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Arvind P. Datar

THE Finance Minister, Mr Jaswant Singh, has proposed the creation of a National Tax Tribunal (NTT) and the setting up of 50 additional Benches of the Income-Tax Appellate Tribunal (ITAT).

These have been announced as "tax reform measures" which are expected to reduce litigation and enable speedy disposal of pending cases. It seems that the Finance Minister has not properly been briefed on the functioning of the Appellate Tribunal and the need for creating an NTT. The proposal of an NTT, or National Direct Tax Tribunal, has been made by several Finance Ministers earlier but has, fortunately, never been implemented. In 1989-90, an "Arrears Committee" was constituted. Its report also recommended the creation of a Central or National Tax Court.

There is a naive notion that new Tribunals will solve all problems. Any difficulty in company law? Create a National Company Law Tribunal. Any problem in intellectual property? Create an Intellectual Property Tribunal. A similar proposal to create a Central Revenue Appellate Tribunal at the national level to deal with indirect taxes was also mooted but, fortunately, never implemented. The sanctioned strength of the ITAT is now 53 Benches with 106 members. At last count, there were 96 members in the Tribunal. Unfortunately, several Benches are located in places where there is virtually no work. While there is large pendency of cases in cities, it is negligible elsewhere. For example:

Guwahati: 459

Panaji: 815

Patna: 817

Cochin: 1,573

Jabalpur: 1,584

Rajkot: 2,496

Allahabad: 2,645

There is simply no need to have full-fledged Benches with two Members and a complete Registry at these centres. On the other hand, extra Members may be required in Mumbai, Delhi and Chennai to deal with long pendening cases.

It is seen that in many places, the Tribunal Benches commence work at 10-30 a.m. and rise for the day within an hour or two. Thus, the present strength is more than adequate to deal with pendency of cases. All that is required is proper reorganisation of the Benches based on the number of appeals pending in a particular area or State.

There is also need for better case management. Of the 1,80,000 cases, at least 33 per cent are appeals where the issues have already been covered by decisions of the Supreme Court, the High Courts or the Tribunal itself. These cases can be grouped together and disposed of expeditiously.

The Supreme Court was able to reduce arrears substantially by proper case management. Specific Benches were allocated to deal with cases on rent control, criminal law, labour, and so on. Adjournments were granted very rarely. By clubbing, or grouping, cases the arrears can be cleared quickly and with minimum additional expenditure. Unfortunately, several Benches have now been created based on political consideration rather than on the requirement of a particular area or State. The most important point to be noted is that with the increase in the number of Members there is bound to be serious erosion in quality.

A recruitment drive of 100 Members to man the 50 additional Benches will have singularly disastrous consequences. The recent trend to create Tribunals at the drop of a hat is nothing but an unfortunate method of creating post-retirement jobs for revenue officials and other civil servants.

National Tax Tribunal

The present system provides for a direct appeal to the High Court from the decision of the Tribunal. The Finance Minister states that because different High Courts sometimes give different rulings, there is justification for setting up a National Tax Tribunal. Nothing can be further from the truth.

If the statistics are analysed, it will be found that the High Courts have taken different stands in not even 1 per cent of the total number of cases. Further, it will not be enough to have one Bench of the NTT. This national tribunal will have several Benches to deal with the large number of appeals that come to it from the ITAT. What is the guarantee that different Benches of the NTT will not take different views?

The creation of an NTT will also create hardship for several assessees in the southern States. In many cases, assessees in the southern States simply cannot afford the expense of pursuing litigation in New Delhi. Even if he succeeds before the Tribunal, the Department's appeal will be filed in New Delhi and, once again, this will necessarily involve huge expense for the litigants.

The Finance Minister need hardly ponder over the fundamental issue of why there is litigation in the first place. One answer is the constant tinkering with the Income-Tax Act and the absurd manner in which assessment orders are often passed.

If the Finance Minister takes the trouble of formulating a long-term fiscal policy with a time-frame of five years, and avoids knee-jerk amendments, a substantial percentage of litigation will be nipped in the bud.

It is sincerely hoped that the Finance Minister realises that the solution to the problem is not in creating additional Benches or an NTT. All that is needed is to make the existing benches dispose of a large number of cases through effective reorganisation and better case management.

Creating the National Tax Tribunal or 50 additional Benches is to fall into the classic trap of the cure being worse than the disease.

(The author is a Senior Advocate of the Madras High Court.)

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