Modi government should zero in on futile litigation

Prime Minister Narendra Modi was not exaggerating when he wryly remarked from the rampart of the historic Red Fort on the country’s 68th Independence Day that he “saw many governments functioning within a government. One department is fighting the other”. Earlier reports have revealed that the Prime Minister’s Office (PMO) has directed the various Central government ministries and departments not to rush to courts each time a brawl brakes out on policy issues, service rules or in implementing schemes. Ironically, litigation, a futile time-consuming, energy sapping exercise has become a pathetic pastime for many in a country where courts are swamped with pending cases.

The notorious litigants in the government are public sector undertakings, caught up in feuds and turf-war with other counterparts or purchasers/suppliers. That is the reason why the Modi government is keen on resolving rows through arbitration, the Cabinet Secretariat, and if necessary by leveraging the instrumentality of the PMO. The other big litigant is the tax authority with an overarching mandate to realise revenue for running the rest of government administration, besides financing public work programmes.

A report of the Comptroller and Auditor General of India (CAG) on Administration of Penalty and Prosecution of the Department of Revenue (Direct Taxes) 2013 has rightly rapped the Income Tax Department (ITD) for wasting the prosecution machinery on technical offences, and not acting in consonance with the spirit of National Litigation Policy. The ITD prosecution machinery was used to handle individual assesses and low money value cases and not against systemically organized entities. The report rued that the Central Economic Intelligence Bureau established for collection, collation and dissemination of information among tax gathering agencies like CBDT, CEBC, has not worked in a coordinated manner to arrest tax evasion by prosecution.

Further, the report has reprimanded the department for pursuing prosecution cases against companies “which have already been liquidated or have been declared sick by the Board for Industrial and Financial Restructuring (BIFR)”. The audit report bluntly noted that the CBDT is wasting resources in pursuing cases under repealed sections of the Act, and dead assessees. It also did not use the prosecution mechanism for ensuring tax compliance under section 276CC of the Act. In a written response in Lok Sabha to a query on the issue on July 25, the Union Finance Minister Arun Jaitley admitted that the amount locked up in Income Tax Appellate Tribunal (ITAT) as on end-March 2014 was Rs1,43,256 crore, in various high courts Rs32,128 crore and in the Supreme Court Rs3,202 crore.

What is revealing is that in majority of the cases disputed by the department for appeal, it invariably lost to the assessees. Hence Jaitley’s ardent appeal at the two-day annual conference of Chief Commissioners and Directors General of Customs, Central Excise and Service Tax in the capital on August 11 for pruning tax litigation and instead focusing on efficient tax settlement mechanism to unlock the money held up in hopeless litigation. The point to ponder is whether the tax authorities would stay away from pitching for dues set aside after appeal at the preliminary level.

The illustration of the tax department’s constant sparring with the assessees is only the tip of the iceberg of the government wing’s harassing saga. In many unreported cases, departmental fights drag on interminably, divesting resources and draining dynamism, besides debilitating the governing issue to the dismay of ordinary citizens. It is time Mr. Modi broke the departmental walls to deliver efficient and effective governance.

The author is a Delhi-based freelance journalist.