INTERPRETATION FOR ADJUDICATION IN TAXATION

[Dr. Sanjiv Agarwal]

What is Adjudication

Adjudication of tax or demand is an important function of any tax administration for which there are specific provisions in tax statutes. These may pertain to scrutiny, assessment, penalties, appeal, recovery, audit etc. How adjudication should be conducted is equally important and it should meet all the tests of being fair, equitable and just.

Adjudication proceedings in any assessment or penal proceedings is a very important aspect of tax administration. It provides an opportunity to the assessee to be heard and show cause before any action is taken in proceedings relating to him. Issue of show cause notice is a pre-condition to a proper adjudication which is an intimation to assessee of the proposed action by the department. The adjudicating officer adjudicates the show cause notice by considering the reply to show cause notice and other available or produced evidences by the noticee. A SCN should follow certain principles to be legally sustainable.

Adjudication has not been defined in the Act but according to www. wikipedia. org,  "Adjudication is the legal process by which an arbiter or judge reviews evidence and argumentation including legal reasoning set forth by opposing parties or litigants to come to a decision which determines rights and obligation between the parties involved. Three types of dispute are resolved through adjudication:

• Disputes between private parties, such as individuals or corporations.
• Disputes between private parties and public officials.
• Disputes between public officials or public bodies."

To adjudicate means to decide, determine or to settle. Literally, it means the act of adjudicating, the process of trying and determining a case judicially. The application of the law to the facts and an authoritative declaration of the result.

'An adjudication in favour of natural rights'. A solemn or deliberate determination by the judicial power: the act of giving judgment.

Black's Law Dictionary defines the term 'adjudicate' so as to mean 'to settle in the exercise of judicial authority; to determine finally'.

Basic Principles

While adjudicating any matter, the adjudicating authority is supposed to observe certain basic principles of a fair and legal interpretation, viz,

• Observing judicial discipline
• Following binding precedents
• Complying with principles of natural justice and
• Issuing a speaking order or a reasoned order.

Adjudication takes place, both at the level of determination of demand of tax, imposition of penalties etc and in appellate matters. In case of appeals even both the parties have to be heard and principles of adjudication do apply to appeal matters also.

In this Chapter, various concepts and principles applicable to adjudication of demand and adjudication of appellate matters.

Concepts in Interpretation

Some of these are part of the law while others are followed by virtue of their recognition in judicial pronouncements are :

• Aspect theory
• Rule of reading down
• Substance over form
• Documents to be read as whole
• Natural justice - audi alteram partem
• Reasoned order
• Binding precedent
• Judicial discipline
• Reason to believe