Civil Procedure Code, 1908 for tax practitioners

1. CIVIL PROCEDURE CODE, 1908 FOR TAX PRACTITIONERS https://taxguru.in/corporate-law/civil-procedure-code1908-tax-practitioners.html Civil Procedure Code or CPC is the single most important statute for any practicing lawyer and as you will go through the discussion below, you will realise that this is the case for tax practitioners, administrators and chartered accounts as well. So what is the civil procedure code? We know that it pertains to civil matters as opposed to criminal matters. But what does this entail?A civil matter covers disputes between private parties and relates to private rights and liabilities. Eg: If you take a loan from a bank and do not return, the bank will file a recovery suit-civil matter. If a wife and husband do not get along, the wife files a divorce and maintenance suit-its a civil matter. If your cousin has wrongly taken away your property. You will file a civil case. This is different from criminal cases. Criminal cases are public wrongs, where the entire society is threatened. And so one person does not file the case against the other, it is the state which prosecutes the wrong doers. Eg if a person has murdered another. The family of the victim files an FIR and then state prosecutes the murdered by a criminal trial. Not the family of the victim. Also, civil matters are remedial in nature. Eg if a person has taken your money and not given you the flat he promised in Koramangala. In a civil case, you can get your money back along with damages. But if you have filed a cheating case against him, which is a criminal case, he can go to jail. And he may have to pay a fine. Here, the state will prosecute the accused. So we know that the civil procedure code deals with civil matters. But what does it mean by ‘procedural code’? Law can be broadly divided into substantive law and adjective or procedural law. Whereas the substantive law determines rights and liabilities of parties, adjective or procedural law prescribes the practice, procedure and machinery for enforcement of those rights and liabilities. Eg Transfer of property law and Indian penal code are substantive laws. Transfer of property law contains rights of property owners, rights of lessors etc. The Indian Penal Code contains details of what is a crime. Like what is a murder, what is a kidnapping and what is the punishment for it. On the other hand CPC is a procedural law. Procedural law is an accessory to substantive law. It does not create or take away any right. It only regulates THE procedure to be followed by civil courts. It is pertinent to remember that the Civil Procedure Code facilitates justice by laying a procedure for civil courts. It is not a penal statute. This means that we interpret the code liberally. No strict application to be done. Purposive construction to give justice to both parties. Most important is achieving justice, equity and good conscience. In this context, we need to remember the legal maxim Ubi jus ibi remedium i.e where there is a right, there is a remedy, which cannot be taken away due to non compliance with a procedure. Procedural Law is not to be a tyrant or obstruction of justice but an aid to justice. So, why study civil procedure code?Is it helpful for tax practitioners? CPC does not apply to assessment proceedings or proceedings before CIT (A) or ITAT. However, it does apply to High Court and Supreme Court proceedings, when tax cases are on appeal. More importantly, reference has been made of civil procedure code

2. in provisions of Income Tax Act like section 131, recovery provisions, service of notice etc. Hence, studying CPC helps understand tax laws better. Basics of CPC: The following paragraphs discuss some of the important terms mentioned in CPC. The same has been explained through an example. Let us learn with an example. If a newspaper has printed an article spreading a fake story about me calling me a thief or a liar, I can sue them for defamation. Defamation suit is a civil suit which I will file against the newspaper. As I am complaining, I will be the plaintiff. I will submit a petition with all the grounds as to why the newspaper has wrongly harmed my reputation and how much money they should pay me to make up for this loss. I will write these facts in a plaint. The newspaper will be called the defendant. They will file their response to my plaint through a written statement. A written statement will have para-wise response to my plaint. If they agree with facts, they will say so. If they do not agree with facts, they will say so. This Plaint and Written Statement should have concise facts not law or evidence. These are called pleadings. If I am able to prove that there was defamation, I will win the case. This is called cause of action. After the court reads the pleadings, they will frame issues: 1. Issue can be issue of fact: In this case, issue of fact can be, whether any article was published with my name or referring to me in the newspaper ? 2. Similarly, Issue of law : what constitutes defamation? Whether an article calling me thief is defamation? 3. Then there can be mixed issue of fact and law. In this case, proving that my reputation was harmed by this article is an issue of law and fact. I.e I will have to prove that I lost my job, I am socially boycotted etc due to the newspaper article. Then there are 3 terms which we need to understand: Decree v. Judgment v. Order: Decree is formal expression of adjudication conclusively determining rights of parties. Eg Dismiss appeal as time barred; Dismiss suit for lack of evidence etc. A judgment gives the reasoning or grounds for decree. Decree is passed on the basis of the judgment. Orders are adjudications by courts which are not a decree. Eg. order granting interim relief; return of plaint for presentation to proper court Judgment Debtor: A person against whom a decree has been passed Ratio Decidendi v. Obiter Dicta (rationale of the judgment v. Observations): For instance in the defamation example, if the court holds that calling a person a thief without any proof is defamation. This is the rationale of judgment. But if a court observes that newspaper publications should be more careful in what they publish. This is a mere observation or obiter dicta. Precedent Value v. Persuasive value: Any ratio of a HC or SC is binding on lower courts of its jurisdiction. If Karnataka HC says that calling a person a thief without any proof is defamation, this is binding on all courts situated in Karnataka. But not really on courts in Gujarat or UP. But this judgment will have persuasive value, means the courts in Gujarat and UP can be made aware of this Karnataka HC judgment, but it is up to them to accept or reject. It is used to persuade and hence has persuasive value.

3. Burden of proof : preponderance of probability: What is the burden of proof in civil cases. Income Tax cases are also largely civil cases, unless there is prosecution, so the same burden of proof is there. It is called preponderance of probabilities or to go with those facts which are more probable. You have to carefully weigh the evidence given by both the parties and go with the narration which seems to be most probable. Always the party which is stressing on the facts has to prove. (In criminal case it is ‘beyond reasonable doubt’. This is more difficult to prove) Res Sub Judice: This rule in CPC prevents simultaneous/concurrent litigation. If the same issue between the same parties is being litigated before a competent court, it cannot take up the case. You will see that in a number of cases, if assessment is pending, the AO refuses to take up rectifications. Or JAO may refuse to take up rectification, if it is already pending with CPC. This is because matter is sub judice with another. There is no point in duplicating the work and wasting resources in such cases. Another term used in CPC is principle of Res Judicata Res Judicata: It is the rule of conclusiveness of a judgment. If a matter is already finally decided, no party is permitted to reopen the case. Eg if a Bangalore court has already dismissed my defamation suit. I cannot again file this case again in Belgaum court. This is important, because otherwise there was no value to the Bangalore court decision. It was useless. Ex Parte Decree: Decree passed in the absence of the defendant. Jurisdiction Jurisdiction means to decide who has the authority to decide the case. CPC states that a civil court has jurisdiction to try all suits of civil nature unless expressly barred. Eg income tax cases do not go to civil courts, they go to CIT (A) and then ITAT. There is always presumption that jurisdiction exists. The jurisdiction clause has to be give a broad interpretation. Territorial jurisdiction: every court has local jurisdiction. Eg courts in patna have no jurisdiction in relation to property dispute in Bangalore. Pecuniary jurisdiction: courts have jurisdiction only on subject matter of a certain value/amount. Eg contract having value Rs.1 lakhs cant be tried at High Court Subject Matter jurisdiction: Family Court, Small causes court Original v. Appellate jurisdiction: Cases where constitutional issues are there-original jurisdiction of HC/SC exists. In other civil cases on contracts, property, they can look at the case on appeal. First, lower courts will try the matter. Stages of civil suit: First the plaintiff presents the plaint to the court. The court then summons the defendant. The defendant appears along with the plaintiff. If no one appears, then ex parte decree can be passed as it will be assumed that the non appearing party has nothing to say in the matter. If the parties appear, then the court takes cognizance of the case and gives time to the defendant to submit written statements. After filing of the written statement, both parties are examined and issues are framed. Thereafter, the evidence is adduced. Witnesses are examined. Then there are arguments from both sides, summarising the evidence. Thereafter, the judgment is pronounced. Within 15 days , a decree is issued. Thereafter an execution petition may be filed and the court may ensure compliance by giving directions to police.

4. There are few other significant terms: Reference: Sometimes, the cases are too complex and involve a question of law. In such cases, Subordinate court may refer the case to High Court for opinion (section 113) Revision: This empowers High Court to take up a case already decided by lower court in its jurisdiction (section 115) Review: This is judicial re-examination of case by same court and same judge Reference of CPC in IT Act: Section 131 of the Income Tax Act, 1961, confers power of a court under the Code of Civil Procedure while trying a suit in respect of : discovery and inspection, issuing of commissions, enforcing the attendance of any person, including any officers of a banking company (this is basically summons) and examining him on oath and compelling the production of books of accounts and documents. Discovery compels a party to disclose what he has in his possession or power. Discovery could be of 2 types: Discovery of facts: compel to answer questions under oath. Discovery of documents: compels a person to disclose the documents in their possession/custody. Documents held to be disclosed as an affidavit. However, there are limits on what we can ask under oath. These are limits of civil courts and apply to ITO’s also: cannot be privileged information ie. a lawyer cannot be asked to give information on his cases. Attorney- Client privilege; Doctor-Patient privilege; Husband-Wife priviledge cannot be injurious to public interest cannot be irrelevant, scandalous or not bona fide to the case; cant be fishing or roving- Random sundry details of all loans taken by you and all people you gave loans etc If someone does not comply with ‘Discovery’ their suit may be dismissed or defense struck off. Summons– Summons is a document issued from office of a court of justice, calling upon a person to attend before a judge. Under CPC and by reference, the IT Act, you cannot summon a select few people: local limits of court or within 200 miles of the same (if public conveyance is available); woman not appearing in public; President of India, Vice President, Speaker of lok sabha/state assemby, Judges of Supreme Court/High Court, Governors, Ministers of Union/states etc (if you want to examine these people, you may issue a commission though.) The power of summons should however be used sparingly. We are in an era of faceless /e-assessment. So unless the assessee is not at all cooperating and unless there is reason to believe that there is concealment of income,

5. which one will only be able to uncover, one should not issue it. If there is non compliance of summons notice: If the summons notice is not complied with, the Income Tax Authority should first examine the serving officer and obtain a certificate from the serving officer (to be verified by an affidavit), that the notice was served as per law. After this, the Income Tax Authority can issue a proclamation requiring such person to the time and place named therein. A copy of the proclamation should be affixed on the outer door or other conspicuous part of the house in which the person ordinarily resides. If the person still does not come, then at their discretion, the Income Tax Authoritycan issue a warrant with or without bail for the arrest of such person and for making an order for the attachment of his (its generally bank accounts-liens through garnishee orders) for such amount as he thinks fit. If the person then appears, one can remove attachment of property etc. Similarly, the income tax authority can also fine the individual. Commission: We know that there are certain cases where we cannot compel personal attendance. Also, we cannot be present at all times to inspect property and persons, specially those in different towns. If these need to be examined, the Income Tax Authority can use commission. By way of commission, an officer posted in another place can be authorised to carry out the inspections or taking statements/evidence on behalf of another. Next significant provision of CPC we need to know is how to serve notices. Section 282 of IT Act states that any mode of service mentioned in CPC is valid mode of service of notice. The mode mentioned in CPC is as follows: i. Personal service ii. By registered post acknowledgement due (RPAD) iii. Speed post iv. Courier service approved by High Court v. Other means of transmission of documents (including fax message or electronic mail service) provided by the rules made by the High Court. Who to serve various notices? 1. Individual : upon the relevant person or his family members (excluding minors and servants) 2. Firm: to any partner or manager 3. HUF: to manager or any adult family member (excluding minors) 4. Local authority: to the principal officer e. Company: to the principal officer or any director (excluding minors) 5. AOP or BOI: to principal officer or any member 6. Any other person (except individual): to anybody who manages and controls the affairs of the person.) In the IT Act, the recovery of tax arrears provisions, contain a reference to CPC (section 60). TROs or Tax Recovery Officers are allowed to attach property of tax defaulters, except certain properties are exempt from such attachment. This is as per CPC. These properties include wearing apparel, cooking vessels, beds, tools of artisans, books of accounts, any right of personal service, stipends and gratuities allowed to pensioners of the Government etc, wages, PPF, monies from insurance policy, subsistence salary etc.