Introduction

• To impose tax means to enact or declare that a pecuniary contribution shall be made by the person liable, for the support of the Government.
• Black’s Law Dictionary defines tax as any contribution imposed by the Government upon individuals, for the use and service of the state, whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name.
• Taxation in India is based on two precepts:
  • Firstly, based on the mandate of of the Constitution of India, (1950) (COI) that no tax shall be levied or collected except by authority of law.
  • Secondly, it is based on the principle of sureness, that any tax levied ought not to be vague, must be consistent and predictable.

Provisions of Income Tax Act, 1961

There are several provisions in the Income Tax Act 1961 (IT Act) major ones being:

• It came into force on 1st April 1962 and provides about the provisions for calculation of tax.
• It is an Act to consolidate and amend the law relating to income-tax and super-tax.
  • Income Tax: It refers to a type of tax Governments impose on the income of businesses and individuals within their jurisdiction.
    • All individuals earning above a certain amount are required to pay income tax on their earned income.
  • Super Tax: A very high rate of income tax or company tax paid by those with a very high level of income or profit.
• Appeal under this act lies to High Court (HC) under Section 260A and to the to the Supreme Court (SC) under Section 261.
• The Income-tax Law classifies the year as Previous year (year in which income is earned) and Assessment year (year in which the income is charged to tax).
• Appearance by an authorized representative is made under Section 288 of the act.
• The act also talks about assessing tax authorities (the person who has the jurisdiction (rights) to make an assessment of an assessee, who is liable under the Income-tax Act

Interpretation by Judiciary of Tax Law Amendment

• The SC of India has undermined the precepts, by reversing a well-reasoned judgment of HC of Gujarat and, by giving birth to taxes that lack legislative support.
• The issue arose in the matter of Income Tax Officer v. Vikram Sujitkumar Bhatia (2023), in which the question before the court of law was whether an amendment to a provision of the IT Act, could have retrospective effect in the absence of legislative mandate.
  • The provision in question was Section 153C of the IT Act, which was amended in 2015. It outlines the circumstances that could lead to the initiation of legal proceedings against individuals and organizations as a result of a search conducted on someone's property.
• The Gujarat High Court in this matter has earlier stated that amendment to Section 153C will not have retrospective effect however, the SC thereafter on appeal held that the amendment brought to this provision by virtue of the will retrospectively apply to searches conducted prior to the date of the amendment, that is 1^st June 2016.
  • The SC, while holding that the amendment will apply to past searches, has acted as a maker instead of an interpreter further stated that SC stated that it seeks to explain an earlier provision. Hence, it is retrospective.
• A similar approach was adopted in the matter of Union of India v. Ashish Agarwal (2022), where SC reversed the decision of Allahabad HC and seven other HCs by reviving the notices of assessment quashed by the HCs that had been issued by Revenue Department without any sanction of law.

Conclusion

• Such judgments of the Top Court indicates that the court has encroached over legislative process.
• The SC by giving such verdict gave life to actions which were otherwise illegitimate.
• Article 265 of the Constitution of India forbids taxation without legislative support but if SC is impersonating Parliament, this mandate will remain imaginary.