This is an old controversy that has acquired timely relevance because of the recent controversy caused by the sharp difference in the perception of the roles of the IRS and IAS. It is worrisome that after 18 years of my retirement from the IRS, I am witnessing same combative wrath that had shocked us in 1965. I had written about it in my autobiographical memoir, On the Loom of Time, [ published by the Taxmann, Delhi, in 2011]. An extrctat from its Chapter 17 (pp. 228-229) is quoted hereunder for general information. The second edition of the text of the said book can be read on my website: shivakantjha.org [http://www.shivakantjha.org/pdfdocs/on_the_loom_of_time_2nd_edition/31_loom_17.pdf]. The unwholesome controversy proves what Burke had said long back: “To tax and to please, no more than to love and be wise, is not given to men.” I had quoted this in the said Chapter.
“(i) I joined the statutory Civil Service
At the IRS (Staff) Training College, Nagpur, Shri V. V. Badami, who later became the Chairman of the CBDT, told us, whilst delivering his first lecture that the Indian Revenue Service was not a general civil service: it was a statutory civil service for which the governing norms were prescribed in the Income-tax Act itself. He told us to keep in view certain constitutional principles of fundamental importance. The Executive Government exercises powers over taxation in accordance with the provisions of our Constitution. In our country, the Executive is a creature of our Constitution with prescribed duties and conferred powers. The executive power is exercised in terms of Articles 53 and 73 of the Constitution. The Article 265 states, with wonderful precision, the norm of Parliamentary control on ‘taxation’. An exclusive power over taxation had been acquired by Parliament in England after the Glorious Revolution 1668. The Executive had, thus, lost all powers on ‘taxation’; and it could exercise these only in conformity with the law. Our Constitution’s provisions are the same as under the British constitution.
We learnt that CBDT was established by the Central Board of Revenue Act, 1963. The Act established separate Central Boards: one for Direct Taxes, and the other for Excise and Customs. The section 3 of the said Act prescribes: “each such Board shall, subject to the control of the Central Government, exercise such powers and perform such duties, as may be entrusted to that Board by the Central Government or by or under any law.” Section 4 authorizes the Central Government to “make rules for the purpose of regulating the transaction of business by each Board”. The following two important propositions emerge:
- (i) the CBDT “shall, subject to the control of the Central Government, exercise such powers and perform such duties, as may be entrusted to that Board by the Central Government”; and/or
(ii) the CBDT shall exercise such powers and perform such duties, as may be entrusted to that Board by the Central Government by or under any law.
It follows that in exercise of the functions entrusted to the CBDT by the statutes, the CBDT is not “subject to the control of the Central Government”. It discharges the Parliamentary commission, and for the propriety of its acts, it is accountable only to the Courts on the points of legality. The tax authorities can be mandated to discharge their public duty, and their orders can be quashed on standard grounds for which remedy for Judicial Review is granted by our superior courts (on the counts of illegality, irrationality, procedural impropriety and also breach of proportionality). The Central Government is, thus, interdicted by law from trespassing on the Board’s spheres of statutory functions which are controlled and guided only by the terms of the statutes. But functions, which are analytically administrative, are under the control of the Central Government to be exercised through the CBDT. These provisions reflect certain constitutional principles of fundamental importance. Without going into details, I would state them thus diagrammatically:
(A) Governed by the Business Rules.
(B) Governed by the Rules of Business.
(C) Powers to be exercised in accordance with the statute ONLY.
The Revenue Department of the Government would be a clear trespasser if it interferes in (C). The Executive Government’s power is derived simply from Art. 53 of the Constitution: and it would be acting ultra vires if it interferes in the exercise of the legal duties prescribed by the law framed under the discipline of Art. 265 of our Constitution. The Income-tax Act is framed in exercise of power under Article 265 of our Constitution”.