THE ART OF PLEADING

PART- 1 INTRODUCTION 

To unfold the topic, I will follow in following terms of the divine ordinance as contained in Surah Taha of the Quran with respect to both essence and mode of pleading your contention before an authority (even when it is as good a tyrant as Pharaoh): 

Supplication of the Prophet Musa(AS)  

رًَ بًِ اشْرَحًْ لِي صَدْرِي وَيَ سِرًْ لِي أمَْرِي وَاحْللًُْ عُقْدَةً  مِن لِ سَانيِ يفَْقَهُوا قَوْلِي

𝘖 𝘮𝘺 𝘓𝘰𝘳𝘥! 𝘖𝘱𝘦𝘯 𝘧𝘰𝘳 𝘮𝘦 𝘮𝘺 𝘤𝘩𝘦𝘴𝘵 (𝘨𝘳𝘢𝘯𝘵 𝘮𝘦 𝘴𝘦𝘭𝘧-𝘤𝘰𝘯𝘧𝘪𝘥𝘦𝘯𝘤𝘦, 𝘤𝘰𝘯𝘵𝘦𝘯𝘵𝘮𝘦𝘯𝘵, 𝘢𝘯𝘥 𝘣𝘰𝘭𝘥𝘯𝘦𝘴𝘴), 𝘈𝘯𝘥 𝘦𝘢𝘴𝘦 𝘮𝘺 𝘵𝘢𝘴𝘬 𝘧𝘰𝘳 𝘮𝘦; 𝘈𝘯𝘥 𝘮𝘢𝘬𝘦 𝘭𝘰𝘰𝘴𝘦 𝘵𝘩𝘦 𝘬𝘯𝘰𝘵 (𝘵𝘩𝘦 𝘥𝘦𝘧𝘦𝘤𝘵) 𝘧𝘳𝘰𝘮 𝘮𝘺 𝘵𝘰𝘯𝘨𝘶𝘦, 𝘛𝘩𝘢𝘵 𝘵𝘩𝘦𝘺 𝘶𝘯𝘥𝘦𝘳𝘴𝘵𝘢𝘯𝘥 𝘮𝘺 𝘴𝘱𝘦𝘦𝘤𝘩.   

Surat Taha 20:25-28 

فقَ ولَ لَه ۥ قَ وْ لًۭ لَّ يِّنًۭ ا لَّعَلَّه ۥ يَتذََكَّ ر أ وَْ يخَْشَى 

𝘈𝘯𝘥 𝘴𝘱𝘦𝘢𝘬 𝘵𝘰 𝘩𝘪𝘮 𝘸𝘪𝘵𝘩 𝘨𝘦𝘯𝘵𝘭𝘦 𝘴𝘱𝘦𝘦𝘤𝘩 𝘵𝘩𝘢𝘵 𝘱𝘦𝘳𝘩𝘢𝘱𝘴 𝘩𝘦 𝘮𝘢𝘺 𝘣𝘦 𝘳𝘦𝘮𝘪𝘯𝘥𝘦𝘥 𝘰𝘳 𝘧𝘦𝘢𝘳 [𝘈𝘭𝘭𝘢𝘩].” 

Surat Taha 20:44

Prayer:

Lord grant that 

1.  I may be able to argument

2.  Accurate in analysis, 

3.  Strict in the study, 

4.  Candid with clients and honest with advisories,

5.  Sit with me at my desk and 

6.  Listen with me to my client’s plaints, 

7.  Read with me in my library,

8.  Stand beside me in court 

9.  So that today I shall not in order to win a point, lose my soul. 

By Thomas More 

(Former Lord High Chancellor of Great Britain)

(Year 1535 – 16th century)

PART 2 – WHAT IS PLEADING IN GENERAL 

In light of common law, and civil law parlance; the object of pleading is: 

  1. To identify the main elements of the parties’ dispute
  2. To prepare formal written documents by which the parties set forth their contentions.
  3. In the context of private law, the subject of pleadings is covered by the Code of Civil Procedure (CPC); but in today’s talk, we are interested in the art & science of tax pleadings before an Authority, Tribunal, or Court.  

PART 3 – TAX PLEADINGS

RELATIONSHIP BETWEEN TAX PLEADINGS AND VARIOUS APPROACHES OF CHARGEABILITY: 

The creation of fiscal liabilities (say the charge of tax) under the direct and indirect laws concentrate on the key factors of tax pleadings. In my appreciation, a sound understanding of the basic scheme of multiple approaches of chargeability is a pre-requisite to emerge as a good tax pleader and a rough count of these approaches is summarized below:   

a.  Income Tax Law = 12 approaches of chargeability;

b.  Sales Tax Law = 10 approaches of chargeability;

c.   Federal Excise Tax Law = 03 approaches of chargeability;

d.  Customs duty law= 03 approaches of chargeability.

Taxation is a domain of public law dealing with the powers of the state to tax citizens. Chief Justice Marshall of the USA has said that the “Power to tax is the power to destroy”. This observation of Justice Marshall speaks volumes about the gravity of a tax pleader’s role. 

WHAT IS THE PURPOSE OF TAX PLEADINGS – HOW TO ACHIEVE IT:

a)  It is to get relief from fiscal liabilities for the taxpayers/clients by assisting an Authority, Tribunal, or Court.  

b)  Some emerging issues in tax pleadings are:

  1. Whether the tax machinery has power for estimation of sales and rejection of expenses.
  2. Whether the tax machinery has the power to estimate production, 
  3. Whether a tax authority can have recourse to Joint invoking of multiple provisions of a tax statute (section 21(l), 21 (m), section 174)   for making a single addition or rejecting a single expenditure beyond a prescribed threshold n manner.
  4. Whether a tax authority of the Inland Revenue Service, in the guise of a common administrator, imports other taxes concepts/ purposes to create liability without any referential legislation. I mean venturing to reopen an income tax case on the plea that the sales declared in the 12 sales tax return do not match the total turnover shown in the annual income tax return or vice versa. 

PRE–PLEADING INTERVIEW – THREE REACTIONS: 

Your interview with a new client is very crucial. At times, he enters your office carrying a nerve-shaking baggage of harassment, intimidation and humiliation. His conversation reflects more on his confounding emotional state rather than the justness of his tax affairs. In this mental frame, he displays three types of usual reactions:

a)  Reaction of fear

b)  Reaction of aversion 

c)  Reaction to misunderstanding

Avoid exploiting his quick mental state. Be a very caring listener, go through deeply the papers that reflect his issue, and give your mind at the end to the effect that:

d)  I can help you within the legal framework of a given tax statute and also confide with  him the logic of your remedial actions 

HOW TO PREPARE AND STRUCTURE A PLEADING NOTE: 

Structuring thoughts in an organized manner is another prerequisite of court craft. Better to be ready with small, crisp, and lead-giving notes as enumerated below prior to pleading your case before a court : 

  • Assemble Facts & Circumstances; 
  • Note the Applicable Law/Rule/bylaws on these facts ;
  • Note the administrative approach on the issue in hand as regards the applicable circulars and SROs;
  • Be keen to know the Department’s practices in handling a given issue to avoid discrimination;
  • Have a good grasp of case laws for or against legal controversy. Anticipate and be ready to answer the queries that may come up by the court as regards the case law that appears to counter your proposition. 

ESSENE OF PLEADINGS: 

Formulating a precise legal proposition for consideration by authority, tribunal, and court, is the heart of tax pleadings. 

HOW TO FORMULATE A LEGAL PROPOSITION OR TO ASSAIL A SCN/ ASSESSMENT ORDER – FIVE AREAS OF ATTACK: 

  • Jurisdictional attack as regards subject matter, territorial, pecuniary, or timeline expiry; 
  • Comprehension of the whole set of preconditions before creating Liabilities and chargeability; 
  • Presence or absence of the preconditions that warrant a grant or refusal of Rights; 
  • Excessive exercise of Power and functions beyond the prescribed tether; 
  • Ascertaining the constituting elements of a particular jurisdiction, concept, liability, right, power, or offense. 

EVIDENCE & BURDEN OF PROOF – THE DOMINANT ROLE OF S. 136 OF ITO, 2001:

  1. By introducing section 136, Income tax law has come up with a new rule of evidence to press a contention at the appellate stage to establish that on the test of balance of probabilities the tax authorities were wrong in drawing an adverse conclusion. Thus the rule of creating civil liabilities is in sharp contrast to the rule of beyond reasonable doubt as applied in the criminal justice system
  2. Facts (allegations) by tax authorities need rebuttal on the rule of the preponderance of evidence – Interestingly, applying this rule, the Australian High Court ( their Supreme Court) has upheld a case of tax evasion against a tax driver who was caught for not reporting income from a leased taxi to another person. 
  3. In tax pleadings, three types of evidence is worth consideration:
  • Documentary evidence 
  • Material evidence (physical)
  • Circumstantial evidence  

CONCEPT OF INFORMATION/INFORMATION GATHERING POWERS/DEFINITE INFORMATION/INVESTIGATION OR THEIR RELATIONSHIP IN THE CONTEXT OF PLEADINGS (Ruling of the SC in the Khan CNG Case – 2017 PTD 1731): 

  1. Information per se is worthless even when so-called definite information is allegedly gathered;
  2. Further processing of such information is a must. Its veracity/authority through investigation is needed to make it potent;
  3. Findings and underlying documents that support the conclusion in an investigation constitute authoritative and incriminating evidence; 
  4. Such evidence is to be confronted to the taxpayer 

INTEGRATED APPROACH IN HANDLING CHALLENGES OF TAX PLEADINGS AT VARIOUS LEVELS: 

  1. An unwavering appreciation of Rights, Liabilities, and Powers n functions as enunciated in tax jurisprudence comprises a basic tool of pleading at appellate stages;
  2. Incorporate the given aspects of the above tool when you sit to  write/frame grounds of appeal before CIR (A) & ATIR; 
  3. Same compass will help you in framing persuasive questions of law/reference/ writ petitions; 
  4. Likewise, this approach will assist you how to frame the question of law of public importance; 
  5. Areas of Integration for the above suggested  legal analysis are:
  • The Constitution 
  • Tax Statutes
  • Jurisprudence 
  • Interpretation of Statute
  • Case Laws
  • General Clauses Act  

HOW TO MAKE PLEADINGS – THE COURT CRAFT – 19 ELEMENTS OF GOOD PLEADINGS:

  1. The opening statement – Your first words must attract attention or arouse the interest of the Court, Tribunal, & Authority;
  2. You can achieve this through diligence and fine thinking – as is the saying, “play chess with it”; 
  3. Decency and accuracy – shun audacity or rudeness;
  4. Eloquence v. erudition Court is there to give you legal relief that you press. Verbosity has no worth before a court. Knowledge has;
  5. Accuracy is the hallmark of advocacy – Better refer to correct Sections, Subsections, Clauses, sub-clauses – Explanation – Provisions – Rules/subrules. You will truly assist the court on the principle of accuracy;    
  6. Avoid blind reliance on the case laws – apply creative imagination – try to discriminate – and attempt to distinguish facts and various aspects of any case law;
  7. Cite a few well-chosen case laws intelligently – pre-check that these are not overruled;
  8.  Learn the process of abstraction of case law – in a fresh case, the SC has diluted the iron grip of the department in rough enforcement of withholding taxes as was inferred from the Blitz Case. In defending a few cases, I have, from the SCs Khan CNG case (above cited) abstracted seven tests before a tax authority could resort to formulary production of a manufacturing concern;
  9. Avoid concealing the facts, misleading the court;
  10. Be brief, logical, and to the point – lengthy & irrelevant arguments will never pay;
  11. Tactfulness v. tactlessness. It is equally prudent to know the judge as good as you know a law;
  12. Give up when the weakness of your arguments is noticed by a Court;
  13. Citation of authorities – Before citing the authorities, the facts of the reported cases should be thoroughly mastered. In nine cases out of ten, the facts make all the difference;
  14. Do not continue arguing when you find a judge in your favor;
  15. Draw up your own law notes/ principles of the leading reported case laws;
  16. Attitude towards the opposite counsel should be forbearing or fair and not sarcastic; 
  17. Punctual attendance either by an advocate or his junior earns you the respect of a court;
  18. Knowing the law is not enough, knowing the judge is equally essential;
  19. Argue by using correct legal phrases in a tax statute as regards concepts. Rights. Liabilities. Powers and functions and do not be impressed by the language used in a headnote of case law. Think for yourself in the context of the controversy and ignore or add value to the head notes to case law. 

PART 4 – (GOOD Lawyers’ ATTRIBUTES)

FIVE FUNCTIONS OF A GOOD LAWYER – BY CHIEF JUSTICE OF SUPREME | COURT OF NEW JERSEY – ARTHUR. T. VANDERBILT:  

  1. Wise Counsellor – Ability to know the client, Judge, and legal outcome
  2. No leading case is written without the lifeblood, sweat – laborer of a lawyer – A skilled advocate  
  3. Enrichment in the profession, the law improvements
  4. Leader of public opinion
  5. Prepared to serve in public office  

SIX LAWS OF ADVOCACY – BY RAJ KISHAN PRASAD- FORMER JUDGE | PAFANA HC I.

  1. Honesty 
  2. Courage
  3. Will
  4. Eloquence  
  5. Judgment 
  6. Intellectual capacity 

PART 5  – TAKEAWAY & CONCLUSION

My 19 years of tax pleading as summarized above have dictated to me that a good tax pleader is likely to have a helicopter view of the following aspects of a taxpayer’s case: 

  1. Advising for seeking a legal opinion before starting litigation;
  2. Having mastery of the basic purpose of a taxing statute i.e., Sales Tax – Monthly tax Liability, Income Tax – annual tax Liability, Custom Law – Moment to Moment tax liability;
  3. Mastering the facts and particular approaches to chargeability of various tax statutes;
  4. Resisting any analogical or common law approaches while constructing complex provisions of a tax statute;
  5. Emerging issues that are being commonly faced with, are still in a limbo and may germinate a host of constitutional petitions by/ through our community are:
  • Growing maltreatment of the newly introduced concept of Active Taxpayer list (ATL) as a tool to raise unjust further and extra tax (sales tax) and income tax by abuse of technology by failing to record in FBR portal taxpayer’s compliance data on on-line realtime (OLRT) basis; 
  • Abuse of Technology – when it comes to treating that online service of notice is sufficient; It is the servant not the master of law;
  • Continuous erosion of taxpayer rights by placing a premium on the inefficiency of the tax authorities in failing to adjudicate matters within the prescribed timeline;
  • FBR’s lack of policy/operation initiative as to whether the provisions of S. 177,111,122 or 182 of ITO 2001 are sequential or standalone provisions for the purpose of the ITO 2001; 
  • Failure of both the FBR and the tax advisor’s community to correctly appreciate the elephant of the Minimum Tax Regime (MTR). We all know that presently it is common practice to pad expenses to reduce the tax liability which otherwise swells to millions in amounts so far as the working of IRIS is concerned. Can we sanction statute-sponsored and (system-triggered) tax evasion (padding of expenses) while filing a tax return online? Here is the challenge for all of us.