Allowing retrospective amendments

The Delhi High Court last week dismissed a batch of 15 petitions moved by several individuals, Sahara India Financial Corporation and Patanjali Ayurveda, challenging the constitutionality of the amendment to Section 142(2A) of the Income Tax Act in the Finance Act of 2013. They contended that by amending the provision, the revenue authorities have been conferred arbitrary powers. Earlier, the only ground on which special audit could be directed, was ‘nature and complexity of the accounts of the assessee’. However, the amendment granted unguided and excessively wide powers on the assessing authorities who could act on their whims. For instance, in relation to the criteria ‘volume of accounts’, what is volume of accounts may differ from one officer to another in the absence of any definition provided in the section. The revenue authorities argued that in matters of taxation, the legislature has wide discretion. The high court accepted that view and observed that in fiscal matters even retrospective amendments can be made. It explained the provision was enacted to facilitate proper determination of tax liability, like when the officer needs to take the assistance of a chartered accountant to understand the assessee’s accounts. The provision is an important tool to curb tax evasion and balances it with the inconvenience that an assessee might face.