Appearance of CA before NTT as representative is unconstitutional; SC quashes law for setting up NTT
Case Law Details
CA Sandeep Kanoi
Constitutional Bench of Hon’ble Supreme Court comprising Chief Justice RM Lodha, Justices JS Kehar, Jasti Chelameswar, AK Sikri and RF Nariman has struck down National Tax Tribunal set up vide NTT Act, 2005. It held the same as unconstitutional as the National Tax Tribunal (NTT) encroaches upon the power of higher judiciary, which can only decide issuesinvolving substantial laws and not a tribunal.
One more Blow to Chartered Accountants
Honorable Supreme Court held that the provisions regarding appearance of CAs before NTT, is unconstitutional and not acceptable in law. It held as follows :-
78. Keeping in mind the fact, that in terms of Section 15 of the NTT Act, the NTT would hear appeals from the Income Tax Appellate Tribunal and the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) only on “substantial questions of law”, it is difficult for us to appreciate the propriety of representation, on behalf of a party to an appeal, through either Chartered Accountants or Company Secretaries, before the NTT. The determination at the hands of the NTT is shorn of factual disputes. It has to decide only “substantial questions of law”. In our understanding, Chartered Accountants and Company Secretaries would at best be specialists in understanding and explaining issues pertaining to accounts. These issues would, fall purely within the realm of facts. We find it difficult to accept the prayer made by the Company Secretaries to allow them, to represent a party to an appeal before the NTT. Even insofar as the Chartered Accountants are concerned, we are constrained to hold that allowing them to appear on behalf of a party before the NTT, would be unacceptable in law. We accordingly reject the claim of Company Secretaries, to represent a party before the NTT. Accordingly the prayer made by Company Secretaries in Writ Petition (Civil) no. 621 of 2007 is hereby declined. While recording the above conclusion, we simultaneously hold Section 13(1), insofar as it allows Chartered Accountants to represent a party to an appeal before the NTT, as unconstitutional and unsustainable in law.
For the sake of convenience, the said verdict has been enclosed herewith for reference.
The Bench quashed Sections 5, 6, 7, 8 and 13 of the National Tax Tribunal Act, 2005 rendering the law ineffective for all practical purposes.
Text of the above sections is as follows :-
5. Constitution and jurisdiction of Benches-
(1) the jurisdiction of the National Tax Tribunal may be exercised by the Benches thereof to be constituted by the Chairperson.
(2) The Benches of the National Tax Tribunal shall ordinarily sit at any place in the National Capital Territory of Delhi or such other places as the Central Government may, in consultation with the Chairperson, notify:
Provided that the Chairperson may for adequate reasons permit a Bench to hold its temporary sitting for a period not exceeding fifteen days at a place other than its ordinary place of seat.
(3) The Central Government shall notify the areas in relation to which each bench of the National Tax Tribunal may exercise its jurisdiction.
(4) The Central Government shall determine the number of Benches and each Bench shall consist of two members.
(5) The Central Government may transfer a Member from headquarters of one Bench in one State to the headquarters of another Bench in another State or to the headquarters of any other Bench within a State:
Provided that no member shall be transferred without the concurrence of the Chairperson.
6. Qualifications for appointment of Chairperson and other Members –
(1) The Chairperson of the National Tax Tribunal shall be a person who has been a Judge of the Supreme Court or the Chief Justice of a High Court.
(2) A person shall not be qualified for appointment as Member unless he
(a) is, or has been, or is eligible to be, a Judge of a High Court; or
(b) is, or has been, a Member of the Income-tax Appellate Tribunal or of the Customs, Excise and Service Tax Appellate
Tribunal for at least five years.
7. Appointment of Chairperson and other Members
(1) Subject to the provisions of sub-section (2), the Chairperson and every other Member shall be appointed by the Central Government.
(2) The Chairperson and the other Members shall be appointed by the Central Government on the recommendations of a Selection Committee consisting of
(a) the Chief Justice of India or a Judge of the Supreme Court nominated by him;
(b) the Secretary in the Ministry of Law and Justice (Department of Legal Affairs);
(c) the Secretary in the Ministry of Finance (Department of Revenue).
(3) No appointment of the Chairperson or of any other Member shall be invalidated merely by reason of any vacancy or any defect in the constitution of the Selection Committee.
8. Terms of office of Chairperson and other Members
The Chairperson and every other Member shall hold office as such for a term of five years from the date on which he enters upon his office but shall be eligible for re-appointment:
Provided that no Chairperson or other Member shall hold office as such after he has attained, –
(a) in the case of Chairperson, the age of sixty-eight years; and
(b) in the case of any other Member, the age of sixty-five years.
13. Appearance before National Tax Tribunal
(1) A party to an appeal other than Government may either appear in person or authorize one or more chartered accountants or legal practitioners to present his or its case before the National Tax Tribunal.
(2) The Government may authorize one or more legal practitioners or any of its officers to present its case before the National Tax Tribunal.
Explanation – For the purposes of this Section,-
(a) “chartered accountant” means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(b) “legal practitioner” means an advocate, a vakil or any attorney of any High Court, and includes a pleader in practice.
Author Bio
display as- ‘ 0 comment’? Needs to be corrected for sake of good order !
Dear Mr. B S K Rao,
Do please conduct with at least the basic requirements of professionalism. What do you mean by Commission Agents? How does the placement of the letters constitute anything? This is a professional forum, and calls for decorum and dignity. Kindly do not extend your personal biases and prejudices, whatever they are to such forums.
(1) Issue of practice of law by Non-Advocates well settled in the case of A.K.Balaji Vs Union of India, Madras HC. Herein, Income-Tax Deptt. also one of the party. Further, Madras HC directed BCI to take action in the matter of practice of law by Non-Advocates.
(2) Only about the issue of foreign lawyers practice of law in India for giving advice in the matter of foreign law was up-held by Madras HC. This was also disputed & filed SLP before Supreme Court. Supreme Court in its interim order passed in the case of Bar Council of India Vs A.K.Balaji affirmed the Madras HC verdict of practice of law by only Advocates. I.e, to practice law the person should be well covered under Advocates Act.
(3) The issue before Supreme Court on date is only foreign lawyers practice of law in India for giving advise about the laws of their country. Therefore, I am of the strong view that issue of prohibiting other than Advocates to practice law in India well settled by Hon’ble Madras HC & Apex Court in their orders without any doubt.
USUALLY ACADEMIC QUALIFICATIONS ACQUIRED BY PERSON AFTER HIS BIRTH, THEREFORE THE SAME IS PUT AFTER HIS NAME. EX:- IF CA QUALIFICATION PUT BEFORE HIS NAME, WILL IT NOT MEAN “COMMISSION AGENT” ?
Indian legislature provided special class of persons called Advocates in Advocates Act, 1961 to practice all Indian laws. Therefore, appearance clause not yet all required in any Indian statute. Bar Council of India Vs A.K.Balaji [SLP(Civil)No(s)17150-17154/2012] Dt.4.7.2012 (SC) & A.K.Balaji Vs Govt. of India (2012) 35 KLR 290 21.02.2012 (Madras HC) it was clearly held by Hon’ble Supreme Court & Madras High Court that Advocates alone are entitled to practice the Profession of Law both in litigious & non-litigious matters, nullifying the effect of Section 33 of Advocates Act. This also confirms to Section 29 of Advocates Act. Latest policy decision of learned officials in Finance Ministry, Govt. of India to expand the definition of “Accountant” to include related professionals in DTC-2013 is highly appreciated. But, in order to give full effect for the same, Tax Practitioners Bill required for India to enable other than Advocates to practice taxation law in India. On date, appearance clause under all Indian taxation statute has been subject to review of apex court & hence require deletion. Other than Advocates should appear before tax authorities under CPC/Evidence Act against summons issued. If such appearance clause still retained in statute book of Indian taxation laws, situation may arise that order of assessing authority passed against the representation of other than Advocates become in-fructuous, bad in law, null & void. Further, such orders can not be enforced/appealed. Our esteemed Central Govt. should come out with subordinate legislation; introduce Tax Practitioners Bill covering all tax law professionals in India. Such Tax Practitioners Bill should be introduced with “Preamble” stating that “Other than Advocates are also practicing tax law in India, in order to protect them & also in the interest of Govt. revenue, this Tax Practitioners Bill has been introduced”. Then such Tax Practitioners Law can not be struck down in view above court verdicts. Treasury Department Circular No.230 for regulations governing practice before the Internal Revenue Service of Income-Tax Deptt. in USA & Tax Agent Service Act of Australia are very good examples for kind consideration of Ministry of Finance, Government of India to have similar Tax Practitioners Law in India also, to generate tax professionals for widening genuine tax base of assesses.
ON DATE ALL RELATED PROFESSIONALS ARE FOLLOWING EVERY FOOT PRINTS OF ICAI (FINANCIALS). IT IS RIGHT TIME ICAI (FINANCIALS) SHOULD CHANGE ITS ATTITUDE & APPROACH AND CONSIDER THE INTEREST OF NATION & RELATED PROFESSIONALS IN ALL ITS ACTIONS & SHOULD PROVE ITS SOCIAL RESPONSIBILITY. I HOPE ICAI (FINANCIALS) WILL NOT MISUSE PRIVILEGE GIVEN TO IT IN INDIAN LEGISLATURE, WORK UNDER TRANSPARENCY IN FUTURE & STAY IN DAMAGE CONTROL MODE.
The judgment , read closely and cohesively is sure to have, contrary to the viewpoints canvassed for in certain limited circle ( more so with a self-centric, in-box or biased approach), left anyone else with the right impression that in holding that the NTT is patently a misconceived legislation having the potential to upset the apple cart , of judicial hierarchy as virtuously embedded in the constitution, in place and fully in function for ages, serving well the common good of the legal system in totality. One of the things mentioned in the Act itself as its object is, in effect, to consolidate and vest the power of adjudication in respect of several direct and other laws in the newly created single institution called NTT. One is not at all clear on the full import of the intention behind or real purpose sought to be accomplished thereby.
Be that as it may, another observation / opinion of the court, which has been subjected to a sort of severe ridicule / criticism in certain quarters, -more so prima facie, in one’s independent and impartial conviction ,-rather unwittingly, is that reads: “We simultaneously hold s. 13(1), insofar as it allows Chartered Accountants to represent a party to an appeal before the NTT, as unconstitutional and unsustainable in law.” Should one go by and consciously make a note of the court’s well-founded reasoning behind, in one’s view, there appears to be no substance whatsoever in the uncannily floated critique there against. For, that is essentially an aspect which should be devoutly looked at from the viewpoint of the ultimate rights and interests of the litigating taxpayers- the serviced; certainly not from that of the adversely affected professionals–the service providers.
For more, may see my recent personal Google Blogs @”swamilook”
vswami
·Rejoinder (meant to be taken as COMPREHENSIVE AND FINAL):
To whomsoever it may concern
Own further comment in any form, on my own comment which was entirely confined- if read carefully, – to a selected simple point of ongoing controversy, is not warranted. The posted comment was not intended to be misunderstood or misconceived by any other for his own reasons, even by erring on a wrong side, as a comment on the right or wrong of the ‘judgment’ as a whole. i would be wrong if i do so, idiotically. For, that is a matter of the topmost overwhelming intricacies galore. and ought to be valiantly fought out by either party (including the ones with own interests who, later, on intervention, came to be imp-leaded), if so decided to the FINISH (ING Line) at his own peril and cost.
Me, neither being a lawyer or CA , or any other professional, in active practice, much less one who, even secretly or remotely, believe to be a law or accounting, or any other, ‘expert’,- more so , in any case, not being a judge to proffer any empathetic or so emphatic as to drive/force anyone to take it , unwisely so, as sacrosanct, Answer,- ‘Yes’ or ‘No’, that too to be binding; simplistically, going by the dominant dictates of PRUDENCE.
In case, by any chance, the idea in the minds of the anyone or more of the rest is to know what others have to say, on the merits or otherwise of the view the apex court taken, on the principal point of issue itself, may, -though not obligated but as a matter of common courtesy, recommend to look up also the other related websites / financial papers ,adequately covering the self-same topic.
PS: Mr Sandeep – My personal request/sincere suggestion to you, in own interests, is to try and ensure, through proper moderation, that, your website is used as a forum for anybody to comment on the subject matter or any aspect incidental thereto, on the line of each one’s individual / independent line of thinking; not to be converted into a forum for any type of ‘debate’ or ‘arguments’ as herein, heated or emotional and the like, more so aimed at solely on/ targeting the comment of any one else, for whatsoever be the reason real or imagined. Especially on any aspect on which there could always be an answer, – YES or NO; AND NOT / NEVER A One-sided,- “Yes” OR “NO”; unlike as from a court, the only so far known constitutional authority empowered to ‘adjudicate’ or issue a writ. Any suggestion or diktat , to adopt, for framing a comment, any particular type of language the reader could understand or is able to understand, is too much to to expect or ask for; and verges on abject poverty of imaginative thinking / absurdity , reflecting the normal human trait of ‘egoism’ on the part of the suggester.
Again, incidentally, kindly note, the need for my such a rejoinder would not have arisen or been realized by me, but for the fact that i per chance / sheer accident happened to have a re -look herein, plainly wanting to know/ get a feedback as to what the other readers, presumably enlightened in their own way, have had to say.
Anyone participating or interacting through such websites, with the purpose of common good in mind or not, ought not to forget that, anyone else so doing wholly for the common good and with an impartial outlook is neither a paid or obedient servant of the former or at his command.
Time for me to say to self, after a really painful but thankless participation – there being no real purpose envisaged or expected to be served anymore, in immediate vision, more so for the common good,- Adieu.
As i have made myself to be understood on several occasions, any comment of mine is intended and to be taken nothing more than an impartial straightforward feedback, considered useful for the common good of one and all; nothing more or short of it.If not found to be so by any reader,even if he be a learned professional, only sensible option for him is to simply ignore and forget.
SUBASH AGARWAL SIR, YOU HAVE CORRECTLY INTERPRETED NTT VERDICT. CAS CAN NOT DECIDE SUBSTANTIAL QUESTION OF LAW IS EVIDENT FROM THE FACT OF WRONG AMENDMENT CARRIED OUT IN 2ND PROVISO TO SECTION 44AB OF INCOME-TAX ACT IN FINANCE ACT 2001 ON THE BEHEST OF ICAI (FINANCIALS)
IF UTTARAKHAND & RAJASTAN HIGH COURT JUDGMENT COMES OUT AND FINAL VERDICT OF A.K.BALAJI IN SUPREME COURT COMES OUT, OTHER THAN ADVOCATES CAN NOT PRACTICE LAW IN INDIA. IT IS RIGHT TIME THAT OUR CENTRAL GOVT. SHOULD ACT EARLY AND INTRODUCE TAX PRACTITIONERS BILL BOTH IN THE INTEREST OF GOVT. REVENUE & ALL TAX PROFESSIONALS COVERED UNDER RULES 12A OF INCOME-TAX RULES,1962.
NOW ONLY SOLUTION BEFORE MINISTRY OF FINANCE IS TO COME OUT WITH TAX PRACTITIONERS BILL IN THE LINES OF US TREASURY CIRCULAR NO.230, SO THAT ALL CLASS OF TAX PROFESSIONALS WHO ARE AUTHORIZED TO PREPARE RETURN UNDER RULES 12A OF INCOME-TAX RULES SHOULD BE TREATED ON PAR IN ALL RESPECTS. THIS IS MY CLAIM BEFORE MINISTRY OF FINANCE SINCE 2001.
Utpal K Saha Sir, the same situation arisen to Ministry of Finance in the matter of authorizing related professionals to sing off tax audit report.
The judgement has been delivered by a constitutional bench of 5 judges comprising of jurists like N Nariman. In my opinion this is an excellent judgement and should be respected by one n all and should be seen in wider perspective rather than on narrow considerations. It must be noted that NTT was sought to be created 4 lessening the burden of high courts n for that matter high court’s jurisdiction in tax matters was sought to be hived off. As such, only lawyers were competent to appear n argue before it as it was required to pronounce verdict on substantial questions of law n violations of constitution of India. Lawyers have in their curriculum subjects like constitution of India , interpretation of statutes , civil procedure code n r trained in court room procedure n decorum. These subjects n training r missing in the profession of CAs & CS. Bench has rightly held CAs are experts in accounts. No doubt some CAs do perform well before the quasi judicial authorities like ITAT n CASTAT but it must be noted that they r not courts but are fact finding bodies & as such do not require the expertise of a lawyer though many a times strictures r passed on CAs appearing before it 4 not conforming to d standards required of them ( see the latest case reported by itatonline abt a week back where in the order written by d Accountant Member – a CA himself , strong strictures have been passed against the CA concerned and the CA institute has been asked to initiate disciplinary proceeding agst the CA). Thus, NTT was a totally misconceived piece of legislation n would have made CAs n CS more vulnerable 2 disciplinary & contempt proceedings for their lack of knowledge & training in court procedure & constitutional law. Govt & the professionals should appreciate that every profession has a role charted out and one should not impinge into each other’s periphery. A person cannot be allowed to conduct surgery on a human body even if he is a doctor unless he has necessary qualification in surgery & training in the said field.
Wrt the SC’s reported observation >”…. We simultaneously hold s. 13(1), insofar as it allows Chartered Accountants to represent a party to an appeal before the NTT, as unconstitutional and unsustainable in law.”
To share own independent perspective: The Court , of course, has gone into / dwelt upon the validity or otherwise of some of the sections in the scheme of the NTT e.g. sec 13 (1) ; and made certain observations . Even so, if analyzed closely, the better view to take,- contrary to the one projected/being canvassed in some quarters,- will be THIS: The validity, legal acceptability, etc. of those sections have been argued/discussed, at some length. But the court has done so, only in the course of and for deciding the principal issue; that is, whether the concept of NTT has a strong foothold, to firmly stand on, so as to be upheld as vires the Constitution. Even if perceived with a different stroke, to say to the effect or suggest that the SC has not borne in mind the basic reality that once the scheme itself is struck down as ultra vires, – as has happened, – the rest of the discussion would pale into insignificance /be rendered inconsequential, and are bound to automatically fall like a pack of cards, would be, to put it in the least offensive manner, tantamount to offending the judicial intelligence.
The government is noted to have valiantly fought the battle thus far, but without success. Its next further move, if at all feasible / open and planning to be pursued,is for now left to anyone’s wild guess.
“Substantial question of law” means to understand actual interpretation of law/actual findings related to law. To determine ” Substantial question of law”.you should have to proper knowledge of other laws.Because every indian law is co-related with other laws.
Income tax law is also co-relation with HINDU LAW matters related to HUF.
PROPERTY TRANSFER ACT, LOCAL LAND LAWS to decide matters related to taxation of property & agriculture matters. Except this other laws like evidence act,
IPC,CPC, CRPC,MOHHAMDAN LAW,CONTRACT ACT & POWER OF ATTORNEY ACT etc.
For better defense in any case before Hon’ble HC & SC. Base should be strong & actual base starts from initial level.
Please note the following points of the Apex Court:
Page 224: “While recording the above conclusion, we simultaneously hold Section 13(1), insofar as it allows Chartered Accountants to represent a party to an appeal before the NTT, as unconstitutional and unsustainable in law”
Page 224: “Even insofar as the Chartered Accountants are concerned, we are constrained to hold that allowing them to appear on behalf of a party before the NTT, would be unacceptable in law”
The apex court has also raised question over Section 5,6,7,8,13 of NTT Act. NTT Act should be reviewed in light of the judgement of the Apex Court.
Mr. Mallikarjun dev
The SC has not said that only advocates shall practice Income tax law. It has said that they shall not appear to argue substantial question of law which are decided in courts. Representation before IT authorities does not involves ‘substantial’ questions of law, rather interpretation of facts. Period. And who is better than Accountants in understanding numbers?
goood for advocates who are practicing in taxwation. realy touched to my heart as advocate
Dear Professional fraternity, now the Apex court has ultimately made it very clear beyond any ray of doubt with all clarity and consistency why only Advocates to practice under Income Tax Law, as “substantial questions of law” is widely involved in various applications. Let now the CBDT and finance ministry realize and initiate the consequential steps, amendments to be taken up at the earliest to stop unconstitutional practices.
The header is misleading. A plain reading of the extract of the judgement quoted by you nowhere says that representation by Chartered Accountants/ Company Secretaries is unconstitutional. What is held as unconstitutional is some of the sections in the Act. Please substitute the misleading header and post the article again
SC is right. A person qualified in law should only be allowed to appear before courts on questions of law. However, NTT should be formed since it will help in speedy disposal of matters instead of burdening highcourts.
TAX PRACTITIONERS BILL IS THE ONLY SOLUTION FOR NON-ADVOCATES TO SUSTAIN IN PRACTICE OF TAX LAWS IN INDIA
It is also difficult to differentiate between appearance of Non-Advocates before revenue authorities.When they appear before Revenue authorities. I think affidavit should be obtained from Non-Advocates when they appear before tax authorities. Affidavit should be contained particulars that They will not engage themselves in ” Practice of law”. When they will appear before tax authorities u/s 288(2) income tax except ” Practice of accountancy”.
It is very good decision of Hon’ble Supreme Court & touch every aspect to decide the matter.
Date extension 30 – 9 – 2014 itr