Indian Tax Legislations
The Income Tax Act of 1961:
- In India, it is an act to levy, administer, collect, and reclaim income tax.
- It became operative on April 1st, 1962.
- India’s income tax charging statute is the Income-tax Act, 1961.
- In an effort to supersede the Income Tax Act of 1961 and the Wealth Tax Act of 1957, the Indian government introduced a draft law known as the “Direct Taxes Code.”
- Regarding the imposition of tax on income that is received in advance as well as income for which the full amount has not yet been received, the Income-tax Act has distinct requirements.
- Tracking one’s TDS deducted is also necessary when determining one’s ultimate tax due at the end of the year.
- However, since the wealth tax statute was overturned, the bill was dropped.
India’s tax code is based on two main principles:
- Regarding the notion encapsulated in Article 265: taxes can only be enforced through legal authority.
- Based on the surety concept, all levies should be transparent, dependable, and consistent.
- These guidelines stem from a broader dedication to the rule of law, specifically to the principles of validity and assurance.
- Cases where the Supreme Court established taxes without the support of Congress:
Vikram Sujitkumar Bhatia vs. ITO:
- Question: Could a 1961 Income Tax Act provision be amended retroactively in the absence of a law mandating such an action?
What does the Act’s Section 153C say?
- It lays out the circumstances in which a search conducted on someone’s property may lead to the initiation of legal action against other individuals or organisations.
- Prior to a 2015 modification, Section 153C permitted the Revenue to take legal action against third persons involved in a search if the material found (money, bullion, jewellery, or books of accounts, for example) “belongs or belong to” someone other than the person who was the target of the search.
2015 amendment:
- Section 153C: It stated that third parties to a search could be subject to assessments.
- even in cases where the material seized “relates” to the person or even “pertains or pertains to” the person, as in the case of documents and books of accounts.
- There was no explicit retroactive nature to the modification.
Decisions from several High Courts:
- Incriminating evidence must “belong” to the subject of the search rather than just relate to or pertain to them in order for it to be used as a foundation for evaluating those who were not involved in the search.
- By itself, mentioning someone’s name would not be sufficient to comply with the law.
- Proof that the item in question is the owner’s property is required.
Gujarat High Court:
- Application would infringe upon rights that individuals had acquired as a result of the prior agreement.
- A legislation that was purely procedural could only be applied retroactively provided it did not violate any of the substantive rights that the subject of the law had been granted.
- The court determined that the modification included a previously excluded class of assessees under Section 153C.
Why the Supreme Court overturned this decision:
- By amendment, the previous Section 153C has been superseded.
- “Pertains or pertain to” had been used in place of the terms “belongs or belong to.”
- Presumably, the unamended section was never in the legislation, not even prior to the amendment’s date.
- Because the new law aims to clarify a prior provision, it is retroactive and declaratory in nature.
Judges ought to be makers, not interpreters:
- It’s possible that Section 153C has been changed by substitute.
- The word “belongs to” is still used in the clause.
- It established a further requirement: material that “pertains or pertains to” an individual may be used as the basis for new proceedings, even in the case of books of accounts and records.
- By no means does the change aim to broaden the scope of the statute going forward.
- It will be applicable to previous searches and has taken on the role of creating law rather than interpreting it.
Union Government versus Ashish Agarwal:
- The Revenue had issued notices of reassessment without legal authority; the Court revived them.
- It did more than just overturn the ruling that the Allahabad High Court had brought before it on appeal.
- At least seven other High Court rulings that were not before it are included in its decisions.
Concerns and the High Court’s Position:
- A new system had been adopted by Parliament to control reevaluations of concluded income-tax cases.
- The Revenue kept sending letters in accordance with a section that had been repealed in spite of the legal change.
- It is derived from executive orders that prolonged deadlines in the aftermath of COVID-19.
- The Income-Tax Department was free to use the new law if the statute of limitations allowed it, even if the High Courts ruled that these notices were unlawful.
- The revenue would be impacted in some way by quashing these notices.
- There have been instances where the authorities were forced to discard proposals for reevaluation because the statute of limitations had run out.
The Way Ahead:
- In addition to attempting to give life to actions that were otherwise wholly illegitimate, the Court appears to be infringing on legislative powers.
- The Court also made use of its authority under Article 142, which gives it the authority to issue directives for “doing complete justice to a cause.”
- Statutory law should not be broken in the exercise of this power.
- In this instance, the Court reversed decisions that were just not up for appeal, in addition to reviving measures that had no legislative backing.
- Taxation without law is prohibited by Article 265.
- The legislative sphere is not where courts should be going.
