Need for amending IT Rule 55 (Pertaining to Registration of Income Tax Practitioners)

SYED MAHABOOB PEER

Brief: Mere qualifying by just passing any accountancy examination recognized in this behalf by the Board [Vide Clause (v) of Section 288(2) of the Income Tax Act, 1961]; or acquiring such educational qualifica­tions as the Board may prescribe for this purpose [Vide Clause (vi) of Section 288(2) of the Income Tax Act, 1961] will entitle the candidate to undertake the profession of Income Come Tax Practitioner.

The Rule 50 of the Income Tax Rules, 1962 sets out the Accountancy Examinations which were recognized in this behalf by the Board. And, the Rule 51 of the Income Tax Rules, 1962 sets out the educational qualifica­tions as the Board may prescribed for this purpose, which includes the Degree in Commerce or Law from Any Indian University incorporated by any law for the time being in force.

Thus, fulfilling the requirement of Clauses (v) and (vi) Section 288(2) of the Income Tax Act, 1961 [read with Rule 50 or Rule 51 respectively] would suffice for carrying on with the profession of representing any Income Tax Assessees as the Authorized Representative or Practicing of Income Tax, and for Registration/Enlistment as an Authorized Income Tax Practitioner fulfilling the condition laid under the Rule 54 of the Income Tax Rules, 1962 is enough.

(i) Introduction:

Our mother INDIA has ever increasing population and accordingly we are fortunate enough to have a good number of educated/graduates in different fields and faculties, but unfortunately, in spite of having the best policies of our country, many of our graduates have to resort for the “brain-drain”, and those who could not resort for the “brain-drain” for one reason or the other, are to look for the assistance from the Government by way of a suitable employment but same is in vain, as any Government could not provide the same to all of its citizens in its service.

However, those educated/graduates having confidence in their intelligence/ knowledge/ educational capacities are straight-away aspiring to take up different professions, such as management consultants, financial consultants, lawyers, chartered accountants, and income tax practitioners, etc.

The Profession of “Income Tax Practitioner (ITP)” is a specialized one that allows carrying on with the Profession with the least & most reasonable qualifications. To be and become a Registered Income Tax Practitioner, apart from Section 288(2)(vi) of the Income Tax Act, 1961, certain positive & assured Rules of the Income Tax Rules, 1962 [particularly the Rules 12A, 49(a), 50 or 51, 53, 54 and partly the Rule 55] are applicable in connection with Registration as Authorized Income Tax Practitioners.

The Learned Jurisdictional CITs are failing to interpret properly the Rule 55 of the Income Tax Rules, 1962 and that has lead to hardship of the First/New Generation Candidature/Income Tax Practitioners.

(ii) Main Body:

The Rule 54 is clearly indicating to accompany the application by documentary evidence pertaining to eligibility for income-tax practice under respective Clause of Sub-section (2) of Section 288 of the Income Tax Act, 1961 only, and that the condition of prior attending/practicing is inapplicable to the applicants under the categories of the Clauses (v) or (vi) of Section 288(2) of the Act, as it has no other/further prerequisite of prior attending/ practicing before IT Authorities, except that of passing the Accountancy Examination or acquiring a Degree in Commerce or Law.

The regrettable thing is that the Jurisdictional CITs competent to Enlist/Register those applicants (who have submitted their Applications in Form No.39) are taking shelter of the Rule 55 for rejecting those applications (of prospective Income Tax Practitioners) with a pretext that the applicant has not been practicing before income tax authorities for not less than one year on the date of the application. All this is due to inability either to make proper application of mind or to interpret properly by them are by their immediate subordinates, who guide the Jurisdictional CITs.

The drafting of the Section 288(2) under Income Tax Act, 1961 has been clearly shown the categories & their prerequisites in it, but while drafting the Rule 55 under Income Tax Rules, 1962 they might have felt it unnecessary for repeating the same sequence or might not have thought of the need of repeating or reproducing the same format of applicable portion of Section 288(2) in the contents of Rule 55, and would have shortened it or merely briefed it, which is mostly causing confusion to the officials, that has lead to hardship to those applicants who desire to enlist their names in the “Register of Authorized Income Tax Practitioners”, or aspire to take up the profession of Income Tax Practitioners.

The Rule 55 of the Income Tax Rules, 1962 pertains with the tasks of (1) Enlistment of eligible Applicant, who has submitted the Application in “Form No. 39”, as an “Authorized Income Tax Practitioner” in the “Register of Authorized Income Tax Practitioners” maintained by the Commissioner of Income Tax in “Form No. 38”, and (2) Issue the “Certificate of Registration” in “Form No. 40”, enabling the Applicant to act as an Authorized “Income Tax Practitioner (ITP)” and to represent his clients (i.e., Income Tax Assessees) before any Income Tax Authority or the Appellate Tribunal in connection with any proceeding under the Income Tax Act, as an “Authorized Representative (AR)” as laid under Section 288 of the Income Tax Act, 1961.

The Rule 55 of the Income Tax Rules, 1962 has a legal-hitch, which might have been occurred at the time of its drafting it clumsy/klutzy in haste (trying to make it in a short & brief form), so as to cover Specially the Clause (vii), apart from the Clauses (v) and (vi) of the Section 288(2) of the Income Tax Act, 1961, and thus, the Rule 55 of the Income Tax Rules, 1962 is “inconsistent” with the Clauses (v) and (vi) of Sub-section (2) of Section 288 of the Income Tax Act, 1961. Hence, the Jurisdictional CITs and/or their immediate subordinate officers misinterpret it, and stand to insist that the “applicants under Clause (v) and Clause (vi) must have been practicing before income tax authorities for not less than one year on the date of the application” and this impose other than the basic prerequisite of just passing any accountancy examination recognized in this behalf by the Board [per Clause (v) of Section 288(2) of the Income Tax Act, 1961] or acquiring such educational qualifica­tions as the Board may prescribe for this purpose [per Clause (vi) of Section 288(2) of the Income Tax Act, 1961] is ultra virus.

Here, let us have a look at the present statute laid under Section 288 of the Income Tax Act, 1961, which reads as follows (as available in latest/recent book of any Income Tax Act, 1961):

“Appearance by authorized representative:

Section 288 (1) Any assessee who is entitled or required to attend before any income tax authority or the Appellate Tribunal in connection with any proceeding under this Act otherwise than when required under section 131 to attend personally for examination on oath or affirmation, may, subject to the other provisions of this section, attend by an authorized representative.

(2) For the purposes of this section, “authorized representa­tive” means a person authorized by the assessee in writing to appear on his behalf, being—

(i) a person related to the assessee in any manner, or a person regularly employed by the assessee; or

(ii) any officer of a Scheduled Bank with which the assessee maintains a current account or has other regular dealings; or

(iii) any legal practitioner who is entitled to practise in any civil court in India; or

(iv) an accountant; or

(v) any person who has passed any accountancy examination recognised in this behalf by the Board; or

(vi) any person who has acquired such educational qualifica­tions as the Board may prescribe for this purpose; or

[(via) any person who, before the coming into force of this Act in the Union territory of Dadra and Nagar Haveli, Goa, Daman and Diu, or Pondicherry, attended before an income-tax authority in the said territory on behalf of any assessee other­wise than in the capacity of an employee or relative of that assessee;] or

(vii) any other person who, immediately before the commencement of this Act, was an income-tax practitioner within the meaning of clause (iv) of sub-section (2) of section 61 of the Indian Income-tax Act, 1922 (11 of 1922), and was actually practising as such.”

From the above, it is visible that the Clauses (via) & (vii) of the Section 288(2) of the Income Tax Act, 1961 are alone insisting prior/earlier attending/ practicing, but for the rest of the categories there is not even an iota of such prerequisite of prior/earlier attending/ practicing.

Here, now let us have a look at the present statute laid under Rule 55 of the Income Tax Rules, 1962, which reads as follows (as available in latest/recent book of any Income Tax Rules, 1962):

“Certificate of Registration:

Rule 55: If the [Chief Commissioner or Commissioner] is satisfied that the applicant fulfils the requirements of clause (v) or clause (vi) *[or clause (via)] or clause (vii) of sub-section (2) of section 288 and has been practicing before income tax authorities for not less than one year on the date of the application, the [Chief Commissioner or Commissioner] shall enter the name of the applicant in the register and issue him a certificate of registration in Form No.40”.

The words shown in bold form above in both the Section 288(2) of the Act and Rule 55 of the Rules are inserted by the IT (Fourth Amdt.) Rules, 1979, w.e.f. 21-7-1979 only, and thus to arrive at the original statute, so as to understand the original position/ ruling, you need to keep aside, for the time being, the later on added/inserted/amendment of words, [such as, clause (via)]. Then, prior to 21-7-1979 the original ruling positions would naturally be different, as follows:

If anybody, by applying proper mind, tries to understand clearly & impartially about the ruling/order of Rule 55 in regard to Section 288(2), it conveys its meaning as follows:

“If the Commissioner is satisfied that the Applicant fulfills the requirements of –

Clause (v) of sub-section (2) of Section 288 of the Income Tax Act, 1961;

OR

Clause (vi) of sub-section (2) of Section 288 of the Income Tax Act, 1961;

OR

Clause (vii) of sub-section (2) of Section 288 of the Income Tax Act, 1961 and has been practicing before the income tax authorities for not less than one year on the date of application, the [Chief Commissioner or Commissioner] shall enter the name of the applicant in the register and issue him a certificate of registration in Form No.40”.

From the above shown original & un-amended ruling “practicing before the income tax authorities for not less than one year on the date of application” is appropriately matching with the statutes laid under Clause (vii) of sub-section (2) of Section 288 of the Income Tax Act, 1961. Similarly, the present statute laid under sub-section (2) of Section 288 of the Income Tax Act, 1961 only Clauses (via) and (vii) will attract that condition.

Further, whereas the Section 288(2) of the Income Tax Act, 1961 is enumerating about the Eligibility of Eight [8] Individual Categories, the Rule 55 under the Income Tax Rules, 1962 mandates only Four (4) Categories [Clauses (v), (vi) & (via) and (vii) only].

For an easy interpretation or thoroughly understanding the ruling, we could further classify the Four (4) Categories of Clauses (v), (vi) & (via) and (vii) into Two (2) Groups – (A) Acquired Educational Qualification, & (B) Previously Attended/Practiced, and each of such groups is covering two Categories/Clauses of Sub-section (2) of Section 288 of the Income Tax Act, for the purpose of Enlistment under the “Register of Income Tax Practitioners” & issue of the “Certificate of Registration” to that effect, as follows: –

A. Under the Clauses (v) & (vi) there is a prerequisite of passing the Accountancy Examination / acquiring Educational Qualification respectively, as follows:

(v): Any person who has passed any accountancy examination recognized in this behalf by the Board;

(vi): Any person who has acquired such educational qualifications as the Board may prescribe for this purpose;

B. Under the Clause (via) there is a prerequisite of prior attending & under the Clause (vii) there is a prerequisite of earlier practicing, as follows:

(via): Any person who, before the coming into force of this Act in the UnionTerritory of Dadra and Nagar Haveli, Goa, Daman and Diu, or Pondicherry, attended before an income tax authority in the said territory on behalf of any assessee otherwise than in the capacity of an employee or relative of that assessee; or

(vii): Any other person who, immediately before the commencement of this Act, was an income tax practitioner within the meaning of clause (iv) of sub-section (2) of section 61 of the Indian Income Tax Act, 1922 [11 of 1922], and was actually practicing as such.

Whereas the Rule 55 is to cover all the above Four (4) Clauses, the above Clause-wise text & explanations could allow any layman to identify or understand easily that there is not even an iota of such a prerequisite of prior attending OR earlier practicing for the Registration/Enlistment of the ITPs under the Two (2) Clauses (v) & (vi) of Section 288(2) of the Income Tax Act, 1961. Thus, it could easily be opined that the later part of the Rule 55, which read as: “and has been practising before income-tax authorities for not less than one year on the date of the application” is exclusively relating to the Two (2) Clauses, i.e., (via) & (vii) of Sub-section (2) of Section 288 of the Income Tax Act, 1961 only & as far as the remaining Two (2) Clauses, i.e., (v) & (vi) of Sub-section (2) of Section 288 of the Income Tax Act, 1961 are concerned, it must be ignored as it will be neither consistent with nor fit by the Section 288(2)(v) or (vi) of the Income Tax Act, 1961, because the right given in this respect by the Act cannot be diluted by Rule 55 nor it can be restricted by Rule 55.

Finding out the exact answers to the following two questions, (after a keen & clear understanding) One could be able to easily & properly interpret the Rule 55:

Which one is the first & foremost in LAW, whether ACT or Rules?

Answer : An “Act” is passed by the Parliament as a law of the Government with a specific purpose or the objective to be achieved.

The “Rules” are instructions that tell you what you are allowed to do and what you are not allowed to do as per “Act”

Whereas an “Act” is a law passed by the Parliament and the “Rules” are framed to instruct as to what to do or what not to do in implementation of the provisions of the Act, the “Act” is the first & foremost in LAW or the Act itself is LAW.

Which is important in LAW, whether ACT or Rule?

Answer: The “Rules” are instructions that tell you what you are allowed to do and what you are not allowed to do as per “Act” and that the rules prescribe procedures and cannot go beyond the provisions of Act. Thus, “Act” is important in “LAW” or the Act itself is LAW.

Even, a look at the following format of Form No.39 [meant for Application for Registration as an Authorized Income Tax Practitioner] with special care for the asterisk (*) marked, would also stands for justifying the view that there is no need of proving earlier practice before the Income Tax Authorities in the cases of candidates under Clauses (v) and (vi) of Sub-section (2) of Section 288 of the Income Tax Act, 1961. The format of Form No.39 [made prior to the IT (Fourth Amdt.) Rules, 1979, w.e.f. 21-7-1979 only] contains only the special “3 sections” marked with (*) pertains to only clauses (v), (vi) and (vii) of sub-section (2) of section 288, which followed with another mark of (*) indicating to delete the inappropriate words, i.e., to delete inapplicable two (of the three) sections, by retaining only one applicable section, and whereas the applicant’s suitable section pertains to only clause (vi) of sub-section (2) of section 288, i,e., acquirement of desired Degree, there is no scope at all for insistence of earlier practice.

Format:

FORM NO.39

[See rule 54]

Form of Application for Registration as Authorized Income Tax Practitioner

To

The Chief Commissioner or Commissioner of Income Tax,

…………………………..

I hereby apply for registration as an unauthorized income tax practitioner under Clause (v)/(vi)/(vii) of Section 288(2) of the Income Tax Act, 1961.

The following particulars are furnished herewith:

1. Name in Full [Block Letters]:
2. Father’s Name:
3. Permanent residential address:
4. Present residential address:
5. Professional address(es) in India:
6. Principle place of profession in India:
7. If partner in a firm, names of the firms and other partners:

*I Certify that I have passed the Accountancy Examination of …. (a true copy of the certificate enclosed)

*I Certify that I have acquired the educational qualification of …. (a true copy of the certificate enclosed)

*I Certify that I was an income tax practitioner within the meaning of clause (iv) of sub-section (2) of section 61 of the Indian Income Tax Act, 1922, and was actually practicing immediately before 1^st April, 1962, as such and some of the cases in which I appeared in that capacity are as below:

Name and Address of Assessee	Assessment Year	Designation of the Income Tax AuthorityBefore whom appeared

I certify that I have been practicing as an income tax practitioner since ……….. and that I have not so far made any application for registration as an authorized income tax practitioner to any other Chief Commissioner or Commissioner of Income Tax.

____________

Signature

Verification

I,……………………. do declare that what is stated in the above application is true to the best of my knowledge and belief.

Date: ____________

Signature

*Delete inappropriate words

————————————————

Further, I request your benevolence to have a look at the following Format of Form No.38, a Register of Income Tax Practitioners to be maintained by the Chief Commissioner or Commissioner of Income Tax:

The above format will enable to understand that mainly there are columns for Qualification & Date of Entry in Register, but there are no columns for Date of commencement of the Practice, and/or the List of Cases in which the applicant has appeared/attended/practiced prior to date of Entry in Register. Thus, there is no scope at all for insistence of earlier practice.

From the above two formats produced, any layman could easily identify or understand that for the Two (2) Clauses (v) & (vi) of Sub-section (2) of Section 288 of the Income Tax Act, 1961, there is not even an iota of such a prerequisite of prior attending OR earlier practicing for the Registration/Enlistment of the ITPs under Clause (vi) of Sub-section (2) of Section 288 of the Income Tax Act, 1961.

Thus, imposing other than those prescribed in Act is ultra virus, and that the right given in this respect by the Act either be diluted by Rule 55 or it can be restricted by Rule 55. The Learned CIT has further failed to understand that the Rule 55 of the Income Tax Rules, 1962 is inconsistent with the Section 288(2)(vi) of the Income Tax Act, 1961. I submit that the Learned CIT has further failed to justify the rest of the Rules of the Income Tax Rules, 1962 [particularly the Rules 12A, 49(a), 50/51 & 54] in concentrating or focusing on the Rule 55.

(iii) Conclusion:

Further, the Prime Duty & Basic Responsibility of the IT Official is to clearly understand, properly interpret & correctly implement the provisions of IT Law with proper application of mind, and see that none to transgress or trespass the same. Similarly, the ITPs are to safeguard the interest of IT Law, with special care to IT Assessees (of course pertaining to his/her clientele) by watching proper implementation of the provisions of IT Law. In this way, both the IT Officials & ITPs are to render, more or less, one & the same service. In fact, the ITPs are an additional & freely available “think-tank” for the IT Dept. But, when the matter pertains to Entry of the Name in the Register of ITPs, the Officials are either turning hostile or wasting valuable time by intentionally imposing additional conditions ignoring the fact that the right given in this respect by the Act cannot be diluted by Rules nor it can be restricted by Rules.

Thus, to overcome this type of trauma, there is an urgent & dire need to bring in suitable amendment in Rule 55 of the Income Tax Rules, 1962, as a permanent cure for ever or atleast the CBDT must issue a notification/circular in this regard to enlighten the Jurisdictional CITs.

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