No Tax can be Levied or Collected except under the Authority of Law

Tax : The subjects of every State ought to have contributed towards support of the Government, as merely as possible in proportion to their respective abilities” Adam Smith said in his celebrated treatise “Wealth of Nations” in the year 1776.

Most citizens recognise that the taxes are unexpendable for the creation, protection and maintenance of all the constitutive infrastructural services provided by the Government. Citizens would generally comply with the tax levies as long as certain inviolable criterion are met.

As the society grows in complexity, especially in financial and fiscal areas, it may not be easy to design and administer a tax system that is fair and equitable in the absolute sense. However, our tax system would achieve an acceptable level of trust of its citizenry if it is generally seen as fair and equitable and this would be the desideratum that any society would aspire to obtain.

Perhaps, the most primary pre-requisite to achieve a process of equality in a tax regime would be the safeguards and the checks and balances that the regime adopts for itself. This is because, for a system based on voluntary compliance, the tax payers must have a perception that the system treats them with equity and fairness.

The Income Tax Act, 1961 provides ineluctably for several layers of safeguards against arbitrary and capricious action. The most fundamental among them is that the tax payers are made to understand and put to notice about the detriment that the Act would inflict on them in case fiscal violation, evasion of tax or suppression of income are substantiated in the manner prescribed. It is when these safeguards and checks are perceived as being primary and inviolable that the system would achieve its most desired level of competence.

Taxation is a realm that is completely and absolutely authorised and defined by statute. No tax can be levied or collected except under the authority of law.

While implementing and administering the tax statute, the classic words of Rowlatt, J. in Cape Brandy Syndicate V.I.R.C. (1921) 1 KB 64 would be the fundamental guiding line:

“In a taxing statute one has to look merely at what is clearly said. There is no reason for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can look faily at the language used.”

That the statutes imposing taxes or monetary burdens are to be strictly construed is settled by the Hon’ble Supreme Court of India in a multitude of decisions and the above words of Rowlatt J. has found approval in them.

It is the statutes of taxation that the maxim “A verbis legis non est recedendum” is the most apt and apodictic. This maxim directs the construction to be put on statutes, against the express letter of which the courts will not sanction any interpretation.

{The above quoted paragraphs extracted from a significant judgment of Kerala High Court in M/s. Travancore Diagnostics (P) Ltd. Vs. Assistant Commissioner of Income-Tax, Circle-1, Kollam dated 19 October, 2016 authored by Justice Devan Ramachandran.

A bench comprising of Thottathil B.Radhakrishnan and Devan Ramachandran, JJ. started the judgment with the above exordium, since the Division Bench finds certain issues that have been raised in the matter, essentially relating to noncompliance, on account of oversight or heedlessness, by the Tax Officers of imperative provisions, which unfortunately obtain to the assessees the benefit of technical defences against orders, which otherwise they would have had to legally suffer.}