people, there are absolute truths even in tax laws. But surely Courts could at least request for larger data sets from relevant authorities and consider them before concluding. This would also ensure that Tax Departments further strengthen their information systems and give a fillip to initiatives such as the National Judicial Reference System (NJRS), a comprehensive database of all tax appeals, envisaged by the CBDT.
The background: Tax Department passes an order and a demand is raised. Tax payer appeals to the Income Tax Appellate Tribunal (ITAT) and asks for a stay of demand. Earlier ITAT could stay the demand for any length of time without any limitation. The Income Tax Act was amended in 2008 to the effect that the Tribunal could not in any case grant a stay beyond 365 days. This limitation is irrespective of the fact that the ITAT has not been able to rule on the merits of the case only because the Tax Department has sought adjournments. The question before the Delhi High Court was the Constitutional validity of what was said to be curtailment of the powers of the ITAT.
The Court ruled that it found no reason to interfere with the amendment – however, it left the question of Constitutional validity open.
What is interesting for us is how the Court went about satisfying itself that the ‘curtailing of powers’ was not causing harm to the taxpayer. It asked for data pertaining to all appeals from the ITAT and Delhi High Court registries. The data obtained showed that over a three year period about two-thirds of the appeals to ITAT for which a stay had been granted had been disposed of within 365 days. Therefore, no great harm is being caused by the ITAT not being able to grant stay beyond 365 days was what the Court opined. Without going into the merits of the outcome, such a data based approach to a question of tax law is rare.
The data quoted in the ruling also shows up other interest trends. For example, over the most recent five year period almost 85 percent of the appeals filed with the Delhi High Court are by the Tax Department. For those in the know, such a low percentage of orders by the Tax Department being upheld by the ITAT come as no surprise.
Surya Prakash B. S. is a student of Takshashila’s Graduate Certificate in Public Policy.