Republic Day is not just a day of national pride, commemorating the enactment of the Constitution of India. It also holds practical significance.
Many are unaware that the Constitution, which came into effect on 26 January 1950, contains important provisions impacting our tax-related rights and obligations, the knowledge and awareness of which can help us significantly in our tax matters.
In current times, when most salaried individuals file their tax returns independently, a lack of professional guidance can lead to underclaiming deductions. For instance, if you donated to the PM Cares Fund but only claimed 50% of the amount as a deduction under Section 80G of the Income Tax Act, while you were eligible for 100%, what happens if the deadline for filing a revised return has passed? Does your right to the remaining 50% deduction vanish due to unawareness?
Fortunately, no. Thanks to Article 265 of the Constitution, which states, “No tax shall be levied or collected except by the authority of law,” you have a safeguard. This provision ensures that India’s tax system is fair and protects citizens from undue taxation, forming a critical part of our fiscal framework.
In the above scenario, the taxpayer should reference Article 265 when making a representation to the income tax authorities, advocating for the rightful deduction under Section 80G for the PM Cares Fund donation. The tax officers must consider this claim, adhering to the lawful deduction standards set by the Income Tax Act.
Besides Article 265, other articles in the Constitution significantly help taxpayers, especially in current times when interactions between taxpayers and tax authorities are mostly online, including PAN registration, tax payments, and filing and processing of returns.
The electronic interface is convenient but not flawless. Sometimes, automated tax demands are raised by AI tools, or refunds are adjusted against such demands without offering the taxpayer a chance to be heard or issuing a reasoned notice.
Here, the Principle of Natural Justice, embedded in Articles 14 and 21 of the Constitution, comes to the rescue of the taxpayer. Article 14 ensures equality, while Article 21 provides for fair and reasonable legal procedures.
The Latin maxim ‘Audi Alteram Partem,’ meaning “hear the other side,” is an integral part of this principle. In Indian tax law, this translates to providing a “reasonable opportunity of being heard.”
The two key components of this rule are notice and hearing.
(i) Notice: In any adjudicatory proceedings including the income-tax proceedings, before drawing any adverse inference or conclusion, the affected party must be given a notice to show cause against the proposed inference or conclusion and seek his/her explanation. It is a sine qua non of the right of fair hearing. Any order passed without giving notice is against the principles of natural justice and is void ab initio.
(ii) Hearing: Any order passed by the adjudicating authority without providing the reasonable opportunity of being heard to the person affected by it adversely, shall be invalid and must be set aside.
Taxpayers can challenge arbitrary demands or incorrect refund adjustments by invoking these constitutional principles, ensuring their right to a fair hearing is respected.
So, as we celebrate Republic Day, let’s also appreciate its relevance in empowering us with essential tax rights. Happy Republic Day!
Mayank Mohanka is the founder of TaxAaram India and a partner at S M Mohanka & Associates.
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Published: 26 Jan 2024, 03:23 PM IST