“The hardest thing to understand in the world is the income tax.”
If one of the most brilliant scientific minds of the 20th century found income tax complex, the average Indian taxpayer ought to be forgiven for having difficulties in coming to terms with the Indian Income-tax Act, 1961, which is perceived to be more complex than the tax laws of many other countries.
For instance, if the Act provides for a mechanism to stay the recovery of tax up to 365 days pending disposal of taxpayer’s appeal by Income-tax Appellate Tribunal, then any delay in disposal of the appeal not attributable to the taxpayer leading to the breach of the 365 days threshold would not, by itself, make the tax demand recoverable. However, the Act provides that where the appeal is not disposed off by the Tribunal within the aforesaid period of 365 days, then the stay on recovery of the tax demand is automatically vacated even if the delay in disposal of the appeal is not attributable to the taxpayer.
An obvious question here is, whether this provision is constitutionally valid for it effectively enables the tax department to recover the tax demand even if the appeal is pending before the Tribunal and the taxpayer is not responsible for delaying the disposal of appeal? This question becomes more critical when juxtaposed against the following ground realities:
n Success rate of the tax department in appeals before the Tribunal is merely around 25% as per past statistics, which effectively means that under the present scheme of provisions of the Act, the tax department has an opportunity to recover tax demand without even having reasonable chance of success in the appeal before the Tribunal.
n There are situations where the delay in disposal of the appeal would not be on account of the taxpayer. For instance, the appeals are not heard by the Tribunal on account of adjournment motions being moved by the tax department. Further, sometimes the Tribunal does not take up a particular issue for hearing on account of the same being pending for adjudication before the special bench of Tribunal.
Though, unfortunately, equity is not a virtue extolled in the Act and the Supreme Court on various occasions has held equitable considerations to be irrelevant in interpreting the provisions of a taxing statute, it would nevertheless be interesting to see if the taxpayer’s concerns on this point would be appreciated by the