How to rely on laws of India, Government of India, and the public when law of land can be amended at any time? - COD POWERS OF HIGH COURT AND AMENDMENTS THROUGH BUDGET 2010 for Direct taxes.

[C.A. DEV KUMAR KOTHARI]

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Earlier article COD POWERS OF HIGH COURT AND AMENDMENTS THROUGH BUDGET 2009 by CA Dev Kumar Kothari

Finance Bill 2010 clauses 48, 49, 55, 56.

Memorandum Explaining proposals Part I.

Section 256 and 260A of I.T.Act,1961.

Sections 27 and 27A of the Wealth-tax Act, 1957.

How to rely on laws of India?

If retrospective amendments are made at any time and to cover any length of past period, then nothing can attain finality. In such situation how any one can rely on the laws of the country and its Government. When a matter like powers of High Courts can be amended with retrospective effect, then what to speak about any other provisions. High courts and the Supreme Court have major roles of even correcting wrongs done by government and its officials. They have power to review laws as to their validity etc. In case a law enacted by parliament is found ultra virse the court can declare it invalid.

 In case of any the laws the fundamental rule is that it is as per language used at any point of time. If the language can be changed at any time with retrospective effect, then there will be no certainty of any law.  If the law is uncertain then how the people of country, and this government can be relied upon?

Difference of opinions of high Courts:

Different High Courts have taken different views. After judgment of SC in relation to CE Act, large number of appeals filed by revenue were dismissed by many of High Courts who took view that the High Court has no power to condone delay in filing of appeal. Only Delhi High court took view that High Court has power to condone delay in case of appeal under I. T. Act.

Finance (No. 2) Bill 2009 and Finance Bill 2010:

In the last budget of 2009, powers to condone delays were specifically conferred in relation to Central Excise. At that time an article written by author was hosted on this website. In the said article provisions of CEA and IT Act were compared. It was also suggested that in case similar power is desired in relation to IT act, then amendment in IT Act can also be made.

In the Finance Bill 2010 amendments are proposed to enable High Courts to condone delay in filing of appeals.

Wrong approaches of half hearted legislation and who care:

When the Supreme court decided that the High Court's do not have power to condone delay in filing of appeals , the government must have examined all provisions and taken steps to analyze the impact and ascertained necessity of amendment. And then should have taken timely steps to amend various enactments wherever require. However, approach of half hearted legislation and 'who care' continued, because now government is fully assured that it can do whatever it want and at any point of time for any length of past period by making amendments with retrospective effect. In the Finance (No.2) bill there was no proposal to amend the direct tax laws. Now proposals are there to make amendment w.r.e.f. 01.06.1981 to enable High Courts to condone delays in filing of reference applications.

Proposals in the Finance Bill 2010:

In the Income-tax Act, 1961 and Wealth Tax Act, 1957 amendments are proposed to insert provisions to empower high Courts to condone delays in filing of reference applications and appeals. It may be noted that provisions of reference applications were substituted with provisions of appeal long back (w.e.f. 01.10.1998), however, amendments are proposed even for condonation of reference applications and that too w.r.e.f. 01.06. 1981. The prosals and explanations are reproduced below with highlights:

To amend Income-tax Act:

48. In section 256 of the Income-tax Act, after sub-section (2), the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of June, 1981, namely:—

"(2A) The High Court may admit an application after the expiry of the period of six months referred to in sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period."

49. In section 260A of the Income-tax Act, after sub-section (2), the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of October, 1998, namely:—

"(2A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in clause (a) of sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period."

To amend Wealth Tax Act:

55. In section 27 of the Wealth-tax Act, after sub-section (3A), the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of June, 1981, namely:—

"(3B) The High Court may admit an application after the expiry of the period of ninety days referred to in sub-section (3), if it is satisfied that there was sufficient cause for not filing the same within that period."

56. In section 27A of the Wealth-tax Act, after sub-section (1), the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of October, 1998, namely:—

"(1A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in sub-section (1), if it is satisfied that there was sufficient cause for not filing the same within that period."

Memorandum Explaining amendments read as follows:

Power of the High Court to condone delay in filing of appeals

A. The existing provisions of section 260A(2) provide that an appeal against the order of Income-tax Appellate Tribunal can be filed before the High Court within a period of one hundred and twenty days from the date of the receipt of the order by the assessee or the Commissioner. Sub-section (7) of section 260A of the Income-tax Act provides that the provisions of Code of Civil Procedure, 1908 (5 of 1908) shall, as far as may be, apply in the case of an appeal filed under this section before the High Court.

The Delhi High Court, while interpreting provisions of section 260A, has held that the High Court has the power to condone delay in filing of an appeal. However, Allahabad, Bombay, Kolkata, Guwahati and Chattisgarh High Courts have held otherwise. It is, therefore, proposed to retrospectively insert sub-section (2A) in section 260A of the Income-tax Act to specifically provide that the High Court may admit an appeal after the expiry of the period of one hundred and twenty days, if it is satisfied that there was sufficient cause for not filing the appeal within such period. Consequential amendments on similar lines are proposed to be made in section 27A of the Wealth-tax Act.

These amendments are proposed to take effect retrospectively from 1st October, 1998.

B. Under section 256 of the Income-tax Act, the Income-tax Appellate Tribunal could to refer a case to the High Court. In case where the Income-tax Appellate Tribunal refused to refer a case to the High Court, the assessee or the Commissioner were allowed to file an appeal before the High Court against such refusal of the Tribunal within a period of six months from the date on which he was served with an order of refusal. It is proposed to retrospectively insert sub-section (2A) in section 256 so as to empower the High Court to admit an application after the expiry of the period of six months, if it is satisfied that there was sufficient cause for not filing the same within such period. Consequential amendments on similar lines are also proposed to be made in section 27 of the Wealth-tax Act. These amendments are proposed to take effect retrospectively from 1st June,1981.

[Clauses 48, 49, 55, 56]

Uncertainties must not hang over heads:

If retrospective amendments are made at any time and to cover any length of past period, then nothing can attain finality. In such situation how anyone can rely on the legal provisions and the Government. Even the people of country cannot be relied on. This is because people having money power, vote power and otherwise influence can get the law amended in their favor and with retrospective effect. Therefore, practice of amending laws with retrospective effect must come to an end.

Finality should not be disturbed:

A general rule of administration is that things which have attained finality should not be disturbed. However, when a law is amended with retrospective effect, all relevant matters which attained finality get disturbed and reactivated. In many cases, such reactivation is not always possible. Suppose a Reference application was dismissed during 1981, is it possible that the concerned officers will be vigilant enough to bring the matter to life again in view of amendment.

The provisions of entertainment expenses were amended with retrospective effect to include even customary tea, coffee, snacks etc. Is it possible for AO to disallow such expenses which were allowed by him in view of judgments of SC, HC and ITAT long back. Therefore, any amendment with a retrospective effect should not be made for a very long duration, because it is not possible to give effect to it for a period beyond a reasonable period of say 3-5 years. However, retrospective amendments are made without application of mind as to how far its effect can be given for past period.