Dr. K. Shivaram  Senior Advocate.

Income-tax Appellate Tribunal (ITAT) – Appointment of the Honourable Members of the ITAT on a tenure basis of four years and proposed Faceless hearing before the ITAT  will destroy the fabric and independence of the institution- Tax Bar Associations across the country have to join together and make a Representation to the consideration of the Honourable Prime Minster of India to bring the status of the appointment of Honourable Members of the ITAT  as it existed before 2017.  

The Income -Tax Appellate Tribunal ( ITAT)  which was established on January 25, 1941, and has completed its 83 years of existence and is considered one of the finest institutions of our country. The ITAT is considered as the Mother Tribunal and as a role model to the establishment of other Tribunals across the country. One of the reasons for the success of the ITAT is the manner of appointment of the Hon’ble members of the ITAT.

In the year 1941 when the ITAT was established, the tenure of the Honourable Members who were appointed was for five years, and the sitting judges were also appointed as members of the ITAT. However, when the number of litigations increased, more benches were constituted, and then the legislature with effect from February 25, 1950, amended the process of the appointment of members permanently till the time of their retirement. The retirement age was initially 60 years and thereafter it was increased to 62 years and the retirement age of the Hon’ble President was 65 years. In a conference held in Mumbai in the year 2006, the then Honourable Law Minister H. R. Bharadwaj stated that he was in favor of increasing the age limit of all members to 65 years.

When the ITAT completed its Silver Jubilee, in year-1996, (25 years ) Ruby Jubilee in the year 1981, ( 40 years )  Diamond  Jubilee in the year  2001(50 years ), and Platinum Jubilee in the year 2016  (75 years ) all stakeholders including the legislatures and Judiciary appreciated the functioning of the ITAT. The then Honourable Union Law Minister  Shri H.R.Gokhale  ( Lok Sabha debates  – 18^th  Session ) on the Constitution (42nd  Amendment Bill ) stated as under ;

“ I have got an example of the Income-tax Appellate Tribunal. We have judicial members, we have accountant members. The Tribunal is functioning extremely well and even those people who have gone before the Income-tax Appellate Tribunal have told me and have spoken on the public platform that the Income-tax Appellate Tribunal as it is constituted today, is the best example to show how the tribunals if properly constituted, can create confidence. I can say that the income-tax Appellate Tribunal’s decisions are rarely interfered with by the High Courts and the Supreme Court   because the quality of their work is sufficiently good as to inspire confidence .”

(Source Members conference  -29-10- 1977 )  (Fine Balance   2017, P. 431)    

A thought for debate is why suddenly changes are made in the process of appointment of the Honourable members of the ITAT   in the year 2017.?

In the year 2017, the Ministry of Finance introduced section 184 of the Act and introduced the concept of Members on a Tenure basis. The only reason given for doing so was to bring uniformity in appointing the members of the various Tribunals functioning in the country. The ITAT Bar Association Mumbai, All India Federation of Tax Practitioners, and tax professionals across the country had sent detailed representation to the Ministry of Finance and Ministry of Law urging them to drop the proposals as regards the appointment.

Despite various representations without allowing hearing to the stakeholders, the law is implemented. The members of the Tax Bar Associations across the country are of the considered opinion that if the appointment of the Members of the ITAT is continued on a tenure basis of four years and if the faceless hearing is introduced it will destroy the fabric and independence of the institution of the ITAT which was established on 25 th January 1941. The brief reasons are as under:

1. Final fact-finding Authority

The ITAT is the final fact-finding authority under the Income-Tax Act and an appeal can be filed to the High Court only upon a substantial question of law or if the order of the Tribunal is perverse. In the High Court appeals filed in the year 2003 are still pending for final hearing despite the best efforts made by the Bombay High Court to dispose of a large number of tax matters. Tax Bench Headed by Honourable Justice Mr. K.R. Shriram in the last two years has disposed of more than 10,000 tax matters, however, due to a shortage of Judges most of the High Courts are not able to dispose of the regular Income tax appeals.  On reading the reported judgments one can realise why so many writ petitions are filed before various High courts. From the assessee’s point of view due to one wrong order of the ITAT, it will take 20 years to get it corrected by the High Court.

2. The Income-tax Act, of 1961 refers to 106 Central Acts and various State Legislations and frequent amendments.

 The Income-tax Act, of 1961 is the only legislation of our Country that refers to 106 Central Acts and various State Legislations. If one looks at the development of Hindu Law, the Transfer of Property Act, of 1882, the Indian Trust Act, of 1882, the Negotiable Instruments Act, of 1881, the Companies Act, of 2013, the Indian Partnership Act, of 1932, the Limited Liability Partnership Act, 2008, Trade Marks Act, 1999, Copyright Act,1957, Indian Trusts Act,1882, Indian Contract Act, 1872, Sale of Goods Act 1930, etc, in addition to Constitution of India, issues under personal laws including Succession and Marriage Acts have to be also adjudicated while dealing with taxation matters. One has to consider the situation of a member appointed on a tenure basis at the age of 55, will they be able to study and decide issues arising in such complicated law? Normally it is seen that it takes nearly four to five years to understand the complicated issues of taxation. A member who has not seen the Income Tax Act till the age of 55 years,   will they able to decide the very complicated issue of taxation. 

3. Double taxation agreements.

 India has double taxation agreements with more than 100 countries. Understanding the intricacies of international taxation and transfer pricing requires a deeper study of not only income tax law, accounting, and international taxation. At present, most of the matters relating to International Taxation are headed by the Hon’ble member who has served more than 15 years as a member of the ITAT. The quality of judgments of the ITAT on International Taxation is appreciated across the world.  Consider a situation where a person has not read the Double taxation agreements, if he is asked to decide the very complicated issue of interpretation of the Double Taxation avoidance agreement, a person who has joined at the age of 55 will find it difficult to adjudicate such a complicated issue.

4. Revenue is litigant either as an appellant or respondent.

Before the Income Tax Appellate Tribunal, in all the appeals, the revenue is a litigant either as an appellant or respondent. Therefore, the functioning of the Income Tax Tribunal cannot be compared with other Tribunals. When a Member decides on a tax matter, if his term is to be renewed by the committee appointed by the Govt., they may lean in favour of the Revenue due to fear that if they decide against the Revenue, their term may not be renewed further. This will affect the impartial justice delivery system.

5. Honourable Members of the Income Tax Appellate Tribunal.

The sanctioned strength of the members of the ITAT is 126 members. The ITAT has at present 115 members.  Few of the Honourable Members have been in service for more than 15 to 20 years, they can guide the newly appointed Honourable members, the convention of the ITAT, and the quality of the orders to be passed. One will find at present  59 members are appointed on a tenure basis. One is not sure how many will be reappointed. Earlier, judicial and accountant members could be appointed with 10 years of practice.  In the years 2024 and 2025, more than 12  members will retire who have been appointed regularly. It seems about  20 Honourable Members have been appointed on a tenure basis their term will be ending in the year 2025. Thereafter it may be very challenging for the Honourable President of the ITAT to manage the functioning of the ITAT. In some of the stations, only members having less than 5 years’ experience may have to decide all important issues that may be affecting all stakeholders across the country.  If one bench decides on a question law it is binding on all benches across the country. Imagine a situation where a bench in a remote part of our country decides a question of law that will bind across the country till it is reversed by the High Court. At present the members are posted in such a way a senior member and a junior member are appointed. One has to imagine a situation when all members are less than four years old, who will head the bench, and how the bench will get the guidance of the senior members. Our considered view is that the entire system will collapse due to non-availability of the guidance by senior Members of the ITAT.

6. Single Member.

At present as per section 255 (3) a single member can decide if the issue involved is less than Rs. 50 lakhs. As we understand, the member should have been in service for at least five years. After a few years, no member of the ITAT may have more than five years of experience hence there will not be an issue with the functioning of the Single-Member Bench.

7. Members are eligible to be appointed only after attaining the age of 50 years.

As per the proviso to section 3(1) of the Tribunal Reforms, Act, 2021, members are eligible to be appointed only upon attaining the age of 50 years. A professional who is in his prime year of the practice may not be interested in joining the bench when he /she is not sure whether he /she will be reappointed.

8. Once appointed as a member, he/she is not eligible to practice anywhere in India before the Income Tax Appellate Tribunal.

According to Rule 16 (2) of the Tribunal (Conditions of Service) Rules, 2021 once a professional is appointed as a member he /she is not eligible to be posted in a place where he/she is practicing. After four years if he is not reappointed he is not eligible to practice anywhere in India before the ITAT across the Country.

The Honourable Members who have been appointed on a tenure basis if they are not reappointed should challenge the said rule as unconstitutional.

9. Faceless Appellate Tribunal.( Introduction of an appellate system with dynamic jurisdiction- Eliminating the interface between the Appellate Tribunal and parties to the appeal in the course of appellate proceedings. )

Under section 86 of the Finance Act, 2021, an amendment was carried on to section 255 of the Income-tax Act (“the Act”) to bring in new sub-section (7), (8), and (9) with effect from April 01, 2021. The amendment proposed to replace the existing tribunal with the “National Faceless Income Tax Appellate Tribunal Centre”. The amendment proposes to change the current mode of physical hearing to a virtual faceless hearing thereby eliminating the interface between the appellants.

The provision relating to the Faceless Appellate Tribunal was introduced in the year 2021. The ITAT Bar Association Mumbai, All India Federation of Tax Practitioners, and stakeholders across the country have objected to the introduction of a faceless Appellate Tribunal. In the Finance Act, 2024 it is postponed by one more year. We are of the considered opinion that the Faceless Tribunal will not serve any purpose, on the contrary, there will be more writ petitions before the High Court against the orders of the Tribunal across the country. The dialogue between Bar and Bench is very necessary to understand and decide the question of fact and law. Not allowing a hearing may be against the basic structure of the Constitution in the justice delivery system When the system has been working very well for more than 83 years why the change is needed and what purpose it will serve to the honest taxpayers?

10. We appeal that in the interest of the Institution.

• Section 252A of the Income-tax Act, as inserted by Finance Act, 2017, may be omitted; or
• The provisions of part XIV of Chapter VI of the Finance Act, 2017, may not be made applicable to the ITAT.
• The Members of the ITAT may be appointed with the same terms and conditions as were prevalent earlier.
• The retirement age limit of Members of the ITAT may be made the same as that of the President of the ITAT.
• The proposed provision relating to the faceless Appellate Tribunal may be deleted.

 Conclusion:

Vision of the Hon’ble Prime Minister Shri Narendra Modi for the year 2047

Honourable Prime Minister Shri Narendra Modi has a great vision for our country. We have the duty and responsibility to support the vision of the Honourable Prime Minister of India. One may have to bring to the consideration of the Hon’ble Prime Minister of India that, on the occasion of the Platinum Jubilee Celebration of the ITAT in the message dated January 13, 2016, his excellency President of India Honourable Shri Pranab Mukherjee in the message stated as under:

“Over the last more than seven decades, the Income Tax Appellate Tribunal has shown exemplary diligence in dealing with intricate domestic as well as international taxation issues and rendering decisions which balance the interests of the taxmen and citizens. The Tribunal has been adjudicating disputes in the field of direct taxes fairly and impartially. It has been discharging its functions not only to the satisfaction of the Executive but also that of the taxpayers at large”

Then Law Minister Honourable Shri Arun Jaitley, in his message dated January 14, 2016, stated as under:

“Income Tax Appellate Tribunal has conducted itself in an unbiased and fair manner in the discharge of its duty of adjudicating disputes under direct tax laws, and is held in high esteem by the taxpaying fraternity as well as Revenue Department”

One failed to understand what made the legislature make drastic changes in the appointment of the Honourable Members of the Income Tax Appellate Tribunal.

If the law relating to the appointment of the Honourable Members of the ITAT is not brought back to them as it was earlier it may cause irrecoverable loss to the honest taxpayers of the Country. We appeal to the stakeholders and people who are concerned with saving the ITAT may attempt to bring it to the notice of the Hon’ble Prime Minister of India. We are very confident that the Hon’ble Prime Minister will take a very positive step in the interest of the Institution and Nation. We appeal to the Honourable Prime Minister of India, to please listen to the Tax consultants across the country who appear regularly before the ITAT and the stakeholders, and thereafter if the reasons are not satisfactory bring the law.

The ITAT Bar Association is proposing the make a detailed representation of the two issues referred above to the consideration of the Honourable Prime Minister of India. We appeal to all stakeholders who are concerned with the functioning of the ITAT  to share their views or send their views by email to,  itatonline.manager@gmail.com   so that the ITAT Bar Association Mumbai can make an effective representation in the interest of the Institution which is considered as Mother institution of our country.

Jai Hind.

26^th April, 2024

From the desk of the Editor-in-Chief

A Tribute to Late Shri Narayan Varma
A great visionary of the tax profession

My Senior, Late Shri V. H. Patil Advocate had encouraged me to write for the Bombay Chartered Accountant’s Journal (BCAJ). I had the fortune of contributing to the BCAJ since 1984, when Shri Shyam Argade, was the editor. Later on I used to contribute to the subject of unreported judgments of the Bombay High Court, Special Bench cases, etc. It was a great rewarding experience to attend yearly meeting of the Journal committee of the BCAS and listen to the new ideas by the editors and other members of the journal committee.

Late Shri Narayan Varma was one of the great visionaries of the tax profession who used to share several new ideas for Professional Organisations, Journals, Seminars, etc. I had the fortune of associating with Shri Narayan Varma in the educational activities of the Bombay Chartered Accountants’ Society, the Chamber of Tax Consultants, and public interest litigation relating to taxation matters. It is Shri Narayan Varma who inspired me to start “Allied Laws” as a new regular feature for the BCAJ.

In April 1996, with my friend Mr. Chetan A. Karia, Chartered Accountant, we co-authored the first feature. Ever since, with the help of my associates, our chamber has contributed to the feature regularly.

This feature on “Allied Laws” is drawn from referring to the All India Reporter (AIR), Supreme Court cases (SCC), Customs and Central Excise Times (Now known as GST Law Times), Sales Tax cases (STC) (Now The Goods and Service Tax Reports (GSTR) and many more journals.

I must acknowledge that the support of my professional colleagues,
Mr. Chetan A. Karia, Chartered Accountant, Mr. K. Gopal Advocate,
Mr. Reepal Tralshawala Chartered Accountant, Mr. Ajay R. Singh Advocate, Mr. Shashank Dundu, Advocate, Mr. Rahul Hakani, Advocate and Mr. Shashi A. Bekal, Advocate, who have from time to time, shared the effort in ensuring timely and regular contribution to the feature “Allied Laws”. The Journal Committee and Editorial team of the Bombay Chartered Accountants’ Society (BCAS) have always added value with their regular inputs for the feature.

Chartered Accountants have domain knowledge of business and accounts and are recognised as experts in the field. Tax Laws do not stand in isolation from other laws and it does not operate in a vacuum. Certain enactments like the General Clauses Act are laws that apply to all enactments of the Legislature. Then there are commercial laws like the Companies Act and, the Indian Contract Act, which will have a direct bearing on a commercial transaction. There are also enactments to which reference is made in the Tax Law itself, as Legislation does not re-enact the same provision again. To top it all, the Rules of Interpretation of Statute, are secular in the sense the Rules will apply equally to interpret an enactment, irrespective of its subject. Therefore, it can be said that general law is the backbone of tax and legal practice.

This publication will serve as a guide and reference to Chartered Accountants in their day-to-day practice. Case laws on general law help the chartered accountants, lawyers, and tax practitioners to be better equipped for representation as well as advisory services. One will find most of the tax journals have now started digesting important judgments on allied laws.

The idea of publishing a publication on “General Laws” was discussed a few years back when I had a discussion with Shri Deepak R. Shah, Chartered Accountant and Past President of the BCAS who has shown a positive response and he had discussed with then President and Chairman of the Publication Committee of the BCAS who then agreed to the proposed publication. I discussed this with Mr. Pradip Kapasi, Chartered Accountant, Past President of the BCAS, and one of my close friends who has supported this publication. When I discussed with my associates who were contributing to Allied Laws, all of them agreed to be part of this prestigious project. Senior members of the profession and my close associates in the profession have agreed to spare their time for editing the publication. They have edited the contents of this publication and added value to the publication. It is due to the great teamwork of the research team and editorial team we were able to bring out this publication.

I owe a lot of gratitude to the BCAS, its past presidents and especially my friend Shri P. D. Desai who gave me the opportunity to deliver a lecture at BCAS’s forum.

I was pondering on the idea of giving back to the BCAS and its members. The idea came to me to come out with a publication on General Laws relevant to Direct Tax as a tribute and in remembrance of the Late Shri Narayan Varma.

This publication will be a useful reference to chartered accountants, lawyers, and tax consultants who practice exclusively on tax laws. This publication will be very useful to all who desire to know about legal issues relating to various acts such as succession, will, nomination, registration, etc. and many other acts.

In this publication, 75 Acts and 924 cases relevant to Direct Tax practice have been discussed. The Research team has digested section-wise, the important case laws on respective Acts. It is a matter of pride that the publication is a joint effort of leading tax professionals. Twelve senior members have edited research material gathered and digested by sixteen professionals. All of them have spared time from their busy schedule.

In my 45 years of practice, I had the opportunity to associate with the BCAS and I must acknowledge that BCAS is one of the finest organisations. The members are dedicated to the professional cause and the BCAJ is a must for every professional who practices on direct and indirect taxes.

This publication is possible due to the support of Mr. Chirag Doshi, President and Past Presidents Mr. Mihir Sheth, Mr. Anil Sathe, and the positive support of Mr. Deepak R. Shah, Past President of the BCAS and convenors Mr. Shashi A. Bekal, Advocate and Ms. Divya Jokhakar, Chartered Accountant. Special Thanks to Ms. Neelam Jadhav, Advocate who has devoted time in preparing the subject-wise index which is very useful to readers.

There is constant change in the law, what we consider today may not be good law tomorrow. I feel that this publication may have to be revised at least once in five years.

We look forword to the valuable suggestions of the readers of this publication.

Dr. K. Shivaram
Senior Advocate

[Source : Bombay Chartered Accountant Society Publication 75 Laws Relevant to Direct Taxes]

Hon’ble Chief Justice Dr. D.Y. Chandrachud is a great visionary, crusader of Justice and a champion of the Constitution. Lordship will make a sincere attempt to reduce the pendency of tax matters which are pending before Hon’ble Supreme Court and various High Courts. Hon’ble Justice Dr. D.Y. Chandrachud always believed that it is the law students who will be the guardian of our democracy and b more women judges are required to be appointed in the judiciary.

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Dr. K. Shivaram, Senior Advocate, has lauded the recent philosophy of the Income-tax Dept of “Honouring the Honest“. He has described it as a “Game Changing Fiscal Policy“. He has advised that the tax administration has to make sincere efforts to satisfy at least 10 expectations of high tax payers. He has opined that this will be a way forward to eliminate the so-called “Trust Deficit” between the Tax Department and the Asseessees

The Hon’ble Prime Minister on August 13, 2020 launched the “Transparent Taxation – Honouring the Honest” platform. The intention of the Government is to enhance Transparency, Efficiency and Accountability and. With a view to achieve its objective it has proposed three areas of work viz. i. Faceless Assessment, ii. Faceless Appeals and iii. A Citizens Charter.

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