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March, 2004 |
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Legal Side |
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Appeal vs. Review in Income Tax by Mahesh Kumar Thapa The
full bench of the Supreme Court of Nepal recently decided on the issue
of appeal vs. administrative review in income tax which was pending for
almost two years. The decision says an appeal is the right way for legal
remedy against the tax assessment order made for the fiscal years before
the new Income Tax Act 2002 came into effect though such tax assessment
might have been made after the new Act was effected. The
decision has simultaneously refused the arguments of Revenue Tribunal
Kathmandu and the Tax Administration that the tax payers should exhaust
the administrative review before filing an appeal in Revenue Tribunal
for all tax assessment orders to which no remedy was sought until April
1, 2003, the date when the new Income Tax Act 2002 came into effect. It
means the aggrieved tax payers should directly approach the concerned
Revenue Tribunal instead of going to the Inland Revenue Department for
administrative review in case of tax assessment orders made for the
fiscal year 2000-01 and before. Income
Tax Act 2002 was unusual in that it kept the Income Tax Act 1974 alive
for two major functions of the tax authority. They are assessment of tax
for the fiscal year 2057/58 (2000-01) and before and collection of such
tax. It was not clearly mentioned in the new Act regarding the
activities which come in between the assessment and collection. For
example, the appeal process starts only after the assessment is made,
and the collection of tax would begin either after exhausting the time
limit for appeal or after the judicial process is completed on the
appeal. If the assessment and collection are to be carried out under the
previous Act, it is not possible to argue that the other activities that
come in between those two functions should be administered as per the
new Act. Confusion,
therefore, arose and the tax payers and professionals who help taxpayers
were in a dilemma when the Tax Administration instructed the tax payers
to go for administrative review under Section 115 of the new law against
those tax assessment orders issued for the income of fiscal years prior
to 200-01. However, the eminent tax lawyers firmly followed the words of
the law and kept advising their clients dissatisfied with the assessment
order not to follow the tax authority’s order and to file an appeal in
Revenue Tribunal. The Inland Revenue Department did not listen to the
voice of the professionals and continued entertaining petitions for
administrative review. In
the initial stage, all Revenue Tribunals were entertaining the appeals.
However, in later days, Revenue Tribunal Kathmandu started
‘endorsing’ appeals, which means it started rejecting to entertain
the appeals. The reason assigned was that the procedural matters are
always subject to change by a new law. Now the Supreme Court has clearly
said that the right to appeal is a substantive right and thus cannot be
changed by any new enactment. Now,
those who had gone to Inland Revenue Department to seek legal remedy
under administrative review, are facing a problem. If they win the case,
there is no problem but if they lose the case, they will have nowhere to
go. Revenue Tribunal is not going to accept the appeal against the
decision of Director General of Inland Revenue Department due to the
abovementioned decision of the Supreme Court. In this case, the Director
General has to take the responsibility and find the solution for those
who were misguided by the Tax Administration in finding out the
appropriate legal remedy against the tax assessment order. (Thapa is a practising advocate specialized in corporate and tax law) |
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