CA Lalit Munoyat
This short discussion is being initiated against the backdrop of the above judgment.
Under various taxing statutes discretionary power vests in a functionary like Income Tax Officer, Dy. Commissioner of Income Tax, Commissioner, Income tax , Service tax and central excise adjudicators and the like in case of customs laws and such other taxation law. Such powers are expected to be exercised reasonably and in good faith following the principles of natural justice. It is by now well settled that whenever such a power is conferred, the functionary cannot lake a stand that it is his absolute discretion to exercise the power or not to exercise the same. When such a power is exercised on a wrong or with an oblique motive or for a collateral purpose or without reference to the call of the principles of rules of reason and justice then such functionary end up with conclusions which are arbitrary, vague and fanciful and depicting more of personal whims than a reasoned reasoning, then court of law step in to control the discretion if exercised capriciously or in bad faith. Restricting this short discussion to Income Tax Issues, it is found from the grapevine and the reports of the assessees that some of the taxing authorities, both administrative and appellate, are prone to exercise the discretion against the above principles which lead to many avoidable litigations consuming the precious time of the Judiciary. Discretionary power ,as such, can’t be done-away-with totally nor does this short discussion aims at suggesting the same but suggests some room to prevent its misuse. In addition to various remedies available to prevent its misuse one more remedy containing the “Stick & Carrot” theory may also be used fruitfully.
According to the grapevine may assessees are faced with some hostile officers who not only do not listen to their views and written explanations but also show a sort of arrogance and pass some unreasoned and non-speaking orders and challenging the assessees to look for appellate remedies knowing it fully well that nothing would happen to him if such order is back fired at the appellate stage.
A thought may be given to the creation of a “System of Credits”. Under such a system each officer should be allowed some number of credits for each order of enhanced assessment which survive the scrutiny of the last fact finding authority i.e. ITAT. Comparative more credits may be allowed for each enhanced assessment involving the question of law which survive the scrutiny of the Court of law i.e. High Court and the Supreme Court.
Conversely , if an enhanced assessment does not survive the factual scrutiny by the ITAT then equal number of negative credits should be deducted from his account. Moreover comparative lesser credits should be deducted for each enhanced assessment involving the question of law which does not survive the scrutiny of the Court of law i.e. High Court and the Supreme Court justifiability appreciating the fact that the level of legal knowledge expected at the lower level and at the Judiciary level can’t be the same.
An alternative theory may also be developed which provides for graded credits at each level of survival of the enhanced assessment or graded negative credits for each level of failure of the enhanced assessment say , for example, higher positive credits for each level of survival and higher negative credits for each level of failure of the enhanced assessment.
The system of credit should be applicable to each departmental authority, original or appellate.
At the end of a suitable block of period say 3 or 5 years, the total available credit may be used for a suitable reward, either monetary or by way of promotional or transfer posting. Negative accumulated credits may be allowed to be set off against future positive credits wherever possible and if not so possible, then be used as a tool for extracting better exercise of discretionary power and with continuing failure, with monetary deductions.
Needless to say, the reward for the accumulated credit should be at par with the expectation of a functionary for exercising discretion with an oblique motive or for a collateral purpose.
Last but not the least this discussion , in no way, aims at undermining the reputation and goodwill of the upright functionaries who not only, always exercise their discretionary powers most reasonably and in good faith but also ensure that such powers appear to have been so exercised without any motive for reward or fear of failure.
This article , in no way, suggests replacement of an ideal ethical establishment wherein every person is supposed to possess, carry and exercise best standards of ethics in carrying out his legal obligations without any ulterior or personal object to be achieved.
Compiled by: CA LALIT MUNOYAT, B.Com.(Hons.),CS,FCA, DISA, @ firstname.lastname@example.org # 98201 93508