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National Tax Tribunal ruffles legal feathers — AIFTP to contest Ordinance provisions

Mohan Padmanabhan

Kolkata , Nov. 3

ALL mega tax payers of the country must be prepared to travel to the five places where the Benches of the recently constituted National Tax Tribunal (NTT) will be set up, if they are thinking of filing a tax appeal.

Did we hear someone say that the pendency of tax cases is bound to rise in the NTT also, as there would be only 10 Benches each of direct and indirect taxes, which was less than the collective number of Benches supposed to function in a High Court.

According to some leading tax advocates, if CAs and retired Chief Income-Tax Commissioners are going to sit on the NTT Benches, sooner or later, the legal fraternity may demand that they should be permitted to conduct tax audit or even statutory audit.

The setting up of a NTT through an ordinance without invoking a proper national debate on how and why such a major judicial body with full powers of the High Court seems to have encountered a serious challenge, ironically though, in the law courts. Tax experts and lawyers are questioning the constitutional validity of such an ordinance, especially when the National Tax Tribunal Bill 2003 was now pending before Parliament.

The All India Federation of Tax Practitioners (AIFTP) is planning to move the Bombay High Court this week to challenge the constitutional validity of NTT. Petitions are also likely to be filed by the same body in Ahmedabad, Andhra Pradesh, Rajasthan, and even Kolkata.

Eminent tax practitioners like Dr Debi Pal, former president of AIFTP, are said to be spearheading the movement against the NTT. The common view among tax lawyers is that such a body was thought of many times in the past, culminating in the Bill, and suddenly, why push it through so hurriedly with the help of an Ordinance, without a national debate.

Mr K. Shivaram, President of AIFTP, told Business Line from his Mumbai office, "While we have no quarrel with such a national body, various provisions of the NTT ordinance are highly questionable, especially as these deal with substantial questions of law". How can you appoint someone with no judicial training as a Technical Member on the NTT Bench? he asked. He said only 10 per cent of the tax appeals go to the High Courts as 90 per cent of these go to the Income Tax Appellate Tribunal (ITAT). And the tax department leads in the number of appeals filed, even though some 90 per cent of the cases in courts are decided in favour of the assessees.

What has actually ruffled weathers is the move to appoint tax administrators and chartered accountants on the NTT Benches with little or no exposure to substantial questions of law. A key question being raised is whether the NTT, which would replace the High Courts in disposal of all tax appeals, would have full independence enjoyed by the High Courts or will it be subjected to executive control?

According to Mr A.K. Chatterjee, Chairman, Bar Council of West Bengal, the move to dispose of pending tax cases in High Courts through such a medium of a NTT was, in his opinion, unconstitutional. Judiciary is one of the pillars of our society and how can you truncate it like this? he asked.

Says Mr Narayan P. Jain, Professor of Law at West Bengal National University of Juridical Sciences: "This experiment of the Government may not succeed as the Supreme Court itself may be flooded with tax appeals, as the NTT verdicts may come too quickly, if non-judicial members are going to help decide the cases."

Pointing out that the NTT was not the solution for reducing pendency of tax cases in courts, he said, as felt by AIFTP, more Benches should be set up in High Courts for speedy disposal of tax appeals.

A major irritant among the various provisions, according to him, was section 15(4) of the Ordinance, which makes part payment of tax (25 per cent of tax or duty payable) mandatory, even before the matter is adjudicated.

This condition did not apply while filing appeals before High Courts. There is, however, a proviso, which says that the NTT may waive this condition, if it felt that it could cause undue hardship to assessees.

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