When Jagjivan Ram ‘forgot’ to file income tax returns
(From my Memoirs)
The old-timers may recollect that in early 1969, the then Food and Agriculture Minister Jagjivan Ram’s failure to file his income tax returns for a few years had become news. There were wide speculations about how he defaulted, what action was taken against him, what was the role of the then Finance Minister, Morarji Desai and what was the reaction of Prime Minister Indira Gandhi.
Recently I happened to read a few pages of a book ‘Milestones’ on the life of Jagjivan Ram (he died in 1986) by his wife Indrani Jagjivan Ram (she died in 2002). On page 231-32 of the book, published in 2010, she writes:
“In the middle of April (1969) Finance Minister Morarji Desai informed him that his income tax returns had not been filed for ten years. My husband was taken aback. Whatever money he received from the government….was after tax had been deducted. So how did this lapse occur? It also showed negligence on the part of the income tax department that no notice was sent to him. A chartered accountant looked after his finances. I thought that Morarji Desai had been jealous of my husband from the beginning; he was his political rival too. Was this a new trick to humiliate my husband?…. How was it possible that no query was sent for ten years? A person who had refused ministership in 1937 for the sake of the party and the nation, at a time when he had very little money, such a person could not even think of doing anything of this kind. Before forming an adverse judgement about such a person, his previous track record of conduct, sacrifice, dedication and patriotism should have been considered.
“My husband was hurt and ready to hand in his resignation – he did not want any blemish on his pristine carrier. His well-wishers stopped him. Indira Gandhi also asked him not to resign. The syndicate was opposing the progressive policies of the government and Congress. Morarji Desai was a prominent leader of the syndicate. If my husband resigned, it would have meant a boost for the syndicate. Indira Gandhi said that Jagjivan Ram had played an important role in her election as the Prime Minister and Morarji Desai had been displeased with him since then. She said that many other MPs had not filed their income tax returns.”
The passage in the book reminded me of an article, highly critical of Morarji Desai, written long ago by I. K. Gujral, much before he became Prime Minister. Gujral had written that as Finance Minister, Morarji Desai misused various investigating agencies under him and came to know that Jagjivan Ram had not filed his income tax returns for several years and created an embarrassing situation for his Cabinet colleague.
Out of curiosity, I took the help of Google to find what others have written on the subject. The search engine showed about 24,300 results to ‘Jagjivan Ram income tax’. Obviously, all these are not about his income tax nor could I read more than a few which appeared relevant. I found that according to those who have written on the subject, Jagjivan Ram had not paid his income tax or had not filed tax returns for 10 years and even more. An interesting piece of ‘information’ appears in the book “The Congress, Indira to Sonia Gandhi’ by Vijay Sanghvi. According to the author:
“Indira Gandhi also chose him for the candidature in the presidential election in 1969, but she could not push through her proposal at the Parliamentary board meeting. She was hesitant earlier to choose him as her candidate because of the tax problems that had enveloped Jagjivan Ram. Not only that he had not paid the income tax for years but had also not filed the mandatory Tax Returns. Indira Gandhi knew that Morarji Desai was sitting on the files as the finance minister.” (Page 255)
I cannot say whether at any stage Jagjivan Ram was Indira Gandhi’s choice for the post of President of India but I can say with full confidence that much of what these people have written is false. I am not saying that these persons were telling lies. A lie is something one tells deliberately to hide something or to mislead someone. But they were not speaking the truth, because they have written on the subject without knowing the truth. What could be the explanation of such writings, not true but sounding convincing because writers include Indrani Jagjivan Ram and I. K. Gujral?
Visualise a dramatic situation. You are sitting before a stage. You hear only noise: MPs making noise in the Parliament that Jagjivan Ram has not filed his IT returns for several years; people reading the news in newspapers and talking about it; in defence of Jagjivan Ram, a minister is heard telling MPs that he had ‘forgotten’ to file tax returns. Scene changes. Morarji Desai is seen ordering action against Jagjivan Ram who is sitting in a corner looking very upset. Morarji goes; Indira Gandhi appears. Someone asks her whether Jagjivan Ram had forgotten to file his tax returns. She says casually, ‘Yes, there was some such forgetfulness.’ Throughout, Jagjivan Ram himself does not say a word.
Those who have written had heard and seen only this much. They did not know how a question was raised in the Parliament. They guessed that Jagjivan Ram’s bete noire Morarji Desai must have been the man behind it, that when such an impropriety had been committed by a cabinet minister and Finance Minister was after his blood, he could have been saved only by the Prime Minister who needed his support in her battle against the Syndicate comprising Morarji Desai and others.
This is what happens when one is confident that his guess is true. The most surprising is what is written in ‘Memoirs’ by his wife. She too was totally ignorant and the person who wrote on her behalf or helped her write knew nothing.
There was only one person who knew everything, from how Jagjivan Ram’s default was detected and how the curtain fell on the drama. That person is still alive. He knows more than what even Jagjivan Ram knew. That person is none other than the author of this article.
In an earlier article “When high-level corruption in India had state patronage” (Oct 04, 2015), I had written that in 1968, I was given charge of an income tax ward which was a very sensitive charge because it had jurisdiction over most of the persons who mattered in the country. Out of over 5500 taxpayers, at least 500 were very powerful: President, Vice President, Prime Minister, most of the central ministers, ex-ministers, several MPs, judges of the Supreme Court and Delhi High Court, senior bureaucrats, officers of my own department posted in Delhi including my own bosses, etc. Anyone of them could create a problem for me, from an adverse entry in my annual records to transfer to the farthest corner of the country. My conscience would not allow me to do anything illegal or irregular under any pressure to please anyone or to win favour. At the same time, I could not be rash to unnecessarily rub anybody the wrong way. I had to be very cautious and diplomatic in dealing with such persons.
During the course of examination of pending cases, I discovered that while most of the persons including those considered powerful were quite regular when filing their tax returns and paying taxes over and above what had been deducted at source, some of the powerful persons were defaulters. Technically and legally I could issue a notice to each one of them but the risk was that some of them might have filed their returns elsewhere, for example in their own hometowns. One option was to ring up everyone to enquire but that was not likely to bring information which I could place on the record. I also gathered from the members of the staff some powerful persons were reluctant to give information and clarifications needed by the Department and believed in showing off.
Under these circumstances, I decided it would be better to give a strong signal to such people to take their income tax matters seriously. I adopted an unorthodox method which one can say was not expected of a civil servant. I called a Delhi Jan Sangh MP, Kanwar Lal Gupta, who was also an income tax practitioner, to my office. I shared the information with him and suggested that a Parliament question should be asked about the ministers and ex-ministers who had not filed their income tax returns for the current year and in the past. It was the biggest scoop for an MP in the Opposition. He sent a question to the Lok Sabha Secretariat for the reply.
Soon thereafter there was hue and cry. Finance Minister Morarji Desai and the officers of the Department of Revenue came to know of it. That such a question had been asked reached the press too. The question reached me through proper channel for preparation of the list of defaulters. The Commissioner of Income Tax (CIT), Delhi – at that time he was the senior most officer in the field – started getting phone calls from offices of ministers and ex-ministers for help in the preparation of income tax returns.
The preparation of reply was not an easy task because I was not sure that record-keeping was as perfect as it should be. I asked my office to check all the records to ensure that there was no mistake in the reply. I prepared the list of defaulters. The most important name was that of Jagjivan Ram. To safeguard myself, I wrote in the reply that the list had been prepared on the basis of the records available and that it was quite likely that some of them had filed their returns elsewhere.
One day Rameshwar Thakur, at that time a practising chartered accountant (years later, in June 1991, he became Minister of State for revenue in the Finance Ministry, then shifted to other ministries before being dropped in December 1994 and served as Governor of different states between 2004 and 2009), came to me to file income tax returns of Jagjivan Ram. As far as I collect, Jagjivan Ram had not filed the returns for the assessment year 1968-69 and three preceding years, not for 10 years as claimed by the people who have written on the subject. The return for the assessment year 1969-70 was within time. During the course of conversation, Rameshwar Thakur told me that a member of Jagjivan Ram’s staff used to look after his tax matters – it was confirmed by members of staff who had been working in the ward for several years – but after his foreign posting Jagjivan Ram did not assign the work to anyone and defaulted. Rameshwar Thakur was handling Jagjivan Ram’s personal income tax matters for the first time.
In response to the statutory notices issued to discuss the case with Jagjivan Ram or his legal representative, Rameshwar Thakur (who later became Minister of State for Finance) appeared. In addition to salary and allowances as Minister from which tax had been deducted at source, the only other income was interest of Rs. 15,000 or 20,000 per annum on fixed deposit with a private company. The source of the deposit was the maturity value of a life insurance policy. At that time there was no provision for deduction of tax at source from interest income. The scrutiny of bank accounts did not reveal anything incriminating. The Income Tax Act required that in addition to filing the income tax return every year within the prescribed time limit declaring income from all sources – returns had to be filed even if the only source of income was salary from which tax was deducted at source – he should pay advance tax and, if necessary, tax on the basis of self-assessment within 30 days of filing the return. Jagjivan Ram had violated all these provisions. Along with the assessment orders, I issued several notices to show cause why penalty should not be imposed on him for concealment of income (due to non-filing of return), for the delay in filing returns of income and for failure to pay advance tax. Jagjivan Ram had paid all the dues with interest after filing the returns in 1969 but that did not absolve him of violations of the law in the past.
In response to the penalty notices, Jagjivan Ram filed a petition before the CIT, Delhi for waiver of penalty under Section 273A of the Income Tax Act. According to the provisions Section 273A (1) as prevailing in 1969, the CIT had power “in his discretion, whether on his own motion or otherwise” to reduce or waive the penalty imposed or imposable on a person for all those offences for which penalty notices had been issued. The conditions for reduction or waiver of the amount of penalty were that the Commissioner “is satisfied that such a person”
(a) has filed the return of income voluntarily,
(b) has voluntarily made full and true disclosure of income and no concealment has been detected,
(c) has co-operated in any enquiry relating to the assessment of his income, and
(d) has either paid or make satisfactory arrangements for the payment of any tax and interest payable by him.
(CIT’s powers to reduce or waive penalty were significantly reduced by amendments to the Income Tax Act in 1986 and 1989.)
In my report to the CIT, I confirmed that Jagjivan Ram fulfilled all the above-mentioned conditions required for the waiver of penalty.
For the next 10 days or so I had to face the music. My CIT, I. P. Gupta (he is no more), known to be a very strict boss and hard taskmaster, was very fond of me and extended full support to me whenever I faced any problem. However, he was not happy with my report. The main issue was whether the returns filed by Jagjivan Ram could be treated as having been filed ‘voluntarily’. If the returns were not filed ‘voluntarily’, the fulfillment of other conditions was meaningless. According to my CIT and many others in the Department, Jagjivan Ram’s returns could not be treated as having been filed ‘voluntarily’ because he had done so after a Parliament question that made him aware of his default. On the other hand, my argument was that if a return of income filed because of Parliament question could not be treated as ‘voluntary’, no return filed even without any notice from the Department could be treated as ‘voluntary’; every person having taxable income filed tax return and paid taxes because of fear of law; the filing of income tax return and payment of tax could not be treated as a charitable act; if the payment of income tax was made voluntary, hardly anybody would pay. In my opinion, the Income Tax Act recognised only two situations: whether the return was filed in response to a statutory notice issued by the Department or without any statutory notice. Since the department had not issued any statutory notice to Jagjivan Ram, in the eyes of the law, the returns filed by him had to be treated as ‘voluntary’.
After a lot of discussion in the Department, my interpretation was accepted but that did not end the Commissioner’s problem. It was difficult for him to reject Jagjivan Ram’s application because in several similar cases the department had waived the penalty. At the same time, because of political overtones, it was not easy for the Commissioner to treat this case as a routine one.
Finance Minister Morarji Desai was keenly monitoring the progress of the case. As ordered by him, Commissioner sent a report in which he mentioned all the developments in the case: Jagjivan Ram had filed all the pending income tax returns and had paid taxes due; income declared by him in each year had been accepted, income tax assessments had been completed and orders passed and penalty notices had been issued; Jagjivan Ram had submitted a petition for waiver of penalty; the assessing officer had sent a report that the assessee fulfilled all the conditions for the waiver of penalty.
Morarji Desai got wild when he read the report. He gave two orders in writing: (a) impose maximum penalty on Jagjivan Ram and (b) take disciplinary action against the assessing officer for suggesting that Jagjivan Ram had fulfilled all the conditions for the waiver of penalty. I was summoned by the Central Board of Direct Taxes (CBDT) and shown the Finance Minister’s order. I was told that the Finance Minister was very angry with me. The CBDT and my CIT were very upset and feeling very sorry for me. My immediate reaction was that unwittingly Finance Minister had done a great to favour to Jagjivan Ram because after what he had ordered in writing, it was impossible to impose any penalty on Jagjivan Ram. My reasoning was that the Finance Minister had absolutely no legal power under the Income Tax Act to give any order and that if a penalty was imposed after this order, it would be struck down by appellate authorities in no time. I even said that if Jagjivan Ram filed a writ petition in the High Court that the Finance Minister was interfering in a quasi-judicial process, he (Finance Minister) would be in trouble.
In my opinion – I could not say that before my seniors – Morarji Desai was a very arrogant as well as an ignorant person. Perhaps, he believed that all the legal and executive powers vested in the mandarins of his Ministry were vested in him too because he was the Minister. He had neither knowledge of law nor common sense but believed that he had all the powers to give any order to his subordinates.
The CIT did not implement the Finance Minister’s order. Jagjivan Ram’s petition was accepted and all penalties were waived.
After some time, a parliamentary committee raised this question. A member of the committee asked the then Finance Secretary whether the Finance Minister had issued an order to impose a penalty on Jagjivan Ram. Finance Secretary denied the existence of any such order. The file in which Morarji Desai had given the order had vanished in thin air. Later, Morarji Desai himself was forced to resign from the government for conspiring against Indira Gandhi.
It is absolutely wrong to say, as some people claim, that Moraji Desai was sitting over the file while others were waiting for his order. In fact, he was in a great hurry to see that penalty was imposed on Jagjivan Ram.
In the entire drama Indira Gandhi’s only role was that in reply to a question by a journalist whether Jagjivan Ram had ‘forgotten’ to file his income tax returns, she had said that ‘there was some such forgetfulness.’
After that episode, not only Jagjivan Ram but several other powerful persons also became regular and cooperative, not all though. A few defaulters, including a prominent socialist leader who had served as Deputy Chairman of the Planning Commission, continued to be defiant. During the course of telephonic conversation, the great socialist leader shouted at me and said that he would not file income tax returns because he owed nothing to the government. Later, he was in serious trouble because he was quite a rich person with taxable income as well as wealth but had not bothered to pay his taxes for several years. Unfortunately, I could not get the opportunity to deal with his case because by that time I had gone to the Planning Commission as deputy secretary.
The moral of the story is that if the truth is not public knowledge, it is very easy to distort history and mislead people. If falsehood can be spread about what has happened during our lifetime, what is the guarantee that what has been written as history is true?
Devendra Narain, IRS (Retd.)