New Rules For Appointment Of Tribunal Members Encroaches Upon Judicial Independence And Also Is Non-Compliant With The Guidelines Issued By The Supreme Court

The appointment of the Judges of Tribunal was regulated by the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 1963. The government replaced these rules with the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017 to incorporate changes in the qualification, salary, selection, appointment and other aspects of the appointment of judges to the ITAT and AAR.

The 2017 rules were challenged in the Supreme Court and were quashed by the Court. (Rojer Mathew v. South India Bank and Another, AIR 2015 SC 1571). The Court directed the Central Government to formulate new rules. Thus, the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2020 were notified by the Central Government. This article analyses the changes in the above-mentioned rules in context of the Income Tax Appellate Tribunal and the Authority of Advance Ruling.

A. Income Tax Appellate Tribunal

1. Eligibility Criteria

1.1. The eligibility criteria remain the same for the President and Vice-President across the 2017 and 2020 rules. While the 1963 rules and the 2017 rules have the same qualification requirements for a person to be appointed as a judicial member, 2020 rules have a modified the qualification criteria for the appointment of a judicial member. Earlier (1963 and 2017) a person who had held “judicial office” for 10 years was eligible. The 2020 rules have further narrowed the eligibility criteria. According to these rules, a person who has served as a district judge or additional district judge for 10 years. Any other judicial officer is not eligible under these rules. Secondly, a person who has practiced as an advocate for 10 years was qualified to be considered for this position (1963 and 2017). Now, the number of years of practice as an advocate have been increased to 25 years to be qualified to be considered for this position.

1.2. A person who has practiced as an CA for 10 years was qualified to be considered for appointment as Accountant member (1963 and 2017). Now, the number of years of practice as a CA have been increased to 25 years to be qualified to be considered for this position. Secondly, a person who had been appointed as a member of Indian Income Tax service Group A and served for 3 years as ACIT was qualified to be considered for this position (1963 and 2017). But the qualification criteria have been increased in the 2020 rules. Now, a person has to be appointed as a member of IRS (Group A) and should have held the position of PCIT for 2 years and has been involved in adjudicatory, judicial or quasi-judicial work. 

1.3. The modified criteria for the advocates and chartered accountants coupled with the short tenure and no scope of reappointment can be discouraging for the practicing advocates and CAs to leave their flourishing practice to become members for 4 years. Neither can they cannot practice before the ITAT thereafter, nor do they have reasonable chances of being appointed as High court judges. They do not have any incentive serve as a member in the ITAT. Further, the eligibility criteria for lawyers to apply for High Courts is 10 years practice in the High Court where a judge is appointed till the age of retirement. The standard being set at 25 years of practice for ITAT memberswith a short tenure of 4 years and no option of reappointment seems unreasonable. The minimum years of practice should be reduced back to 10 years. This will attract young lawyers to join the tribunal.

2. Retirement Age and Tenure

2.1. President

• The 1963 rules had specified a retirement age of 65 years, but no tenure was specified. Thus, a person appointed under the 1963 rules would serve in the capacity of president till the attainment of the age of 65 years.

• The 2017 rules specified a tenure of 3 years and the age of retirement was the same i.e. 65 years. A member would retire after 3 years or on the date of the attainment of age of 65 years, whichever is earlier.

• The 2020 rules increased the tenure to 4 years and the age of retirement to 70 years.The president appointed under these rules would retire either at the attainment of the age of 70 or at the completion of tenure of 4 years, whichever is earlier.

2.2. Vice-President

• The 1963 rules had specified a retirement age of 62 years, but no tenure was specified. Thus, a person appointed under the 1963 rules would serve in the capacity of vice- president till the attainment of the age of 62 years.  

• The 2017 rules specified a tenure of 3 years and the age of retirement was the same i.e. 62 years. A vice-president would retire after 3 years or on the date of the attainment of age of 62 years, whichever is earlier.

• The 2020 rules increased the tenure to 4 years and the age of retirement to 65 years. The vice- president appointed under these rules would retire either at the attainment of the age of 65 or at the completion of tenure of 4 years, whichever is earlier. 

2.3. Judicial Member and Accountant member

• The 1963 rules had specified a retirement age of 62 years, but no tenure was specified. Thus, a person appointed under the 1963 rules would serve in the capacity of member till the attainment of the age of 62 years.

• The 2017 rules specified a tenure of 3 years and the age of retirement was the same i.e. 62 years. A member would retire after 3 years or on the date of the attainment of age of 62 years, whichever is earlier.

• The 2020 rules increased the tenure to 4 years and the age of retirement to 65 years. The member appointed under these rules would retire either at the attainment of the age of 65 or at the completion of tenure of 4 years, whichever is earlier.

2.4. The Hon’ble Supreme Court explicitly stated in its decision in Rojer Mathew v. South India Bank and Another, AIR 2015 SC 1571and L. Chandra Kumar v. Union of India [ (1997) 3 SCC 261] that the term of the members of the tribunals should be “seven or five years subject to eligibility for reappointment for one more term”. The tenure of the members should be extended till the age of retirement for multiple reasons.

• Firstly, due to the specialized and technical nature of income tax it takes a longer period for a person appointed as a member to understand and master the duties as a member of the ITAT and after attaining such expertise it would be important for such a member to serve as a member of ITAT for its increased efficiency and productivity.

• Secondly, a longer tenure is required for the members of ITAT because the essential nature of ITAT is different from other tribunals. It is different simply by the reason that the administrative tribunals are established under Article 323 A of the Constitution and ITAT is amongst the specialized tribunals established under Article 323B. Further, ITAT is different in composition from other tribunals because of the requirement of appointment of the technical members for the adjudication process.

• Thirdly, the increased tenure will increase the chances of the member for appointment to the post of vice-president and hence, act as an incentive for the eligible people to serve as ITAT members.

2.5. The tenure basis appointment and the absence of reappointment clause was brought in the 2017 rules which were quashed by the Hon’ble Supreme Court in the Rojer Mathew case (Supra) and reinstated in the 2020 rules. In context of the tenure, the 2020 rules have incorporated mere surface changes and have failed to incorporate the guidelines of the Hon’ble Supreme Court in the Rojer Mathew case (Supra). The guidelines regarding tribunals have been suggested by the Hon’ble Supreme Court in various cases i.e. L. Chandra Kumar case (Supra) and Rojer Mathew case (Supra), but the legislation hasn’t incorporated the guidelines in the legislations made thereafter. According to the 1963 rules, which were in effect prior to the enactment of the 2017 rules, a member would be appointed till the age of retirement. The members should be appointed till the age of retirement as this will be good for the productivity and efficiency of the ITAT and will also be a great incentive for prospective candidates.

3. Search-cum-selection committee

3.1. The members of this committee included the Chief Justice of India (or a sitting Supreme Court judge appointed by him), the president of ITAT and the secretary of Ministry of Law and Justice.

3.2. The 2017 rules modified the members to be appointed in this committee. Separate members were to be nominated for determining the appointment of the President and the Vice-president. The number of members from the Executive have been increased in this committee, thus, increasing the government participation and control in the appointment process.

3.3. The 2020 rules have still retained the high number of members from the executive in the search-cum-selection committee.

3.4. There should be judicial dominance in the selection committee of the members for ensuring the independence of the judiciary. This non-interference of executive and legislation in the process of the appointment, transfers, etc. of the judiciary has been held to be a pre-requisite for ensuring judicial independence and hence, impartial decision making in various landmark decisions of the Hon’ble Supreme Court, which include but are not limited to, S.P. Gupta v. UOI [AIR 1982 SC 149]; Supreme Court Advocates-on-Record Association v. UOI[(2015) AIR SCW5457];  In re Special Reference 1 of 1998 (Procedure Regarding Appointment of Supreme Court and High Court Judges)[AIR 1999 SC 1]; Rojer Mathew (Supra) and L. Chandra Kumar (Supra). Further, the government is the biggest litigator in the cases before ITAT. Representatives of government participating in the process of the selection of the members, who would preside over the cases between the government and the assesses, would lead to a conflict of interest. Hence, the government should not be involved in the process of the selection of the members because justice should not only be done but should also be seen to be done. Thus, the search and selection committee should be comprised of judges only.

4. Salary

4.1. The salary of Rs. 80000/- per month (under 1963 rules) for the President has been revised and increased to Rs. 2,50,000/-per month. The same amount has been included in the 2020 rules as salary.

4.2. The salary of Rs. 80000/- per month (under 1963 rules) for the Vice-Presidents and Members has been revised and increased to Rs. 2,25,000/-per month. The same amount has been included in the 2020 rules as salary.

4.3. The new rules will not affect the salary, retirement age, tenure or any other thing covered under the rules for the president, vice-president and members. They will be governed by the rules under which they were appointed. The salary of the members is a part of the features recognized by the Hon’ble Supreme Court as a part of the aspects of the judicial appointments which should be free from/ should involve minimum government interference to ensure judicial independence in Rojer Mathew case (Supra). The funding of the tribunal should not be derived from the ministry it is attached to. The tribunal is under the Ministry only for administrative purposes and this should not affect the judicial wisdom of the tribunal. While the non-interference of the executive in the appointment and transfers of the judges ensures the individual independence of the judges to discharge their duties without fear or favor, the independent trust/ fund be setup for the purpose of finances of the tribunal will ensure the institutional independence of judiciary. {Supreme Court Advocates on Record Association and Another v. Union of India (2016) 5 SCC 1}.

5. Interpretation

5.1. The absence of Interpretation clause in the 2020 rules can be indicative of the fact that that in case of an ambiguity arising under these rules, the opinion of the Central Government will not be considered but judicial decision will be final.The absence of this clause in the 2020 rules implies that in case of any ambiguity in the interpretation of the rules, the decision of the court will be the deciding factor.

6. Savings Clause

6.1. The 1963 rules and the 2017 rules had a savings clause incorporated within them. This clause regulated the power of the government to make exceptions to these rules for a specific class of people such as scheduled caste, scheduled tribes and ex-servicemen.

6.2. The absence of the savings clause under the 2020 rules can be indicative of the fact that the reservations, in relation to the age limit and other concessions to the SC, ST and ex-servicemen will not be explicitly covered as exception under these rules. They might be covered under other constitutional provisions, but the statutory protection accorded to them under the earlier rules has been taken away due to the absence of the savings clause. This can adversely affect the independence and proper functioning of the judiciary because when the power of the government is regulated by a statutory provision, it can be limited to a great extent. But, in absence of the statutory regulation, the government can have unfettered powers to make any exceptions to the procedure laid down in the rules. Even if the power is limited by constitutional provisions, a great variety of the actions of the government can be sought to be justified under “reasonable restrictions” as it is a highly subjective standard. Thus, there should be a savings clause regarding the power of the government to make exceptions because it will allow the power of the government to be regulated. 

B. Authority on Advance Rulings

7. Chairperson

7.1. The people qualified to be appointed as the Chairperson have been reduced because the criteria laid down by the 2017 rules has been further refined by the 2020 rules. A person qualified to be appointed as a Supreme Court Judge, a person who has served as the Vice-Chairman, accountant member, law member of the AAR or a person having experience and specialized knowledge in specific areas useful for the AAR is no longer qualified to be appointed as the Chairman of AAR.

7.2. The removal of these persons from the list of eligible persons can adversely affect the efficient functioning of this forum as these people have experience and knowledge which can be immensely beneficial to the Tribunal.

8. Vice-Chairman
8.1. A person who is qualified to be a Judge of the High Court is no longer qualified to be appointed as the vice-chairman.

8.2. The qualification criteria for the officers form IRS has been raised by the 2020 rules. The requirement of been involved in adjudicatory, judicial or quasi-judicial work for three years has been increased. This is in consonance with the guidelines mentioned in various judgements as the technical members also need to have some experience in adjudication, judicial or quasi-judicial work, in addition to the technical expertise of the subject. 

9. Judicial Member

9.1. The members for Indian Legal Services are no longer eligible to be appointed as judicial members. Only a person who has served as a district-judge or additional district judge for 10 years is qualified to be appointed for this position. This is in compliance with the requirement of some experience in judicial, adjudicatory and quasi-judicial work as laid down in various cases.

9.2. However, the presence of the executive in the search-cum selection committee for the members adversely affects the judicial independence, the perception of justice and the faith in the judiciary as an impartial justice system. Thus, the search-cum-selection committee for the members should comprise of judicial members only.

In a nutshell, the 2020 rules are quite similar to the 2017 rules. The guidelines laid down by the Hon’ble Supreme Court regarding the procedure for qualifications, experience and other conditions for appointment to tribunals in the Rojer Mathew case (sura),R.K. Jain v. Union of India[(1993) 4 SCC 119], L. Chandra Kumar(supra), Madras Bar Association v. Union of India[(2015) 8 SCC 583] and Gujarat Urja Vikas Nigam  Ltd. v. Essar Power Ltd. [(2016) 9 SCC 103] have not been complied with by the government while framing the 2020 rules. These rules encroach upon judicial independence, separation of powers and are not in compliance of the separation of powers. They are in defiance of the guidelines laid down by the Hon’ble Supreme Court in the Rojer Mathew case (Supra) which are binding on the government. Thus, the requisite changes should be made to these rules or new rules in compliance with the guidelines should be formulated.

Annexure: Comparison of the provision of the rules for appointment of members across the years.