A constitution bench of the Supreme Court held in 2005 that all criminal offences are creatures of statute. And a statute is an edict of elected representatives, not of the rulemaking executive.
Law also says that an essential legislative function cannot be delegated. Sourcing/defining criminal offence is surely an essential legislative function.
It is absurd to suggest that Parliament would confer on the rulemaking executive the authority to define, create, prosecute and even repeal a criminal offence. The rule of law would collapse if such a bizarre situation is countenanced.
Every criminal offence takes away life or personal liberty of individuals. Life and/or personal liberty are otherwise guaranteed fundamental rights of every person under Article 21 of the Constitution. Article 21 stipulates that no person shall be deprived of his life or personal liberty except according to procedure established by "law". And "law" under article 21 means law made by Parliament or state legislatures, as was held earlier in 1957 by another constitution bench of the Supreme Court.
Amid this well-settled principle of criminal jurisprudence, it is surprising to observe that the Income Tax (IT) department has been taking a contrary stand. The Income Tax Act, 1961 (ITA) has delegated powers to Central Board of Direct Taxes (CBDT) to frame rules — IT Rules. The said rules stipulate, inter alia, the “time limit” for depositing tax deducted at source (TDS) to the government. CBDT’s authority to prescribe “time limit” is not in dispute. But what is the consequence of breaching the “time limit”, say, of seven days? Does it lead to civil contravention or criminal prosecution? Civil contravention for breaching time limit of seven days is axiomatic. In such a situation the tax deductor has to deposit TDS with interest on eighth day onwards. But does it also lead to criminal prosecution on the eighth day?
If you issue a cheque on February 18, 2015, deduct tax simultaneously, and deposit the TDS on February 26, 2015, according to IT department, offence is committed on February 26, 2015, that is the eighth day. This stand of the IT department is absurd, shocking, and without jurisdiction. By this logic, CBDT can elongate, curtail or waive “time limit” to define or repeal a criminal offence. CBDT cannot substitute Parliament. Defining or repealing criminal offence is an essential legislative function. This cannot be delegated. This cannot and does not happen in any civilised jurisprudence in the world.
Amid this dismal situation, the statement made by finance minister Arun Jaitley that the department would now shift focus on prosecution for tax evasion adds fuel to the dampening investment climate. It also seeks to disrespect, if not scare away, more than 30 million direct tax assessees, from whom the finance minister has budgeted to garner Rs 7,35,000 crore only on July 10, 2014, leaving indirect tax revenue way behind at Rs 6,24,000 crore. Direct tax is now the backbone of India’s economy. In 2008-09, direct tax revenue surpassed indirect tax revenue for the first time. Since then, direct tax constitutes the single largest source of revenue for the government.
It would be observed that direct tax assessees have saved India to maintain fiscal discipline. A buoying direct tax kitty is a good sign for the economy. Till March 31, 2014, 2,31,49,112 (2.31 crore) returns were filed electronically by individuals, 6,18,806 (6.18 lakh) returns were filed electronically by corporates, and another 8,49,178 (8.49 lakh) returns were filed electronically by partnership firms, association of persons and body of individuals. Thus, a total of 2,46,17,096 (2.46 crore) returns were filed electronically. Many other assesseees, with annual income below the threshold level of five lakh rupees, have exercised option to file hard copies of return. These assesses are already registered with the IT department. The government should treat them as long-term friends. Today tax is collected mostly by advance tax, at source and from the salaried class. There is minimal scope for evasion from existing assesses with an excellent electronic system in place.
Most evasions take place as a sequel to scrutiny assessment. Proceedings in scrutiny assessment are conducted behind closed doors of the assessing officer. The vigilance department, or anyone else, can never get to know what transpires behind closed doors between the assessing officer and the assessee. It is time to open the door and allow independent neutral observers in every scrutiny assessment hearing. Every tax evader would then be caught, and the leakage of revenue would be plugged.
Have your say. You can comment here.Direct tax assessees need encouragement, not threat or coercion. Threat and coercion do not help. The dismal collection of indirect tax revenue is a reflection of wielding the stick. Indirect tax officials have the power to arrest. Direct tax officials have no such authority. If such a power is conferred on the IT department in this budget, that would be a recipe for disaster for India’s economy.
More than 30 million (direct) tax payers, and many more still outside the system, need to be enthused for unleashing the magic of India. Let us not hound the golden goose, the taxpayer.
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