Uncertainties about tax laws are increasing by review of Supreme Court judgments - a cause of concern. The CJI is requested to take an objective decision while allowing review.

[C.A. DEV KUMAR KOTHARI]

Tax law must be known and simple:

It is desirable that taxpayer should be made aware of tax laws as applicable to him well before the date when tax becomes payable. Generally we can say that tax law should be clearly expressed before the commencement of previous year. This is necessary to enable the tax payer to know his liability. Clarity  in tax laws is also required so that a general tax payer is able to understand his liability.

Tax laws should also be certain and should not be amended to make law uncertain.

Retrospective amendments and  review of judgments by Supreme Court increases uncertainties:

The practice of retrospective amendments  is now very common and that creates uncertainty of tax laws.

Review of judgments by Supreme Court is another cause of creating uncertainity:

Any judgment of the Supreme Court is law of land. The same is binding on all courts in India. Therefore, the judgment of the Supreme Court should be considered as final and there should not be review of the same except in rare cases.

Even if a judgment of the Supreme Court is considered as not laying correct law and deserves to be reconsidered, a review should be rare and not a general tendency.

In case of tax laws more than two views are always possible. That is reason that many times dissenting judgments are rendered and then decision is taken based on majority. However, once a judgment is rendered by the Supreme Court, even if it is based on majority or by consent of all judges, it should be considered as final and only in exceptional circumstances a review should be allowed.

If we go by importance of matter we can say that it is not that important to take route of  review  of  a judgment on tax laws  because it simply make a pecuniary impact either on revenue or on taxpayer. In case of impact on government revenue, in context of overall revenue collection a  reviewed judgment may not be very important.

A tax dispute cannot be considered as  having much impact on government and the public of our country. Therefore, a review that too can have impact of some revenue in  favour of revenue should not be considered as a routine affair.  In view of overall budget a revenue impact of few thousand crore rupees can be considered as a peanut, and the Supreme Court can do well by avoiding review on such issues.

Review of judgment of Supreme Court  should be considered important only when question of life , living and administration etc. are involved and not on issues which only affect some of parties to disputes in monetary terms

Recent case of review:

 Recently we find that the Supreme Court has decided to refer the matter  to larger bench for review by larger bench the decision in case of Sandik Asia 2006 (1) TMI 55 - SUPREME COURT  by observing that the decision  may not be correct and should be reconsidered.

CIT vs. Gujarat Flouro Chemicals 2012 (8) TMI 740 - SUPREME COURT

 In this case the Supreme Court had before it the issue about  interest  payable by the Revenue to the assessee if the aggregate of instalments of Advance Tax/TDS paid exceeds the assessed tax?

In this case the assessee relied upon Sandvik Asia Limited vs. CIT 2006 (1) TMI 55 - SUPREME COURT where it was held that the assessee was entitled to be compensated by the Revenue for delay in paying to it the amounts admittedly due. HELD by the Supreme Court:

             We have serious doubts about the correctness of the judgement in Sandvik Asia. In our view, the judgement in Modi Industries Ltd correctly holds that advance Tax or TDS loses its identity as soon as it is adjusted against the liability created by the assessment order and becomes tax paid pursuant to the assessment order. If Advance Tax or TDS loses its identity and becomes tax paid on the passing of the Assessment Order, then, is the assessee not entitled to interest under the relevant provisions of the Act? taxmanagementindia.com

 We say no more.

With respect, we are of the view that Sandvik Asia has not been correctly decided. In the circumstances, we direct the Registry to place this matter before Hon’ble the Chief Justice on the administrative side for appropriate orders.

About Judgment in case of Sandvik Asia:

We find that the judgment is dated 27.01.2006 that is to say that the judgment was rendered  about seven years ago. The decision was of a division bench of the Supreme Court  per honorable Shri H.K.Sema and Dr. AR. Lakshmanan JJ. The case was represented by two learned and senior counsels for assessee and by the Additional Solicitor-General of India and five other senior counsels who represented revenue. There is elaborate  discussion about facts, law and decided cases. The judgment in case of Modi Industries Ltd was also considered. The reported  judgment runs from pages 646 -678 of volume no. 280 of ITR. Thus the judgment was based on detailed discussions and arguments, and after very well representation by both sides.

The judgment is on issue of interest payable by government. By taking technical grounds government should not be allowed to retain wrongly collected tax and then not to pay even interest for delayed refund. The overall impact on revenue will not be much. In fact some interest allowed to taxpayer can be very helpful to taxpayer as his resources are limited. However, such payment by government is not significant for the government when we consider overall revenue of government. Therefore, a review which can have result into a monetary benefit to government should not be allowed. 

Generally delays in refund is because of mistakes of revenue authorities. Therefore, interest should definitely be allowed to taxpayer when money is held by government authorities, in unreasonable manner.

In such circumstances, a review can be considered an avoidable review.  Let us hope that the honorable Chief Justice of India will take a view on the matter and will not consider this case as a fit case for review.

The matter is before the CJI on the administrative side for appropriate orders. The CJI is requested to consider the issue in an objective, purpose seeking and result oriented manner. The issue of stability of law and credibility of judiciary also needed to be considered.