S. Murlidharan

There is an impression that Section 119, which allows limited powers to the CBDT to remove the rigours of straightjackets in certain cases, is a panacea for all the difficulties faced by taxpayers.

Senior citizens, being individuals who were of the age of 65 or more at any time during the previous year, are allowed the privilege of giving a declaration in Form 15H if their taxable income is going to be nil, warranting no deduction of tax to those giving them the specified incomes, including interest, and thereupon such person shall not deduct tax at source.

This is the sum and substance of Section 197(1C) which unfortunately still describes a senior citizen as one eligible for tax rebate under Section 88B, whereas this rebate was abolished by the Finance Act, 2005 following the increase in the tax-free limit for senior citizens to Rs 1.85 lakh.

The matter is serious because by this touchstone — eligibility for rebate under Section 88B — nobody, including senior citizens, would be eligible for this privilege. Let this faux pas however pass for the nonce.

The real issue is in the wake of the Government opening the floodgates of the Senior Citizens Savings Scheme to those opting for voluntary retirement despite not being senior citizens — 65 years of age — there has been a clamour by the beneficiaries of this sop for relaxation of Section 197(1C) too.

Reports doing the rounds are that the Government has not only agreed but made a complete capitulation in favour of everyone, senior citizen or not, though nothing is available on the official Web sites in this regard. Assuming that the relaxation has indeed been made, let us examine the legality of it.

There is an impression that Section 119, which allows limited powers to the CBDT to remove the rigours of straightjackets in certain cases, is a panacea for all the difficulties faced by taxpayers. And this view, unfortunately, has got a leg-up from some judicial pronouncements.

For ease of reference, Section 119(1) is reproduced: "The Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act, shall observe and follow such orders, instructions and directions of the Board."

It is now well settled that such instructions cannot fetter courts. In other words, courts are not bound to follow these instructions and orders. They bind only the officers and other employees of the income-tax administration.

Fair enough. But the truth is once such orders and instructions are issued, the departmental authorities, including the assessing officers, are obliged to follow them, right or wrong, so long as they are not prejudicial to assessees.

Executive overreach

Since the Department's hands are tied, no one therein is going to appeal against the orders made pursuant even to a patently wrong instruction. And here lurks the danger of executive overkill or overreach. The Gujarat High Court, in Laxmichand Hirjibhai vs CIT (1981 128 ITR 747), went to the extent of saying that benevolent circulars, even if they deviate from the legal position, are required to be followed by the Department. On this touchstone, the Department would be perfectly justified in vesting the hallowed status of senior citizen even on a 50-year-old. Nothing can be more preposterous than this. Why it may even override any other operative provision of the Act.

The truth is, the freedom given to the CBDT is only to carry forward the mandate of the Act. For example, it can by all means extend the deadline for filing returns but it certainly cannot say that no salaried person is required to file return because this would go against the law, which says, even salaried persons are required to file their returns.

The following observations of the Bombay High Court in Kerala Financial Corporation vs CBDT (1994 210 ITR 136) is pertinent in this regard: "What Section 119 has empowered is to issue orders, instructions or directions for the `proper administration' of the Act... Such an order, instruction or direction cannot override the provisions of the Act; that would be destructive of all the known principles of law as the same would really amount to giving powers to a delegated authority to even amend the provisions of law enacted by Parliament."

What Section 119 vests the CBDT with is the power to relax the rigour of law. The power to relax is not the same as the power to legislate. Even the power to legislate vested to the CBDT by Section 295 for the purpose of making rules is only to carry forward the mandate of Parliament.

The Government, which is paranoid about judicial activism encroaching upon Parliamentary prerogatives, should be more worried about executive high-handedness.

(The author is a Delhi-based chartered accountant.)

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