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How To Improve India’s Legal System? Professionals Must Offer Suggestions To Chief Justice Ranjan Gogoi

Dr. K. Shivaram, Senior Advocate, has sent the clarion call to all professionals to put on their thinking caps and offer suggestions to the Hon’ble Chief Justice of India on how to improve the Country’s broken legal system. The author has highlighted a few core reforms which require to be implemented on an imperative basis

TAX PROFESSIONALS OF THE COUNTRY SHOULD CONTRIBUTE TO THE VISION OF THE HONOURABLE CHIEF JUSTICE OF INDIA WHO IS TRYING TO EVOLVE A SYSTEM WHICH CAN PRODUCE BETTER RESULTS.

PENDENCY IN TAX APPEALS THAT IS PLAGUING THE HIGH COURTS AND THE SUPREME COURT CAN BE REDUCED CONSIDERABLY IF THE JUDICIARY, MINISTRY OF FINANCE, MINISTRY OF LAW AND JUSTICE, THE TAX BAR AND TAX ADMINISTRATION CAN COME TOGETHER AND DRAFT A ROAD MAP.

TAX BAR INVITES OBJECTIVE SUGGESTIONS FROM MEMBERS AND PROFESSIONALS FOR REDUCTION IN PENDENCY OF CASES.

The 21st National Convention of the All India Federation of Tax Practitioners will be held at Guwahati on the 22nd and 23rd of December 2018. The theme of the Conference is “SAARTHI” and the convention is set to be inaugurated by the Honourable Chief Justice of India Mr. Ranjan Gogoi.

This is a great opportunity for tax professionals of the country to contribute to the vision of the
Honourable Chief Justice of India who is trying to evolve a system which can produce better results

The 21st National Convention of the All India Federation of Tax Practitioners (AIFTP) will be held at Guwahati on 22nd and 23rd of December 2018. The theme of the mega event is “SAARTHI”.

The Honourable Chief Justice of India Mr. Ranjan Gogoi will be inaugurating the convention and also releasing a Publication of the AIFTP dedicated to late Justice Dr. B. P. Saraf, the former Chief Justice of Jammu & Kashmir High Court.

More than 1,000 delegates from across the country are expected to attend the convention which will prove to be a memorable day for the members of the AIFTP.

One of the major challenges faced by the Judiciary is the large pendency of cases before it. The Honourable Chief Justice of India is trying to evolve a system which can produce better results. Tax Practitioners may have to play a proactive role to fulfil the objective of the Honourable Chief Justice of India to reduce the pendency of litigation.

The AIFTP has made various suggestions from time-to-time and immediately after the convention, it desires to forward a discussion paper on direct and indirect taxes to reduce the pendency of tax matters to the Honourable Chief Justice of India, honourable Finance Minister and Honourable Law Minister.

Few thoughts are discussed hereunder and we desire that members of the AIFTP and all concerned interested persons may send their valuable suggestions to the AIFTP on or before 30th November 2018 which may help in preparing a discussion paper on the subject mentioned above.

We propose to draft the discussion paper into three parts (1) Conceptual (2) Administrative, and (3) Amendment in law.

1. Conceptual Reforms

a) The setting up of an e-Bench of the Supreme Court can be an effective alternative for having four Regional Benches of Apex Court. The e-Bench of Apex Court will help render speedy justice to the litigants thereby saving huge cost incurred on travelling back and forth to New Delhi.

The Apex Court can have an e-Bench of the Supreme Court. The hearings of the matters before the e-Bench of the Apex Court can be done by linking various High Courts and affording facilities for arguing the matter before the Apex Court from the respective High Courts atleast at the Special Leave Petition (SLP) admission stage.

An e-Bench of the Supreme Court can take up the matters High Court wise e.g., One day could be for matters from the High Court of Bombay while another day could be matter from the High Court of Madras, Calcutta or other states.

Initially, on a trial basis an option may be given to the parties to hear the matters through either the e-Bench or the regular Bench.

The Income-tax Appellate Tribunal has started an e-Court at Mumbai through which the matters of Nagpur are heard by members sitting in Mumbai at the Mumbai Bench. The experience has been found to be very satisfactory and both the tax payers and the Department have found the functioning of this Bench beneficial. As per the concept, the litigants will be given an option to ‘opt in’ or ‘opt out’ of the e-Bench facility.

If the litigants desire not to be heard by the e-Bench and would like to approach the Apex Court in person, they may have an option to opt out. This option would be given to them even at the time of hearing of matter by the e-Bench of the Apex Court. One Court room each of the various High Courts across the country may be converted into an e-Bench.

b) Increase in age limit of judges and members of the Appellate Tribunal from 62 to 65 years.

Parliament has constituted a committee headed by Smt. Jayanti Natrajan as Chairperson for considering the increase in age limit of Judges of High Courts from 62 to 65. The Committee observed as under:

Taking into account the justifications given by the secretary, Department of Justice, and the statement of objects and reasons appended to the bill, the committee supports the proposal for increase in the retirement age of judges of the High Courts from sixty two years to sixty five years and to be at par with the retirement age of the judges of the Supreme Court. The Committee also acknowledges that the Bill has been brought forth in pursuance of the recommendation made by the Committee in its earlier reports

Though the committee has made the above recommendation on 7th December, 2010, the recommendation has not been followed till date.

The then Hon’ble Law Minster, Mr. H. R. Bhardwaj, while addressing the Member’s conference at Mumbai on 4th November, 2006, stated that the Government will increase the age limit of all Members from the present age of 62 years to 65 years. A similar representation has also been made by the AIFTP for increasing the retirement ages of High Court judges.

We are of the opinion that the knowledge and experience of a Judge/Member is an intangible asset of a precious nature, and therefore it should be used for justice delivery efficaciously. We are of the considered opinion that increasing the age limit will help in reducing the pendency of cases substantially.

c) Institutionalisation of the process of elevation of Members to the High Court

Very few Members of the ITAT have been elevated to the High Courts. This process may be institutionalised. Deserving Members of the ITAT due to their specialised knowledge and experience in ‘taxation’ and ‘commercial transactions’, would be able to understand and decide the issues involving both the subjects in a better manner. This will also attract young bright lawyers to join the Income Tax Tribunal.

d) Setting up of Special Courts to deal with prosecution in relation to Direct and Indirect taxes

Under the present system, it takes more than 20 years to decide prosecution matters relating to Direct Taxes.

Therefore the deterrent provisions fail to achieve the desired object due to delay in disposal of cases by the lower courts. Income-tax being a specialised subject, may be heard by a Special Court of two judges, similar to the Tribunal and thereafter an appeal may lie to the High Court.

It may be considered whether the jurisdiction to deal with prosecution matters relating to the respective taxes can be delegated to the Tribunal i.e., prosecution relating to Central Excise and Customs to the CESTAT and prosecution relating to VAT and Central Sales Tax before the Sales Tax Tribunal.

A Bench of two Judicial Members may be constituted to hear the prosecution matters. An appeal against the said orders of the Tribunal, before the High Court, may be provided to the aggrieved. The Government need not create separate infrastructure for setting up of Courts. The present set up of the various Tribunals may be sufficient to handle prosecution matters. This will help in the speedy disposal of matters.

2. Administrative Reforms

a) Regular Tax Bench in various High Courts

In all High Courts, there has to be at least one Tax Bench to decide the issues relating to direct and indirect tax matters. The Tax Bench may function throughout the year. If required based on the pendency of tax matters more than one Tax Bench may be constituted.

(b) A Responsive system to be established in every Ministry to discuss and take action on suggestions made by the Apex Court, High Courts and other Judicial authorities

It has been observed that various High Courts make several recommendations to Ministries in the Government of India to look into certain matters and take appropriate measures. However, there is no mechanism to find out whether the issue was brought to the notice of the concerned Ministry and whether the directions have been complied with.

It is therefore, advisable to put up such orders on the website of the concerned Government department in public domain and after considering the various suggestions, appropriate action can be taken. This will bring transparency and accountability in the functioning of the Ministry.

c) Acceptance of orders of High Courts

In the earlier days, whenever the Department would accept a decision of a particular High Court on interpretation of law, the Central Board of Direct taxes used to issue a circular stating that a particular interpretation of law has been accepted. Such a practice is discontinued now which causes a multiplicity of litigation.

If this process is readopted and published on regular basis on the website of the CBDT, it will bring transparency and will benefit the revenue as well as assessees.

d) Monitoring tax appeals

Though the Department is the single largest litigant in the higher Judiciary across India, the Income-tax Department does not have a centralised wing to effectively monitor its appeals from the stage of inception until the final disposal.

It is advisable for the Department to have an independent National Tax Litigation Cell to monitor tax appeals before various High Courts and Apex Court. In tax matters, department is always either the appellant or the respondent.

With the help of technology, CBDT can find out which are the issues pending before the Apex Court, High Courts and also the Appellate Tribunal. This will help in quick disposal of matters where common issues are involved. At present there is no mechanism to find out which appeals are pending before the High Courts or the Apex Court.

As per the 1946 Rules of ITAT Manual, the Tribunal keeps the records only for six years after disposal of the matters and old records are weeded out being more than six years old. If the High Court desires to look into the original records while final hearing of the matters, the record may not be available.

It is desired that all records of the ITAT may be digitalised and preserved. It is desired that an amendment may be introduced in the Act or Rules wherein an intimation may be sent to the ITAT as soon as the appeal is filed so that the concerned file may be preserved.

There is no mechanism to find out whether appropriate effect is given of the orders passed by Apex Court, High Courts and Appellate Tribunal. System may have to be developed wherein the AO may be able to find out the status of appeal, effect given, refunds to be given etc.

e) Settlement Commission – Professionals may also be considered as eligible candidates for the appointment as members of the Settlement Commission

The Income-tax Settlement Commission was established in the year 1976 for the purpose of expeditious settling of disputes between the assessees and the Revenue. The Income-tax Settlement Commission (the “Commission”) is one of the most powerful commissions under Direct Tax laws.

Section 245B(3) of the Income-tax Act (the “Act”), in express terms, requires the Central Government to appoint the Chairman, Vice-Chairman and its other members “from amongst persons of integrity and outstanding ability, having special knowledge of, and, experience, in problems relating to direct taxes and business accounts”.

Unfortunately, at present, there is no transparency in the appointment of the Members of Settlement Commission. In the case of appointment of Members of the Income-tax Appellate Tribunal (the “ITAT”), applications for the posts of Members of the ITAT are invited from professionals and Commissioners of Income-tax who are selected by the committee headed by the senior most Judge of the Supreme Court, the Law Secretary and independent professionals (Additional Advocate General or member of the Law Commission) and the President of the ITAT.

Dr. Vijay Kelkar’s Committee recommended instituting transparent procedures for the appointment of Members and Chairman of the Central Board of Direct Taxes [(2012) 258 ITR (Journal) 1 (45)]. We are of the opinion that the appointment of Members of the Commission, being a quasi-judicial body, must be done in the most transparent manner possible.

The Federation conducted a survey on various issues – including the appointment of Members of the Commission – relating to tax administration, the findings of which were released at the 12th National Convention at Mumbai on 24-12-2012 (Souvenir, P. No. 149). About 97% of the professionals who were surveyed, opined that the Government should appoint at least few Members from the profession.

In order to achieve the desired end in settlement proceedings, it is imperative that the Benches of the Commission consist of persons of diverse backgrounds. The ideal combination of a Bench would be the constitution of a Member each from the Department, the legal profession and the accountancy profession.

The Members should ideally have a tenure of at least five years and the Chairman, of at least two years, so that she or he can take important decisions relating to the regulation of its procedures.

3. Amendments to the tax law

a) Appeals to the Tribunal

One of the suggestions made by professional organisations is that all the orders passed must be made appealable. This will save time and amount spent only in deciding whether an order is appealable or not. There are a number of orders of the Commissioners of Income-tax against which no appeal can be filed. E.g. orders under section 264, 273A, waiver of interest charged under sections 234A, 234B, and 234C, orders under section 179, denial of approval u/s. 10(23C) and other approvals by Chief Commissioner, etc.

The only remedy available to the taxpayer is to approach the High Court in its writ jurisdiction. A simple amendment in the Income-tax Act may be made stating that all orders of the Chief Commissioner, Commissioner and Commissioner (Appeals) are appealable to the Tribunal. This would save substantial amount of time of the higher judiciary and the taxpayers would get speedy justice from the Tribunal.

b) Amendment to section 255(3) of the Income-tax Act, 1961 to the jurisdiction of the Single Member Bench

As per section 255(3) a single Member can hear the appeal if the assessed income does not exceed ` 50 lakh. It is desired that instead of the assessed income being the threshold for the matter to be heard by a single member, the tax in dispute may be made the threshold. A threshold amount of Rs 35 lakh for tax in dispute, Rs 15 lakh for penalty and another appropriate amount for the interest amount may be made.

This will trigger an increase in disposal of matters where the penalty amount is less or the interest amount is less without causing much burden on the Division Bench.

c) Direct appeal to the Supreme Court to attain finality on important issues

Section 257 of the Income-tax Act provided for direct reference to Supreme Court under old provision of reference. No such provision is incorporated after the insertion of section 260A. The Income-tax Appellate Tribunal refers the matters to Special Bench when there are conflicting decisions of various Benches.

In the meantime, one of the High Courts may have taken a contrary view. In such a case the decision of High Court will be binding upon the various Tribunals.

Though the Income–tax Act is an all India statute, the Tribunal sitting in a particular State is bound by the decision of respective High Court of the particular State. This brings uncertainty in tax law.

To avoid all these controversies, the Tribunal may be given power to refer the matter to Supreme Court either of its own, or upon an application made by the assessee or department.

If this process is followed, a certain degree of certainty will be introduced in tax law which will also help in reducing the pendency of cases before various High Courts and finality shall be attained on some of the important issues within a reasonable time.

d) Mechanism for effective consultation before legislation is introduced.

It may be desirable that, before introduction of new legislation, consultations may be held with various State Bar associations. Such a practice in respect of all Central tax laws would help in bringing stability and transparency in tax laws. Proper and timely consultations may also help in avoiding subsequent challenges to the viruses of the legislation.

e) Accountability in tax administration

Due to lack of accountability on the part of Assessing Officers, it is common to find additions being made for namesake, knowing well that they may not withstand judicial scrutiny.

In order to keep a check on such frivolous additions, Dr. Raja J. Chelliah, in his report [(1992) 197 ITR 177 (St) (257) Para 5.9] suggested that ways must be found to hold the Assessing Officers accountable for kinds of assessments they make. He suggested as follows:

The Assessing Officers should be made accountable for their actions by being blamed for raising demands which are not upheld by a reasonable figure, say 50 per cent, the officer should be given a black mark and reprimanded. On the other hand an Assessing Officer should be protected and defended if he has observed instructions of the Board and followed the Court rulings even though audit might raise objections about his actions.

Bringing in accountability in the tax administration is the first step in reducing avertable litigation and would benefit the honest tax payers of the country.

Thought for Consideration: The problem of pendency in tax appeals that is plaguing the High Courts and the Supreme court can be reduced considerably if the Judiciary, Ministry of Finance, Ministry of Law and Justice, the Tax Bar and Tax Administration can come together and draft the short term plan and a road map for the long term.

By the time we celebrate 75 years of Independence, at least in tax matters, the aim should be that assessees can get finality within two years of the assessment. Readers are requested to send their objective suggestions which can help the AIFTP to prepare the discussion paper for presenting to the Government for their consideration.

Dr. K. Shivaram
Editor-in-Chief AIFTP Journal

Reproduced with permission from the AIFTP Journal, October 2018
13 comments on “How To Improve India’s Legal System? Professionals Must Offer Suggestions To Chief Justice Ranjan Gogoi
  1. Ramasamy Ulaganathan says:

    i) In many cases we have seen that the AOs while passing OGE to CIT(A) order / ITAT’s order do not obey the directions orders of the CIT(A) or ITAT on the pretext that it has been decided to file an appeal or filed appeal to the ITAT or High Court against the CIT(A)/ ITAT’s order . Even though operative portion of order was not stayed by the Higher Court, AO’s denied to follow the Order given by the CIT(A)/ ITAT. This eventually lead to Second level of litigation for the assessee.

    In the past, even though various Courts including Hon’ble Supreme Court raised serious concern on this issue. It is become a casual approach of the AO to disobey the Jurisdictional ITAT order and even some cases High Court Order on the pre text that SLP filed before Supreme Court and appeal pending before the Supreme Court.

    In some case, it is very strange that Revenue even file appeal for the matter which are already settled by the Jurisdictional High Court or Supreme Court.

    Merely because revenue department facing revenue pressure, they can’t take Judicial system and geniune asseesse for granted and waste everyone valuable time and money. If revenue continue this practice, this will not only lead to adding huge volume of cases, assessee will lose the trust in the Indian judicial system itself.

    I request you to make appropriate recommandation before the respective Govt. fourm to change this and bring some heavy penalty on officers who are not following the judicial discipline.

  2. Dr. Ashok Saraf Sr. Advocate National President says:

    23rd day of January, 2019
    To,
    Justice Sri P.P. Bhatt,
    Honourable President,
    Income Tax Appellate Tribunal
    Pratishtha Bhavan, 4th Floor,
    101, M. K. Road
    Mumbai – 400020,

    Respected Sir,

    Sub: Suggestions for better administration of Appellate Tribunal

    Sir, I would take this opportunity to wish you a Happy and Prosperous New Year.

    All India Federation of Tax Practitioners (AIFTP) is an Apex body of Tax Practitioners of India. It has more than 7500 members across the country and 150 associations as its members. One of the main object of the Federation is to make representations for better administration of tax laws.
    Sir, I am making this representation on behalf of the All India Federation of Tax Practitioners for achieving fully systematic and better administration of the Appellate Tribunal. Our suggestions are discussed as under:
    1. Selecting the new Members for the ITAT,
    1.1. A case study may be given to the candidates and they may be requested to draft the order;
    1.2. The Selection Committee may consider getting information from the senior members of the Tax Bar of respective places, which may also help in knowing about the integrity of the candidates from the respective places;
    1.3. The professionals, who are practicing from their respective places, if selected may not be posted in the places where he or she was practicing. It is desired that the same principle may also be applied to the Departmental Officers, who are selected for the post of Accountant Members.

    2. Before newly appointed ITAT Members start sitting on benches, there should be an orientation programme undertaken for them whereby training is provided to them for functioning as Tribunal members and also provide knowledge as to TP/ IT issues. This will help in reducing pendency.

    3. It is seen that many times new members start sitting on the benches and are allotted various heavy matters to pass orders. It is suggested that senior members may discuss the matter and guide the junior members before allotting matters to them. Apart from this many times it is seen that the division bench functions like a single member bench. Further a member simply signs the order without application of the mind only for the reason that he/she is not the author of the order and may not want to take conflicting views. This defeats the basis of having a division bench and having specialised members in the field of law and accountancy. Such a situation needs to be avoided.

    4. At present, there is not much assistance available to the Tribunal Members for performing their functions. There should be a qualified assistance provided to them, as is available in the High Courts/other Tribunals. Interns from law school could be appointed as “Legal Assistants” for a minimum period of 15 months. This would serve dual purpose. It would be cost effective as well as 15 months period would be a good time to train them and utilize their services. From the students perspective they would have a better understanding of the working/functioning of the court and laws which make them better professionals.

    5. Further the members are given a target of 50 orders per month which creates unnecessary pressure on the Members, which forces them to apply short cuts and pass short orders instead of well-reasoned orders. Many times the orders are having spelling and grammar mistakes which tarnishes the image of the Tribunal. Further this also affects health of members, who have been burdened with so much work and to further stay away from their home town and family.

    6. Priority should be given to Special bench cases/Third member cases. Where a request for special bench is made before the Tribunal, then such decisions should be taken on priority basis and matter should also be decided within a frame of 6 – 9 months from the date of filing. Also, in cases where reference is made to the Third Member in case of conflicting views of the Bench, then such matters should be fixed and disposed-off in 6-8 months.

    7. It is suggested that double shift of benches (i.e. combined benches) should be avoided as far as possible as lot of matters get adjourned for want of time. Further benches waiting for first available member should also be avoided.

    8. The Tribunal may consider sending notices through email and sms. It is suggested that at the time of appeal filing email id and mobile number be asked and notice for hearing can be issued through email by registry in addition to sending physical notices. Over a period of time, looking at response, registry may consider whether to discontinue sending notices physically.

    9. There is urgent need for total computerization of entire functioning of the Tribunal, across the country.

    10. All the orders of ITAT should be compulsorily uploaded on the website (ITAT.nic.in). There is a persistent lag on this front. Stay orders and miscellaneous application orders are completely left out. All the orders should be uploaded within 3 working days from the date of pronouncement. Further at present it is seen that ITAT orders for recalled matters, or matter that having been remanded by High Court or third member orders, are not getting uploaded on the website (as there are multiple number of orders of same appeal numbers). A provision should be made to upload more than one order for same appeal numbers.

    11. Stay orders
    Many times stay orders are delayed and in the meanwhile department takes coercive actions. Hence it is suggested that stay orders be passed and be uploaded on the website on the same day. If the matter is adjourned and interim order is passed, then it may be noted in the proceeding sheet and the representatives be allowed to take the copy of the proceedings sheet.

    12. Pronouncement of orders
    Pronouncement of orders is not a mere procedural formality. Many times order is not even pronounced in open court and is pronounced in chambers. The causelist does not list each and every case of pronouncements, which otherwise is mentioned in the orders. It also happens that decision/view is pronounced at the time of hearing, however the ultimate order is completely different. Hence it is requested that procedure of pronouncements may be followed in letter as well in spirit.

    13. Discharging the board
    In High Courts, if a matter which is being heard is likely to take considerable time, rest of the Board is discharged. It is suggested that a similar practice be adopted in Tribunal.

    14. E-bench of Tribunal
    The Income-tax Appellate Tribunal had started the e-Court at Mumbai through which the matters of Nagpur were heard by members sitting at Mumbai. The experience has been very good and both the tax payers and the Department have found the functioning of this bench satisfactory. Request that it may be started again.

    I request your Honour to kindly consider the afore-mentioned suggestions.

    Thanking you.
    For All India Federation of Tax Practitioners

  3. Dr. Ashok Saraf Sr. Advocate National President says:

    Dated: – 24th day of January, 2019
    To,
    Sri, Piyush Goyal
    The Hon’ble Finance Minister
    Ministry of Finance,
    Government of India, North Block,
    NEW DELHI 110001

    Sub: Suggestions relating to Income-tax Act and reduction of
    tax litigation.

    Respected Sir,

    I would take this opportunity to wish you a Happy and Prosperous New Year.

    All India Federation of Tax Practitioners (AIFTP) is an Apex body of Tax Practitioners of India. It has more than 7500 members across the country and 150 associations as its members. One of the main object of the AIFTP is to make representation for better administration of tax laws.
    Sir, AIFTP has already sent detailed suggestions earlier. In this presentation AIFTP is restricting the suggestions only to issues relating to better tax administration, dispute resolution and appellate proceedings. Our suggestion are divided in to, three parts i.e.
    I. Conceptual;
    II. Specific;
    III. Procedural

    These are discussed as under:
    I. Conceptual

    1. Ombudsman :
    The Concept of income tax ombudsman was introduced to redress public grievances and improve tax payer service. Income tax ombudsman guidelines were issued in 2010. Though it has been around 10 years, the outcome has hardly been satisfactory. Most of the times, the chair is vacant as no appointments are made. As per the Guidelines an ombudsman should have been serving officer preferably from IRS (Income tax). According to us, ombudsman should be an independent person and could be a retired ITAT member.

    The guidelines also define the “income tax authority complained against” as junior most income tax officer. Many times income tax officers act as per the directions of their seniors and hence it should include all officer below Commissioner level.

    The guideline further states that ombudsman would be located at various locations. Instead of that Ombudsman can be centrally located and all applications and documents may be allowed to be filed online. The ombudsman need not necessarily be located at several places but can use technology to their advantage. This would also reduce costs.

    The Guidelines further state that award shall be binding on the department only if the complainant furnishes its acceptance in full and final settlement of his complaint. This creates unnecessary burden and hardship to the complaint. It has to be binding on the department irrespective of complainant accepting or not submitting its acceptance.

    The Ombudsman has to report to Secretary, Department of Revenue, GOI and Chairman CBDT for appropriate actions against erring officials. However there is no statistics as to what actions have been taken after such reports. If not individual names, atleast quarterly statistics should be made public, which may act as a deterrent for erring officials and may reduce malpractices.

    It is also seen that there are various parallel procedures which are in place simultaneously. For example there is a Grievance Redressal Mechanism, there are separate toll free numbers, there is Ombudsman system. This creates lots of confusion and hence it should be merged under one roof. There has to be uniform system across country.

    2. Settlement Commission : Transparency in appointment of Members of Settlement Commission – Professionals be appointed
    Income-tax Settlement Commission which was established in the year 1976 to expeditiously settle disputes between the assessees and the Revenue. The Income-tax Settlement Commission (the “Commission”) is one of the most high-powered commissions under Direct Tax laws. Section 245B(3) of the Income-tax Act (the “Act”), in express terms, requires the Central Government to appoint the Chairman, Vice-Chairman and its other members “from amongst persons of integrity and outstanding ability, having special knowledge of, and, experience, in problems relating to direct taxes and business accounts”.

    Unfortunately, at present, there is no transparency in appointment of the Members of Settlement Commission. Antithesis to this is the manner of appointment of Members of the Income-tax Appellate Tribunal (the “ITAT”). The applications for the posts of Members of the ITAT are invited from professionals and Commissioners of Income-tax who are selected by the committee headed by the senior most Judge of the Supreme Court, the Law Secretary and independent professionals and the President of the ITAT.

    Dr. Vijay Kelkar’s Committee recommended instituting transparent procedures for appointment of Members and Chairman of the Central Board of Direct taxes [(2012) 258 ITR (Journal) 1 (45)]. We are of the opinion that the appointment of Members of the Commission, being a quasi-judicial body, must be done in a manner as transparent as possible. It can be similar to that of the Tribunal and there is no reason to deviate from a well-established procedure. This will help gain confidence of the taxpayers in this Institution.

    AIFTP conducted a survey on various issues – including the appointment of Members of the Commission – relating to tax administration, the findings of which were released at the 12th National Convention at Mumbai on 24-12-2012. (Souvenir, P. No. 149). 97% of the professionals surveyed opined that the Government should appoint at least few members from the profession. In order to achieve the desired results in settlement proceedings, it is imperative that the benches of the Commission consist of persons of diverse backgrounds. The ideal combination of a bench would be a Member each from the Department, law profession and accountancy profession. The Members should ideally have tenure of at least five years and the Chairman of at least two years, so that he/she can take important decisions relating to regulation of its procedures.

    There ought to be a mechanism wherein, if it is found that a Member has compromised his integrity, he or she should be removed promptly following due process of the law. Further as per the amended Service Rules applicable to the Members of the Customs, Excise and Service Tax Appellate Tribunal and the ITAT, a Member cannot practice before the same forum after retirement. Introduction of such a provision for the Members of the Commission would undoubtedly elevate the stature of the Institution.

    3. Advance Ruling for taxation – scope may be extended to Residents by giving power to Income Tax Appellate Tribunal

    One of the very important provision in the Maharashtra VAT legislation is the provision for Advance Rulings on the interpretation of any provision of the Act, Rules or Notification in respect of a transaction proposed to be entered into by any registered dealer even though such question has not arisen in any proceedings. The Advance Ruling is given by the Bench consisting of three members of the Sales Tax Tribunal, i.e. Chairman, senior Practitioner nominated by the President of the Tribunal and an officer of Sales Tax Department not below the rank of Jt. Commissioner nominated by the Commissioner of Sales Tax.
    If similar provision is introduced in the Income tax Act, for all residents, litigation can be substantial reduced and tax payers will know the tax liability. Federation is of the view that the Income tax Appellate Tribunal is more competent to decide the issues relating to Advance Rulings. It is therefore, suggested that in respect of residents the power and authority for advance rulings may be given to the Income tax Appellate Tribunal.

    4. Arbitration in tax matters (Lok Adalat)
    The Government may consider the proposal of constituting a committee consisting of representatives from legal and accountancy profession and from the tax department of the rank of Principal Chief Commissioner of Income-tax for arbitration in tax matters. The assessee may refer the matter to such committee within 30 days of receipt of the order from the assessing officer and the committee should pass an order within six months from the receipt of application. The order passed by such committee may be made binding on both the parties. To begin with the matters like technical defaults, refunds, etc. may be referred for resolution. The concept of Lok Adalat may be introduced. The Government may consider the services of retired members of Tribunal. The proposal will benefit the tax payers as well as the tax department.

    5. E-bench of Supreme Court can be an effective alternative for having regional benches of Apex Court. E-Bench of Apex Court will help render speedy justice to the litigants thereby saving huge cost incurred on travelling back and forth to New Delhi

    A common man of our country cannot even think of approaching the Apex Court for justice as it is beyond his reach. One can imagine how expensive it would be for the citizens to approach the Supreme Court for justice and thereby constitution of an e-bench of the Supreme Court is the need of the hour. The hearing of a matter before the Apex Court can be done by linking various High courts and affording facilities for arguing the matter before the Apex Court from the respective High Courts. An e-bench of the Supreme Court can take up State wise matters, e.g. one day could be for matters of Mumbai, another day could be for matters from Chennai or other places, etc. Initially, an option may be given to the parties for hearing the matters through e-Bench or regular Bench. The Income-tax Appellate Tribunal has started the e-Court at Mumbai through which the matters of Nagpur are heard by members sitting at Mumbai. The experience has been very satisfactory and both the tax payers and the Department have found the functioning of this bench satisfactory. The e-Bench of Supreme Court may initially be started with SLP, relating to direct and indirect tax matters. One Court room of the respective High Court may be converted in to an E-Court.

    6. Setting up of special courts to deal with prosecution in relation to Direct and Indirect taxes

    Under the present system, it takes more than 20 years to decide prosecution matters relating to Direct Taxes. Hence, the deterrent provisions fail to achieve the desired object due to the delay in disposal of cases by the trial courts. Income-tax being a specialized subject, the prosecution cases may be heard by a special court of two judges, similar to the Tribunal, and, thereafter, an appeal may lie directly to the Jurisdictional High Court. This will help in speedy disposal of matters. In fact, speedy prosecution will have great deterrent effect.

    7. Accountability in tax administration

    Due to lack of accountability on the part of Assessing Officers, it is common to find additions being made for name sake only knowing well that the same may not withstand judicial scrutiny.
    In order to keep a check on such frivolous additions, Dr. Raja J. Chelliah, in his report [(1992) 197 ITR 177 (St) (257) Para 5.9] suggested that ways must be found to hold the Assessing Officers accountable for kinds of assessments they make. He suggested as follows:
    “The Assessing Officers should be made accountable for their actions by being blamed for raising demands which are not up held by a reasonable figure, say 50 percent, the officer should be given a black mark and reprimanded. On the other hand an Assessing Officer should be protected and defended if he has observed instructions of the Board and followed the Court rulings even though audit might raise objections about his actions.”
    Bringing in accountability in the tax administration is the first step in reducing avoidable litigation and would benefit honest tax payers of the country.

    8. Return of Agricultural income
    In case where a person is claiming to be earning only exempt income say, for example, agricultural income, and, the receipt is, say, for example, above Rs. 10 lacs, he may be asked to file returns which will enable the department to find out whether the income shown is exempt income or from any other undisclosed sources.

    9. Independent Committee to suggest amendments in Tax Laws
    An independent Committee consisting of representatives from profession, tax administration, taxpayers, judiciary, etc. ongoing basis may scrutinise suggestions received from various bodies. After examining in detail, they may suggest amendments which should be made public and debated. If this process is followed, Federation is sure 90% of litigation will be reduced automatically.

    II. Specific

    1. Appeals to the Tribunal
    There are a number of orders of the Commissioners of Income-tax against which no appeal can be filed. E.g. orders under section 264, 273A, waiver of interest charged under sections 234A, 234B, and 234C, orders under section 179, denial of approval u/s. 10(23C) and other approvals by Chief Commissioner, etc. The only remedy available to the taxpayer is to approach the Jurisdictional High Court in its writ jurisdiction. A simple amendment in the Income-tax Act may be made stating that all orders of the Chief Commissioner, Commissioner and Commissioner (Appeals) are appealable to the Tribunal. This would save substantial time of the higher judiciary and the taxpayers would get speedy justice from the Tribunal.

    2. Single Member

    As per section 253(3), a single member of the ITAT can decide the matter if the assessed income is up to Rs. 50 lakhs. It is seen that many times the assessed income may be more than 50 lakhs but the disputed amount is less than 50 lakhs. Hence matters should be decided on the basis of disputed amount instead of assessed income.
    Further, in cases of penalties or interest, even if the amount in only Rs. 10,000/-, still it has to be decided by a division Bench. It is desired that an amendment may be made in the Act wherein, if the penalty or interest is up to Rs. 10 lakh, it may be decided by a single member of the ITAT, which will help in speedy disposal of the matters. It may also be considered that instead of “assessed income”, “tax / penalty / interest in dispute”, may be decided by the Single Member Bench.

    For appeals relating to tax deduction at source, if the amount of subject matter in dispute is less than Rs. 2 lakhs, the same may be heard by Single Member Bench.

    Sometimes even in cases where the loss assessed is more than Rs. 50 lakhs is heard by single member Bench. The law may be amended so that, when the loss assessed is more than Rs. 50 lakhs, the matter may be referred to division Bench

    3. Direct appeal to the Supreme Court to attain finality on important issues
    Earlier Section 257 of the Income-tax Act provided for direct reference to Supreme Court, which was applicable to orders passed before 1-10 1998. No such provision is incorporated after the insertion of section 260A. The Income-tax Appellate Tribunal refers the matters to a special bench when there is a conflicting decision of a co-ordinate bench. In the meantime one of the High Courts may have taken a contrary view. In such a case the decision of High Court will be binding. Though the Income–tax Act is an all India statute, the Tribunal sitting in a particular State is bound by the decision of respective High Court of a particular State. This brings uncertainty in tax law. To avoid all these controversies, the Tribunal may be given power to refer the matter to Supreme Court either on its own, or by an application made by the assessee or department. If this process is followed, there will be certainty in tax law which will also help to reduce pendency of cases before various High Courts and finality may be attained on some of the important issues within a reasonable time.

    4. Appealable orders S. 246A
    Every order passed by Income tax authority, i.e. Assessing Officer / tax recovery Officer, etc. which has the effect of adversely affecting an assessee in any manner may be made appealable before the Commissioner (Appeals)

    5. Time limit for passing orders by CIT(A)s
    Though there are time limits for AO to pass order, there is no time limit for appellate authorities. Hence there should be some time limit to pass orders for CIT(A) and also there has to be time limit for sending remand report to the CIT(A). The CIT(A) may be directed to pass order with in prescribed time, from conclusion of the hearing, not later than 90 days from the end of the month of the hearing. Concept for time barring can be brought at CIT(A) level stage as well. This concept is already prevailing under the DRP route and can be brought for CIT(A) route as well.

    III. Procedural

    1. Monitoring tax appeals – National tax litigation Cell

    Though the I.T. Department is the single biggest litigant in the higher judiciary across India, it appears that the Income-tax Department does not have a centralized wing to effectively monitor its appeals from the stage of inception until its final disposal. It is advisable for the Department to have an independent National Tax Litigation Cell to monitor the tax appeals before various High Courts and Apex Court. This will help the Department in quantitative and qualitative disposal.

    2. Acceptance of orders of High Courts
    Earlier, whenever the Department would accept a decision of a particular High Court on interpretation of law, the Central Board of Direct taxes used to issue a circular stating that interpretation has been accepted. This practice seems to have been discontinued now. If this process is adopted and instructions /circular are published, litigations shall be reduced considerably. Hon’ble Bombay High Court in CIT v. TCL Ltd. (2016) 241 Taxman 138 (Bom.)(HC) has passed a detailed order asking the Chief Commissioner of Income tax to post details of the matters admitted before the Bombay High Court, matters accepted by the Revenue, etc. online. Though the assurance was given by filing an affidavit, however, no action seems to have been taken by the tax administrative authorities in this regard.

    3. Mechanism to discuss and take action on suggestions made by the Apex Court, High Courts and other Judicial authorities

    It has been observed that various High Courts make several recommendations to CBDT to look into certain matters and take appropriate measures. However, it appears, there is no mechanism to find out whether the issue is actually brought to the notice of the Ministry concerned and what action has been taken. It is therefore, advisable to put up such suggestions on their website for public domain and after considering various suggestions, appropriate action can be taken. This will bring transparency in the functioning of the Ministry and will also bring accountability.

    4. Instructions and statements
    All Instructions may be made available to the public. As soon as statement of an assessee is taken in course of search and survey, a copy thereof may be made available to the deponent. In search cases, the appraisal report may also be made available to the assesses. This will bring more transparency and also accountability.

    5. Appeal effects are not given in time
    It is too difficult to get timely appeal effect, though section 153 provides for the same. It is desired that there has to be internal reporting system to monitor whether appeal effect has been given or not.

    6. Proper monitoring of rectification application
    There should be proper monitoring of all Rectification Applications filed. There should be proper reporting of the number of applications filed, disposed and pending disposal and concerned officer should be answerable for long pending rectifications.

    7. Prosecution and compounding fee
    In number of matters, notices for prosecution are issued though the matters are pending before fist appellate authority and in some of the cases, even penalty appeals are pending before the Tribunal. This has resulted in unnecessary harassment to honest tax payers which may be avoided. Compounding Fee may be liberalised. The matters pending before the Courts, which are pending for more than 15 years, may be compounded by taking nominal compounding fees.

    8. Tax deduction at Source.
    At present there are more than 25 sections under which the assessee is required to deduct tax at source and file the returns Many a times there is no clarity on various issues. It is desired that one may consider having concept of passbook and only one return for all Tax deducted at source. The assessee may deposit the amount as advance or may adjust against various taxes to be deducted. This will help to reduce the compliance provisions.

    9. Tax Benches in High Courts

    It may be noted that the pendency before ITAT is only 90000 appeals and the matters are heard within two years of filing of appeals and in some of the Benches within six months of filing of appeals. However, in some of the High Court’s due to shortage of judges the tax matters are not heard within reasonable time. In cities like Mumbai for admission, it takes around two to three years and if admitted for final hearing, it takes another 10 years. It is desired that the High Court should have a continuous and dedicated tax bench for the tax litigation. If revenue prepares the list of pending cases which are admitted and to be admitted and the questions of law involved, it may help quick disposal of pending matters before various Courts and also Apex Court. In tax matters it is the department which is always a party either as petitioner or respondent hence, it may be easy to prepare the list. Once the list is prepared, it can be published in the website which can also help the assesses as well as the department. This project can be done with the co–operation of the tax Bar of the respective State. All India Federation of Tax Practitioners, will be ready to help the tax administration, if an opportunity is given to them.

    I therefore request you to kindly consider the afore-mentioned suggestions.

    With sincere regards,

    Yours sincerely,

  4. Dr. Ashok Saraf Sr. Advocate National President says:

    Dated: 23rd of January,2019
    To,
    Hon’ble Mr. Justice Ranjan Gogoi
    The Chief Justice of India,
    Supreme Court,
    New Delhi.

    Sub: Suggestions to reduce tax litigation before various Courts.

    My Lord,

    I would take this opportunity to wish you a Happy and Prosperous New Year.

    All India Federation of Tax Practitioners (AIFTP) is an Apex body of Tax Practitioners of India. It has more than 7500 members across the country and 150 associations as its members. One of the main object of the AIFTP is to make representations for better administration of tax laws.
    My Lord, for reducing the tax litigation, I request your lordship to consider for following suggestions:
    1. Tax Benches in High Courts
    It may be noted that the pendency before ITAT is only 90000 appeals and the matters are heard within two years of filing of appeals and in some of the Benches within six months of filing of appeals. However, in some of the High Court’s due to shortage of judges the tax matters are not heard within reasonable time. In cities like Mumbai for admission, it takes around two to three years and if admitted for final hearing, it takes another 10 years. It is desired that the High Court should have a continuous and dedicated tax bench for the tax litigation. If revenue prepares the list of pending cases which are admitted and to be admitted and the questions of law involved, it may help quick disposal of pending matters before various Courts and also Apex Court. In tax matters it is the department which is always a party either as petitioner or respondent hence, it may be easy to prepare the list. Once the list is prepared, it can be published in the website which can also help the assesses as well as the department. This project can be done with the co–operation of the tax Bar of the respective State. All India Federation of Tax Practitioners, will be ready to help the tax administration, if an opportunity is given to them.

    2. E-bench of Supreme Court can be an effective alternative for having regional benches of Apex Court. E-Bench of Apex Court will help in rendering speedy justice to the litigants, thereby saving huge cost incurred on travelling back and forth to New Delhi.

    A common man of our country cannot even think of approaching the Apex Court for justice as it is beyond his reach. One can imagine how expensive it would be for the citizens to approach the Supreme Court for justice and thereby constitution of an e-bench of the Supreme Court is the need of the hour. The hearing of a matter before the Apex Court can be done by linking various High courts and affording facilities for arguing the matter before the Apex Court from the respective High Courts. An e-bench of the Supreme Court can take up State wise matters, e.g. one day could be for matters of Mumbai, another day could be for matters from Chennai or other places, etc. Initially, an option may be given to the parties for hearing the matters through e-Bench or regular Bench. The Income-tax Appellate Tribunal has started the e-Court at Mumbai through which the matters of Nagpur are heard by members sitting at Mumbai. The experience has been very satisfactory and both the tax payers and the Department have found the functioning of this bench satisfactory. The e-Bench of Supreme Court may initially be started with SLP, relating to direct and indirect tax matters. One Court room of the respective High Court may be converted in to an E-Court.

    3. Elevation of members of Income Tax Appellate Tribunal to High Court
    India’s Income Tax Appellate Tribunal (ITAT) was set up on 25 January 1941, and it was the first experiment in Tribunalization in the history of India. It is considered to be a very successful experiment in Tribunalization and is often cited to justify more steps in this direction. However, till date very few Members of the ITAT have been elevated to the High Courts. Deserving Members of the ITAT due to their specialised knowledge and experience in ‘taxation’ and ‘commercial transactions’, would be able to decide the tax matters speedily. This will also attract young bright lawyers to join the Income Tax Tribunal. My Lord, Further, the lawyers practising on the taxation side in the High Courts may be considered for elevation as Judges of the High Court for speedy disposal of the tax litigations.
    I request your Lordship to kindly consider the afore-mentioned suggestions.

    With sincere regards,
    Yours sincerely,

  5. Arvind Shukla, Advocate, Varanasi says:

    1. That more of distinguished and experienced ITAT members should be elevated to the High Court this will vastly improve the quality of tax benches and will also ease the early disposal of tax appeals. Please appreciate that tax matters have cumulative year to year effect and hence early finalisation of such matters will benefit both the department as well as the assessees. It may also be appreciated that tax laws are perhaps more complex than other civil and criminal laws and need more in-depth study for comprehensive judicial analysis. With all due respect to the learned judges of the Hon’ble High Courts and Supreme Court often tax matters come before judges without taxation background causing delays and sometimes inappropriate judgement s.
    2. Further for prosecution cases under tax laws the present system has special Chief Judicial Magistrates. It is suggested that the powers to try such cases may be shifted to ITAT members. The exposure at ITAT makes the members tax experts besides many of the incumbents are from the judiary itself. This will not only improve the quality of judgement in prosecution cases with quicker disposals besides eliminating the chances of incorrect judgement. Here I would like to quote the facility of lower judiciary with direct examples. The settled position of law is that where the penalty or tax or both have been finally deleted in appeal the prosecution loses ground and is liable to be quashed. In Varanasi alone the Spl CJM convicted a person who had won his appeal and the addition itself was deleted in 2002. Following this decision, which is apparently perverse at least 20 convictions have been made by Spl CLM Varanasi( with several new incumbants in office) and the process is still going on. The judges do not want to take risk of going against judicial discipline notwithstanding the fact that they agree with the concept that where the tax or penalty or both have been deleted there is no scope for continuation of prosecution. Please imagine the plight of the helpless assesse having to undergo the rigors of jail, bail, high court appeal and heavy expenditure due to no fault on his part and the incorrect judicial orders. In order to avoid the misuse of courts and judicial process the cases should be posted before judges actually well read and conversant with tax laws. And for this there can be no better proposal than to have members of ITAT and CESTAT as CJM for prosecutions cases under tax laws.
    3. The concept of time barring must be attached with all proceedings at least at the first stage. This will definitely drastically reduce the infinite delays in disposal of cases.

  6. Senior Advocate from Delhi says:

    1. It is desired that the Benches which are functioning may be notified at least 15 days in advance in respect of all the Zones;
    2. As far as possible, Double shifts for Members may be avoided;
    3. Matters referred to Special Benches may be published on the website of the ITAT and in case such a matter is adjourned, the same may also be published;
    4. As far as possible, part-heard matters may not be kept along with miscellaneous applications on Friday;
    5. Hearing of miscellaneous applications may be informed as soon as the application for miscellaneous application is filed

  7. Shri Y. P. Triverdi, Sr. Advocate and Former Member of Parliament says:

    The ITAT Bar Associations’ Co-Ordination Committee may consider my suggestions, which are as under:-
    • While selecting the new Members for the ITAT, a case study may be given to the the candidates and may be requested to draft the order;
    • The Selection Committee may consider getting information from the senior members of the Tax Bar of respective places, which may also help in knowing the integrity of the candidates from the respective places;
    • The professionals, who are practicing from their respective places, if selected are not posted in the places where he or she was practicing. It is desired that the same principle may also be applied to the Departmental Officers, who are selected for the post of Accountant Members.

  8. ITAT Bar Associations' Co-ordination Committee says:

    You may be aware the Govt. of India has appointed Hon’ble Mr. Justice P. P. Bhat as President of the ITAT. Govt. has also appointed seven Vice-Presidents.

    We desire to make objective suggestions for better administration of justice before the ITAT and also suggestions to reduce the pendency of tax matters before various forums. We are requesting you to send your valuable suggestions on or before 25th November, 2018 for enabling us to prepare a discussion paper which we intend to present to Hon’ble Chief Justice of India, Hon’ble Finance Minister, Hon’ble Law Minister and Hon’ble Mr. Justice P. P. Bhat, President of the ITAT.

    We desire that the suggestions can be on following:-
    (a) Conceptual
    (b) Amendment in law , and
    (c) Adminstrative
    (d) General

  9. PRV Raghavan says:

    Dear Mr. Shivram,

    In my memory, Dr. B.P. Saraf was Former Chief Justice of High Court of Jammu & Kashmir and former Judge of the Bombay High Court and the Gauhati High Court and was not Chief justice of India.

  10. Subramaniam S says:

    The SC and the CJI should focus on

    1) reducing the number of adjournments to max 3 – taking into account the present day techno evolution to submit documentary evidences, within shorter time duration

    2) not allowing or rejecting cases on Policy decisions of the Govt of the day, more so on matters like Bus/Train fare increase, Entry fees to various places including places of worship, etc – this unnecessarily culminates into stopping these measures (which only the Govt can decide, according to their executive powers) by political ‘activists’ and opponents,coupled with damaging the benefits to a large extent

    3) not allowing frivolous PILs (such the present CBI matter) which should be left at the discretion of the executive – else it becomes a way of life for each and every executive decision being subjected to and approved by the Judiciary, which was intended in our constitution

    4) once any ‘activist’ or’advocate’ or ‘policital party’ found to be guilty of false or unverified allegations and penalised by HC or SC, as the case may be – should be debarred from approaching the courts for atleast 3 years, as a punishment for their ‘misadventure’ or ‘forum shopping’ – right now activists like Prashant Bhusan uses the SC for his ‘forum shopping’ and frequently attacks it, with his daily-routine of frivolous PILs

  11. dn khanna says:

    Supreme Court should start afresh interpreting the provisions of the statue marrying with the changed environment in the society disregarding its earlier judgments as they were delivered in the social environment existed at that time. This will start giving directions to the lower judiciary to follow the suit; be it may the criminal jurisprudence more particularly the in the political-bureaucrats – criminals nexus.

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