Applying Article 142 in the Income Tax Law for validating the reassessment proceeding: An overview

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Applying Article 142 in the Income Tax Law for validating the reassessment proceeding: An overview

 

There are only two things which are certain in life- Death and Taxes

To do “Complete Justice”, for the first time in the history of Indian Taxation, Article 142 appears to have been invoked by the Hon’ble Apex Court of the country. Article 142 is used by the judiciary when the law of statutes is silent or is used to fill the lacuna of the law.

Without Article 142, there would not have been any other options or way out which would have been there in the hands of the Revenue. The reason to some extent appears to be logical as over 90,000 cases involving corers of revenue were related to the issue.

  Let us know more about Article 142 which reads as under:

142. Enforcement of decrees and orders of Supreme Court and unless as to discovery, etc.-

(1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or orders so made shall be enforceable throughout the territory of India in such manner as may be prescribed by or under any law made by Parliament and, until provision in that behalf is so made, in such manner as the President may by order prescribe.

(2) Subject to the provisions of any law made in this behalf by Parliament, the Supreme Court shall, as respects the whole of the territory of India, have all and every power to make any order for the purpose of securing the attendance of any person, the discovery or production of any documents, or the investigation or punishment of any contempt of itself.

The purpose of Article 142 of the constitution of India is to provide “complete justice”. It empowers the Supreme Court (no High Court is empowered under Article 142) to pass any order to do “complete justice”.

Cases where Article 142 was invoked by the Hon’ble Supreme Court are as under:

  1. Ayodhya Case:
    It may be noted that the Article 142 in Constitution of India was invoked by theApex Court in Ayodhya case wherein the bench handed over the disputed land of 2.77 acres to a trust to be formed by the central government within three months for the construction of a temple, under the Acquisition of Certain Area at Ayodhya Act, 1993. Another 5 acres of land was allotted for the construction of a mosque in Ayodhya. The court observed as under:
    The phrase ‘is necessary for doing complete justice’ is of a wide amplitude and encompasses a power of equity which is employed when the strict application of the law is inadequate to produce a just outcome. The demands of justice require a close attention not just to positive law but also to the silences of positive law to find within its interstices, a solution that is equitable and just. The legal enterprise is premised on the application of generally worded laws to the specifics of a case before courts.”
  2. Bhopal Gas Tragedy:
    The Hon’ble court observed as under:
    “prohibitions or limitations or provisions contained in ordinary laws cannot, ipso facto, act as prohibitions or limitations on the constitutional powers under Article 142……..But we think that such prohibition should also be shown to be based on some underlying fundamental and general issues of public policy and not merely incidental to a particular statutory scheme or pattern. It will again be wholly incorrect to say that powers under Article 142 are subject to such express statutory prohibitions. That would convey the idea that statutory provisions override a constitutional provision. Perhaps, the proper way of expressing the idea is that in exercising powers under Article 142 and in assessing the needs of ―”complete justice” of a cause or matter, the apex Court will take note of the express prohibitions in any substantive statutory provision based on some fundamental principles of public policy and regulate the exercise of its power and discretion accordingly. The proposition does not relate to the powers of the Court under Article 142, but only to what is or is not ‘complete justice‘ of a cause or matter and in the ultimate analysis of the propriety of the exercise of the power. No question of lack of jurisdiction or of nullity can arise.”
  3. The much publicized Government order on Alcohol Banning on State And National Highways
  4. Well known Coal Block Allocation Case

Why Article 142 for validating the reassessment proceeding initiated in between 01.04.2021 to 30.03.2021? What now?

  1. The only alternative option could have been the retrospective amendment in the Income Tax Act- 1961 which could have been titled as “Clarificatory in nature”. However, this time no retrospective amendment was carried out on this point by the Finance Bill – 2022 but the Judiciary have decided the issue in favour of the assessee.
  2. No Government could have dared to leave crores and crores of revenue for mere “Technical breaches” of law.
  3. It may be noted that there are various other sections where the proceeding is invalidated for the reason of technical breaches like imposition of penalty without due tick in the income tax notices, without mentioning the dates, etc. However, the present issue was backed by some “bonafide” justification as a result of which the Article 142 is invoked by the Hon’ble Supreme Court.
  4. Now, there are the chances when the taxpayer would approach the Hon’ble Supreme Court with a request for invoking natural justice. It may happen in the GST proceeding in most of the cases.
  5. There are a lot of issues which are going to emerge from the Supreme Court pronouncements. Though, it appears that all the revenue may not get the benefit in all 90,000 cases, but still a major chunk of cases will be there in the kitty of the income tax department.
  6. The Officers Association has already written to the CBDT for clarification, still it appears that the interpretation would be the matter of further litigation and controversy on either side.
  7. One thing is sure now that most of the assessee would be flooded with the notices and compliances of section 148A(b). Let us enjoy the uncertainty of the tax laws.

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