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Considerably, litigators represent a party in a dispute, working to achieve the best possible outcome for their client. Each case takes on a life of its own, and the litigator must constantly evaluate next steps in light of what the judge /authority or opposing counsel have done. Sometimes it pays to be aggressive.

Coming to a tax litigant, he usually faces a situation where even after having an affirmative order which attained finality; the tax department doesn’t release the refund amount. Such cases are in the form where tax had been deposited as a pre-deposit (20% of disputed amount in Income Tax Laws and GST Law) in an appeal.

Role of Litigator

Hence, a duty of counsel is not over even after vanquishing the case against the revenue. Rulings of court dealt with a similar issue in which the tax department was directed to incur the penal interest and costs. The legal prepositions following from the orders:

1. Contempt petition was entertained on the failure of the tax department to refund the tax amount even after the final order.

2. Department being stated within the meaning of Article 12 of the Constitution is expected to not act as “finders keepers” to the prejudice of citizens.

3. After the assessment was quashed & the lis attended finality, the department is not entitled to retain the tax in violation of Article 265 of the constitution.

4. That the power under Section 241/241A of the Income Tax Act, 1961 cannot be used arbitrarily and refund cannot be denied merely because the revenue had filed certain proceedings by way of appeal and that such appeal was pending.

Ideally in such cases, when the appeal or initial writ is being disposed of by the courts, an undertaking on behalf of the department must be taken on record regarding refund timelines to save additional cost & resources.

For the same reliance was placed on:

1. Team HR Services v. Union of India.

2. Sandvik Asia Ltd. Vs. Commissioner of Income Tax-I, Pune.

3. Hello Minerals Water (P) Ltd. Vs. Union of India.

4. Punjab and Haryana High Court in Naurata Ram [1998] 100 Taxman 266.

 The CBDT has issued the circular No 14 in the year 1955 (14/1955) in which:

The intention of this circular is not that tax due should not be charged or that any favour should be shown to anybody in the matter of assessment, or that where investigations are called for, they should not be made. Whatever the legitimate tax it must be assessed and must be collected. The purpose of this circular is merely to emphasize that we should not take advantage of an assessee’s ignorance to collect more tax out of him than is legitimately due from him.

The revenue must be reminded by the appellant in every appeal that an officer cannot collect the tax amount more than the amount charged as per the authority of law. Assessee has to face the hardship and hasty erroneous proceedings for the refund even after the department itself issued the circular.  Thus, corroborating the legal maxim ‘justice delayed is justice denied’.

Though late but the assessee who fights under the law gets justice or benefits but the assessee who feel that they do not want to be intimidated by the law or any authorities and they pay taxes and interest, but they later regret, is totally wrong. The government should frame and instruct to follow the law for all the people; otherwise it seems an unfair situation that the person who complies with the laws will be beaten.

Apart from the above, in the concept of common law, natural justice constitutes higher procedural principles introduced by the courts. These principles must be complied by every judicial, quasi-judicial and administrative agency. It is used before taking any decision that may adversely affect the rights of a private individual. To maintain trust of the public in the country’s legal system. Therefore, natural justice forms an important part of the constitution.

The role and jurisdiction of administrative agencies is increasing at a rapid pace in India today. If the function of the state is not carried out in a just and fair manner, the Rule of Law would lose its validity. Natural Justice is firmly grounded to Article 14 and 21 of Indian Constitution. Since violation of natural justice leads to arbitrariness, so violation of justice is violation of equality. Additionally, constitutional remedies are guaranteed under Art 32, 226, and 136 in the matters pertaining to the violation of any of fundamental rights as well as in the cases of deprivation of the principles of natural justice.

Consequently, there would inevitably be much fine detail to be mapped out as the litigator got dissolved himself so much in the case which objects not only his existence but also to what extent their duties and responsibilities are bound towards the client/ assessee. But it can be achieved by considering a rebalancing of the whole ‘ecosystem’ of legal aid and the broader legal services market. On the other hand, unfortunately, authority seems to have lost all sense of proportion and rationality in trying to advance their point of allegations and cause of the order making it difficult for the litigator even more.

Conclusion: If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws. Thus, recognising the principle of natural justice which encourages equity, fairness and equality, must be followed at every staggered procedure. It has become the game of infesting either of law or of justice, both can’t be expected from the Authorities as a whole. It is true that while making out in the case and with the focus on what it is that was wrong, how to demonstrate that and what remedy is appropriate, the role of litigator is becoming like a vicious circle demonstrating “Litigation: Evidence or Emotion?”.However, a sympathetic, independent intervention at the start geared not to apportioning blame but to finding a way to work together might well prevent this nature escalation all out.

Disclaimer: The views expressed herein above are solely the author’s personal views/opinion. This is an informational article and should not be considered as a legal opinion. The possibility of any errors and omissions in the article cannot be ruled out.

Authored By-
CA Bhavya Shah Author is a practicing member of ICAI with L.L.B. qualification.
CA Ankesh Patni Author is a practicing member of ICAI.

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May 2024