Taxation law

Judicial Remedies

1. Scheme of judicial Control over Tax Administration, Decisions and Assessment

of Tax

2. Administrative Review

3. Appeal Provision under Tax Laws and its' Process

4. Revenue Tribunal

5. Writ Jurisdiction

1. Scheme of judicial Control over Tax Administration, Decisions and

Assessment of Tax

Judicial Control over Tax administration

Judicial control is a way of limiting unlawful acts of administration. It is needed to

apply the doctoring of separation of power. The doctrine of separation of powers
implies that each pillar of democracy - the executive, legislature and the judiciary -
perform separate functions and act as separate entities. The executive is vested
with the power to make policy decisions and implement laws. The legislature is
empowered to issue enactments of laws. The judiciary is responsible for
adjudicating disputes. Judiciary exercises judicial review over executive and
legislative action.

Judicial control is a way of judicial remedies. Judicial control paves the way for the
correction of decisions of administration. On the grounds of judicial control, the
quasi- judicial decisions are tested by judiciary. For the proper implementation of
rule of law in administration judicial control is inevitable. Judicial control teaches
the lessons to administration about proper implementation of taxation laws.
Judicial control is related to administrative responsibility too.

Generally responsibility means liability to provide satisfactory service and exercise

of power and in the case of lack of satisfactory service provide and misuse of
power, judicial control mechanism becomes active for guaranteeing the rule of law.
There are various ways of controlling judicial decisions. The legislature, electorate,
administrative superior, professional bodies are some examples but the final
control mechanism cannot be except judiciary. So the rights and liberty protection
of judiciary is judicial control. In the case of administrative decisions and testing
its legality, administrative liability/power and judicial remedy are thought as two
sides of same coin.

 Judicial control over administration

The control exercised by the Courts over the administration is called judicial
control, that is, to the power of the court to keep the administrative acts within the
limits of law. It also implies the right of an aggrieved citizen to challenge the
wrongful act of administration in the court of law. The primary purpose of judicial
control over administration is the protection of the rights and liberty of citizens by
ensuring the legality of administrative acts.

In Nepal, the judiciary occupies an important place. The constitution visualizes an

independent judiciary to safeguard the rights of citizens in a democratic polity.
Administration has to function according to the law and the Constitution. The
judiciary has an important role to play in protecting the citizen against the arbitrary
exercise of power by administration.

Basis of Judicial Control: Rule of Law

The term ‘rule of law’ is originated from England and Nepal has taken this
concept. The concept of rule of law further requires that no person should be
subjected to harsh or arbitrary treatment. The word ‘law’ in rule of law means that
whether he is a man or a society, he must not be governed by a man or ruler but by
law. In 1885, Professor A.V Dicey developed this concept and propounded three
principles or postulates of the rule of law in his classic book, Introduction to the
Study of the Law of the Constitution.

1.   Absence of Arbitrary Power: No man is punishable or can be lawfully made

to suffer in body or in goods except for a distinct breach of law established in the
ordinary legal manner before the ordinary courts of the land. Dicey went on and
stated that no one should have too wide and arbitrary or discretionary powers.

2.   Equality before law: According to the second principle, equality before law

and equal subjection of all classes to the ordinary law of land to be administered by
the ordinary law courts and this principle emphasizes everyone which included
government as well irrespective of their position or rank. He criticized French legal
system of Droit Administration as there were separate tribunals for deciding the
cases of state officials and citizens.

3.   Predominance of Legal Spirit: According to the third principle of Dicey, it is

generally presumed that the written constitution is the source of legal liberties of
citizens. However, it is not true as Britain has an “unwritten Constitution.” Legal
spirit is the real source of law in England. The legal spirit is seen in its customs,
conventions and judicial decisions. Dicey opines that the individual rights and
liberties are more safely protected in Britain than France. Rule of law as
established by Dicey requires that every action of the administration must have
legal backing and done in accordance with law.

Grounds of Judicial control/Intervention

In order to develop democracy, rule of law has played a great role in Nepal.
Constitution is considered to be supreme and no one is above the Constitution.
Rule of law is also given impliedly in the preamble and such concept is enshrined
in Constitution. Generally judicial intervention in administrative activities is
confined to the following cases:

a) Lack of Jurisdiction: If any public official or administrative agency acts

without or beyond his/her or its authority or jurisdiction the courts can declare such
acts as ultra vires. For instance, according to administrative rules and procedures,
in all organizations, the competent authority is identified for taking decisions and
actions. If any authority or person other than the competent authority takes action,
the court's intervention can be sought under the provisions of lack of jurisdiction.

b) Error of Law: This category of cases arises when the official misconstrues the
law and imposes upon the citizen obligations, which are absent in law. This is
called misfeasance in legal terminology. The courts are empowered to set right
such cases.

c) Error of Fact: this category of cases is a result of error in discovering cases and
actions taken on basis of wrong assumptions. Any citizen adversely affected by
error of judgment of public official can approach courts for redressed.
d) Error of Procedure: "due process/due procedure" is the basis of governmental
action in a democracy. Responsible government means a government by
procedure. Procedure in administration ensures accountability, openness and
justice. Public officials must act in accordance with the procedure laid down by
law in the performance of the administrative activities. If the prescribed procedure
is not followed the intervention of the courts can be sought and legality of
administrative actions can be questioned.

e) Abuse of authority: if a public official exercises his/her authority vindictively

to harm a person or use authority for personal gain, court's intervention can be
sought. In legal terms, it is called malfeasance. The courts can intervene to correct
the malfeasance of administrative acts.

Means of Judicial Control Over Administration

The forms and methods of judicial control over administration vary from country
to country, depending upon the type of the constitution and the system of law.
Broadly speaking, there are two systems of legal remedies against administrative
encroachments on the rights of citizens.

One is called the Rule of Law system and the other is called the Administrative
Law system.

The Rule of Law means that everybody, irrespective of social and cultural
differences, whether an official or a private citizen is subject to the same law and
the ordinary law of the land. The official cannot take shelter behind state
sovereignty in committing mistakes in his official capacity. A.V. Dicey, the main
exponent Law system stated that the Rule of Law assumes equality of Rule of all
before law and application of the same law to all. The rule of law system prevails
in England and other Commonwealth countries. It is also prevalent in the USA and
many other democratic counties.

The administrative law system is based on the assumption of separate law and
courts for dealing with administrative actions. This system prevails mainly in
France. In the following paragraphs, we shall discuss some of the forms of judicial
control over administration under the Rule of Law system.
Judicial Review: The judicial review implies the power of the courts to examine
the legality and constitutionality of administrative acts of officials and also the
executive orders and the legislative enactments. This is very important method of
judicial control. This doctrine prevails in countries where Constitution is held
supreme, for example, in Nepal, U.S.A. India, Australia, etc.

Statutory Appeal: The statutes made by Parliament and State Assemblies itself
provide that in a particular type of administrative action, the aggrieved party will
have a right of appeal to the courts Judicial Administration or to a higher
administrative tribunal. Sometimes, legislative enactment itself may provide for
judicial intervention in certain matters.

Suits against the Government: There are several limitations, varying from

country to country, as regards filing suits against the government for its contractual
liability. The State is liable for the tortuous acts of its officials in respect of the
non-sovereign functions only. In Britain, under the Crown Proceedings Act of
1947, the State is liable for torts (wrongs) committed by its servants i.e., public
officials, subject to some exceptions.

Criminal and Civil Suits against Public Officials The position regarding the
public officials' personal liability in respect of acts done by them in their official
capacity varies from country to country. Civil proceedings can be instituted against
a public official for anything done in his official capacity.

Extraordinary Remedies/writ: Apart from the methods of judicial control already

discussed, there are the extraordinary remedies in the nature of writs of Habeas
Corpus, Mandamus, Prohibition, Certiorari and Quo-Warranto.

These are called extraordinary remedies because the courts grant these writs except
the writ of Habeas Corpus, in their discretion and as a matter of right and that too
when no other adequate remedy is available. A writ is an order of the court
enforcing compliance on the part of those against whom the writ is issued. In
Nepal, these writs are available under the provisions of the Constitution of Nepal.
While the Supreme Court is empowered to issue these writs or orders or directives
only for the enforcement of Fundamental Rights, the High Courts are empowered
to issue these writs not only for the enforcement of Fundamental Rights but also
for other rights.
b) Mandamus: Mandamus literally means command. If a public official fails to
perform an act which is a part of his public duty and thereby violates the right of an
individual, he /she will be commanded to perform the act through this writ. From
the standpoint of judicial control over administrative lapses, it is an effective writ.

c) Prohibition: It is a judicial writ issued by a superior court to an inferior court,

preventing it from usurping jurisdiction, which is not vested with it. While
Mandamus commands activity, Prohibition commands inactivity. This writ can be
issued only against judicial or quasi-judicial authorities to prevent exercise of
excess of jurisdiction by a subordinate court.

d) Certiorari: While Prohibition is preventive, Certiorari is both preventive and

curative. It is a writ issued by a superior court for transferring the records of
proceedings of a case from an inferior court or quasi-judicial authority to the
superior court for determining the legality of the proceedings.

e) Quo-Warranto: Literally, Quo-Warranto means 'on what authority'. When any

person acts in a ‘public office’ in which he/she is not entitled to act, the court by
the issue of this writ, will enquire into the legality of the claim of the person to that
office. If the said claim is not well founded, he/she will be ousted from that office.
It is, thus, a powerful instrument against the usurpation of ‘public offices’.

Besides these, there is one more writ, namely the writ of Injunction. It is of two
kinds, mandatory and preventive. Mandatory injunction resembles the writ of
Mandamus while Preventive Injunction resembles the writ of Prohibition. Through
this writ, a public official can be restrained from doing a thing which, if done
would cause irreparable damage to the rights of individuals. While Prohibition is a
writ available against judicial authorities, Injunction is a writ, which is issued
against executive officials.

Organizations/institutions of judicial control over tax administration

1. District Court 2. Revenue tribunal

3. High Court 4. Supreme Court

Administrative Review

Administrative decision is a unilateral decision taken by the concern administration

in an individual case which produces direct legal consequences or issues and
administrative review is way of correcting the decisions made by administrative
authority.

Income tax act and value added tax act has made provisions regarding
administrative review. Administrative review is like an appeal filed under Inland
Revenue department being dissatisfied against the decision made by tax officers.
When a tax payer may not be satisfied with the decision, he/she can knock the door
of director general of department for the correction of decision made by inferior
tax officers which is known as administrative review.

There are two types of appeal system in tax acts: first appeal is to the Inland
Revenue Department which is known as administrative review and second appeal
is to Revenue Tribunal for the judicial control over tax administration. The Acts
have made it mandatory for the tax payers to file an objection with the IRD for
an administrative review before appealing to the Revenue Tribunal.

According to the income tax act and value added tax act tax payer as victim party
may file an application for objection/reviewable decision into IRD within 30 days
of receiving of notice of decision made by tax officer. The time limit for file
application can be extended for further 30 days under with the condition of
circumstances out of access.

The provision of reviewable decision has been made in section 114 of income tax
act 2058 Bs. For the purpose of Income Tax Act 2058 administrative review may
be conducted on the following decisions.

114. Decisions subject to administrative review and procedures there for: (l) For
the purposes of this Act, the following decisions may be subject to administrative
review:
(a) Advance ruling issued by the Department pursuant to Section 76, and decision
or order made pursuant to sub-section (8) of Section 90,
 (b) Estimate made by the Department on, or decision made by it to estimate, the
estimated tax payable by any person, pursuant to sub-section (7) of Section 95,

(c) Decision made by the Department to order any person to submit the income
return pursuant to sub-section (5) of Section 96 or Section 97,

(d) Decision made by the Department on any application made by any person for
the extension of the time-limit for submission of the income return pursuant to
Section 98,

(e) Assessment of tax payable by any person for any income year pursuant to
Section 100 or 101 or assessment of auction expenses referred to in sub-section (5)
of Section 105250 or assessment of the fees and interest payable by any person
pursuant to Section 122,

(f) Notice given by the Department requiring to set aside the amounts as
receivable by any person as a recipient, pursuant to sub-section (2) of Section 108,

(g) Decision made by the Department to order any person who holds moneys
payable to the person in an-ear of tax to pay the same to the Department pursuant
to sub-section (1) of Section 109,

(h) Decision made by the Department to order any person to pay tax of any person
due and payable on behalf of a nonresident person pursuant to sub-section (1) of
Section 110,
(i) Decision made by the Department on any application made by any person for
the refund of tax pursuant to subsection (5) of Section 113, and

(j) Decision made by the Department on any application made by any person for
the extension of the time-limit for filing a complaint pursuant to sub-section (3) of
Section 115.

(2) In spite of any decision made by the Department on the matters mentioned in
clauses (d), (i) and U) of sub-section (1), if the Department does not give a notice
of the decision to the applicant within thirty days after the making of the
application pursuant to Section 98, sub-section (3) of Section 113 or sub-section
(3) of Section 115, the decision may be subject to administrative review as if it
were a decision to reject the application.
(3) If the applicant does receive a notice of decision within the time-limit referred
to in sub-section (2) and registers information thereof with the Department, the
decision made by the Department to reject the application mentioned in that sub-
section and notice thereof shall be deemed to have been served on that person on
that date

Or
Decisions regarding following are reviewable decision
- Personal ruling
- Estimated tax payable
- To file tax return
- Extend the date of file return
- Assessment of income tax payable
- Interest and penalties payable
- Amount to be set aside by a person as a receiver
- To pay monies owing to a tax debtor
- To pay tax on the behalf of nonresident person
- Refund of tax
- Extension of time limit for file objection to IRD

Such as almost similar provisions have been made in the value added tax act
2052
Section 31

31 Application may be made for administrative review: (1) A person who is not
satisfied with the decision of tax assessment made by a Tax Officer may make an
application to the Director General against such decision, within thirty days of the
date of receipt of a notice of that decision.

(2) In cases where the time limit for making application pursuant to Sub-section (1)
expires, an application explaining the reason for such expiration may be made to
the Director General for the extension of time limit within seven days from the
date of expiration of the time limit; and if the reason for the extension of time limit
appears to be reasonable, the Director General may extend the time limit for a
period not exceeding thirty days from the date of expiration of the time limit.

(3) If the claim of the taxpayer appears to be true while examining the application
made by the taxpayer pursuant to Sub-section (1), the Director General may, by
executing a memorandum setting out the clear reasons, void that tax assessment
order and may order concerned Tax Officer or any other Tax Officer for re-
assessment.

(4) The Director General shall make decision on the application for administrative
review within sixty days of receiving the application pursuant to Sub-section (1).

(5) If the Director General does not give decision within the time limit referred in
Sub-section (4), the concerned person may file an appeal to the Revenue Tribunal
pursuant to Section 32.

(6) The taxpayer submitting an application pursuant to Sub-section (1) shall pay
entire of the undisputed tax amount out of the assessed tax amount, and deposit one
fourth of the amount of the disputed tax amount.
(7) If the taxpayer has deposited amount more than the amount required to be paid
pursuant to Sub-section (6), prior to the making of the application, only the amount
remaining after deducting such additional amount shall be deposited.

(8) The amount deposited pursuant to this Section shall not be refunded until the
final settlement of the case.

32. Appeal in the revenue tribunal: (1) A person who is not satisfied with an
order of suspension made by the Director General pursuant to Section 30 or a
decision made by the Director General pursuant to Sub-section (4) of Section 31A,
may file an appeal in the Revenue Tribunal.
(2) The person filing an appeal pursuant to Sub-section (1) shall make a written
notification to the Department along with a copy of the appeal within fifteen days
from the date of filing appeal.
Application must be given for the administrative review. The provision of
application for administrative review is managed under section 115 of income tax
act.

115. Application for administrative review: (1) A person who is not satisfied
with any decision subject to administrative review referred to in Section 114 may
make an application to the Department against the decision within thirty days of
the date of receipt of notice of that decision.
(2) The application to be made pursuant to sub-section (1) has to clearly set out the
reasons and grounds for such review.
(3) If the time-limit for making application pursuant to subsection (1) expires and
any person makes an application for the extension of time-limit within seven days
from the date of expiration of the time-limit, the Department may do as follows:
(a) To extend the time-limit for a period not exceeding thirty days from the date of
expiration of the time-limit for making application pursuant to sub-section (1),
where there is a reasonable reason, and

(b) To give the applicant a written notice of the decision made by the Department
on the application.

(4) The implementation of the decision mentioned in subsection (1) of Section 114
shall not be deemed to be affected from the making of application pursuant to sub-
section (1).

(5) Notwithstanding anything contained in sub-section (4), the Department may

postpone or otherwise affect the decision made pursuant to sub-section (1) of
Section 114 pending the settlement of the application made by any person pursuant
to sub-section (1).
(6) A person who make an application pursuant to subsection (1) shall pay the total
amount of undisputed tax and one fourth of the disputed tax, out of the assessed tax
amount.

(7) The Department may do as follows on an application made by any person

pursuant to sub-section (1):
(a) To accept or reject, fully or partly, the matters mentioned in the application, and
(b) To give a written notice of the decision on the application.

(8) If the Department fails to give the applicant a notice of decision on the
application within sixty days of the date on which the application was made
pursuant to sub-section (1), the applicant may make an appeal to the Revenue
Tribunal pursuant to Section 116.

(9) If an appeal is made pursuant to sub-section (8), such person shall give
information in writing to the Department, enclosing the copy of appeal, within
fifteen days of the date on which appeal was filed.

Such as there is almost similar provision regarding administrative review in section

31 of VAT act.
Appeal Provision under Tax Laws and its' Process

There is appeal provision in tax laws mainly in income tax act and value added tax
act. As mentioned before there are two ways of appeal in both acts: appeal in
administration as administrative review and appeal in revenue tribunal as second
appeal against the decision made by director general of IRD.
A person who is aggrieved/victim by a decision on an objection may appeal to the
Revenue Tribunal in accordance with the revenue tribunal act 2031Bs. Applicant
should file a copy of the notice of appeal with the department within 15 days of
doing so. However the enforcement of a decision on an objection decision in not
stayed or otherwise affected by an appeal. The provision of appeal has been
managed in section 116 of income tax act 2058 as mentioned below.

116. Appeal to the Revenue Tribunal: (1) A person who is not satisfied with any
decision made to the Department pursuant to Section 115 may make an appeal to
the Revenue Tribunal under the Revenue Tribunal Act, 2031(1974).

(2) A person who makes an appeal pursuant to sub-section (1) has to register a
copy of the appeal with the Department within fifteen days of the date of making
appeal.

(3) The implementation of the decision mentioned in subsection (1) of Section 114
shall not be deemed to be affected from the making of an appeal pursuant to sub-
section (1).

(4) Notwithstanding anything contained in sub-section (1) of Section 114, if the

Director General has made a decision subject to administrative review as
mentioned in that sub-section, an appeal may be made to the Revenue Tribunal.

Almost similar provision has been made in sestion32 of VAT act about appeal in
Revenue Tribunal. There is provision of appeal in district court in the case of local
taxation in Nepal.

Revenue Tribunal
Revenue Tribunal is a body of judiciary established for hearing the appeal against
the administrative reviewable decisions made by Director General of IRD.
Revenue Tribunal performs its' functions according to the provisions made in the
Revenue Tribunal Act 2031 Bs.
Revenue Tribunal is established for timely reform in the provision of justice
relating to revenue in order to maintain convenience and economic interests of the
general public.

- The area and headquarters of each tribunal shall be as specified by the

Government of Nepal from time to time, by a Notification in the Nepal Gazette.

-Each tribunal shall consist of the following members appointed by the

Government of Nepal: (a) Law member, (b) Revenue member, and (c) Accounts
member.

-The law member shall be the chairperson of the tribunal and, in his or her
absence; the revenue member shall chair the tribunal.
-law member to possess the qualification of judge of high court and revenue
member and account member has to gained at least bachelor degree and seven
years of experience in concerning field the revenue administration.

- The Three members shall collectively exercise the jurisdiction of the tribunal.
Majority opinion shall be deemed to be a decision of the tribunal.

-The jurisdiction of the tribunal to hear appeal and petition on a case relating to
revenue
- The tribunal shall have the following powers:
(a) To finally dispose of the case,
(b) To remand the case to the office or authority that has disposed of the case
originally to try and dispose the matter within the reasonable period as specified by
it and setting out the main matters to be disposed of in the case, and maintaining
the records,
(c) To uphold, reverse, or partially reverse the judgment or order made by the
office or authority that has disposed of the case originally and to take such action
and decision as that lower office or authority is empowered to take,
(d) To examine further evidence by itself and also cause the lower office or
authority to examine evidence,
(e) To exercise such powers including to summon the presence of parties and
witnesses, take their depositions, examine evidence, order the submission of
documents and impose punishment as the court may have pursuant to the
prevailing Nepal law
- Appeal to lie in Supreme Court: Only if the Supreme Court grants leave to
make appeal to it considering that the decision of the tribunal will be reversed fully
or partly because of a direct (clear) legal error on any of the following questions,
an appeal shall lie in the Supreme Court against a judgment or final order of the
tribunal:
 Question of jurisdiction,
 Question of having not examined the evidence that should have been
examined or having examined the evidence that should not have been
examined,
 Question of violation of the procedural law that must be followed, (d)
Question of serious legal error.

About writ jurisdiction, it has already mentioned.