Report No. 79
Jurisdiction under Special Acts-tax Cases
I. The Present Position
A number of special Acts confer jurisdiction on the High Courts.1 In an earlier Chapter,2 have referred to the jurisdiction exercisable by the High Courts in appeals under special Acts. In this Chapter, we propose to deal with one important species of jurisdiction under special Acts, namely, jurisdiction in regard to matters relating to taxation. We are, in this context, primarily concerned with direct taxes. Taxing statutes, as is well known, undergo changes more frequently than legislation on other subjects. It is obvious that as the pattern of taxing law changes, the pattern of litigation in proceedings concerned with the decisions of income-tax authorities would also change.
Tax planning, in the sense of planning one's affairs so as to legitimately avoid tax, is also now a familiar phenomenon. In this process, the complexity of the questions that come up for determination before various appellate authorities under the direct tax laws increases. Thus, taxing statutes, complicated and technical as they usually are require continual concern with them for acquiring and maintaining reasonable familiarity with their provisions. Jurisdiction under these laws has, therefore, an interest and importance of its own.
1. Chapter 2, supra.
2. Chapter 9, supra.
17.2. Appeals in taxation cases.-
Authorities administering the direct tax laws have large powers, but an important restraining influence is the review of their decisions by appellate authorities functioning under those laws. The Income-tax Act and other Central laws relating to direct taxes provide a machinery for appeals. There is a whole hierarchy, starting with the Appellate Assistant Commissioner and ending with the Supreme Court. The first appeal lies generally to the Appellate Assistant Commissioner.
The Finance (No. 2) Act (19 of 1977)1 now makes provision for disposal of appeals by the Commissioner (Appeals). From the decisions of the income-tax authorities mentioned above, an appeal lies2 to the Income-tax Appellate Tribunal.3
In certain cases, there is an alternative avenue by approaching the Commissioner of Income-tax, but we are not concerned with that.
In this hierarchy of appeals, the final authority on facts is the Income-tax Appellate Tribunal,4 while the High Courts, and, in certain cases, the Supreme Court5 can be approached on questions of law. Jurisdiction of the High Court, as the law stands at present, is advisory (being exercisable on a reference made by the Appellate Tribunal). To the High Court, the Appellate Tribunal can make a reference on question of law. From the judgment of the High Court delivered on such reference, an appeal lies to the Supreme Court on a certificate of fitness for appeal ranted by the High Court6 or on special leave granted by the Supreme Court.7-8
1. Finance (No. 2) Act (29 of 1977), section 39 and Fifth Schedule.
2. Section 253, Income-tax Act, 1961.
3. Briefly referred to as the Appellate Tribunal.
4. Rameshwar Prasad Bagala v. C.I.T., Uttar Pradesh, AIR 1973 SC 182 (185), para. 10
5. Section 261, Income-tax Act, 1961.
6. Section 261, Income-tax Act, 1961.
7. C.I.T. v. Arunachalam Chettiar, 23 ITR 180 (185) SC: AIR 1953 SC 118 (121), para. 8.
8. Article 136, Constitution of India.
17.3. Volume of tax cases.-
This jurisdiction has been extensively resorted to, as would appear from the statistics on the subject. A large number of matters before the High Court consists of references made to it by the Appellate Tribunal under section 256 of the Income-tax Act, 1961, or under substantially similar provisions in the other central enactments relating to direct taxes, or in certain state enactments relating to sales-tax and other indirect taxes. It would appear1 that on the 1st January, 1977, 12,133 Income-tax references and applications were pending in the High Courts, and during the year 1977, 6289 such references and applications were instituted.
During the same year, 3195 such references and applications were disposed of by the High Courts. At the end of the year 1977, 15,227 such references and applications were pending. The disposal, counted as a percentage of institution, was 50.8 per cent. in the case of such references and applications. Barring the disposal rate in regard to election petitions, during the year 1977, this rate of disposal as a percentage of institution represents the lowest disposal rate of various types of cases during the year 1977.
1. Ministry of Home Affairs, Department of Justice, letter No. 36/1/1978-justice(M), dated 2nd June, 1978, Table V, item 9.