Dr. K.Shivaram Senior Advocate , Bombay High Court
A Tribute: 82 Glorious years of the Income tax Appellate Tribunal – Legacy and way forward.
January 25, 2023 will mark the 82nd Foundation Day of the Income-tax Appellate Tribunal (ITAT), the Mother Tribunal of our country. ITAT is one of the oldest Temples of Justice in our country. Older the temple, the greater is its sanctity and reverence. It is the strong foundation of this great institution which has made possible for it to retain the glory as one of the finest institutions of our country.
In the 82 years of ITAT, it has gained the confidence of both the tax payers and the Revenue authorities alike by rendering impartial decisions in a transparent manner. No other Tribunal in India has won such well-deserved popularity and confidence of the public. This was made possible due to the efforts of the earlier and present Hon’ble Presidents, Hon’ble Vice-Presidents, Hon’ble Members of the ITAT, proactive ITAT Bar Associations across the country and the Departmental Representatives who represent the Revenue before the ITAT.
The pendency of appeals as on December 31, 2022 is 39,000 cases whereas in the year 1989 it was 3,00,597. In most of the Benches, the assessee is able to get the justice from the ITAT within six months of filing of an appeal. When this great institution enters 82nd year, we as stake holders have to discuss on how to retain the glory of this institution and how we can further improve the justice delivery system by use of digitization and technology, so that a tax payer from the remote parts of our country can get justice at their door step. Hon’ble Dr. D.Y. Chandrachud, Chief justice of India while delivering the talk on inaugurating the Judicial Academy at Andhra Pradesh highlighted the use of digitalization, technology, and speedy justice and the duties & responsibilities of the judicial officers in the justice delivery system.
Tax Bar being one of the stake holders in the functioning of the ITAT, we thought to pen down few suggestions for debate and consideration. Suggestions are divided in to four parts (a) Expectation from the Bar, (b), Expectation from the Bench (c) Expectation from the Judiciary and (d) Expectation from the Legislature.
(a) Expectation from the Tax Bar.
1. Partnership among equals.
The role of the Bar in the administration of justice is no less than that of the Bench. A good Bar makes a good Bench. It is a partnership among equals. The Bar and the Bench are like two sides of the same coin. Both should have mutual respect and confidence in each other and only then can they play a proactive role to retain its distinctive quality as one of the finest institutions in this country and a model for other institutions to follow.
2. Culture of Chamber.
The Tax Bar of Mumbai has a great legacy, as when we started practice, we had the fortune of witnessing the legends of tax profession viz. Shri N.A. Palkhivala, Shri R.J. kolah, Shri S.P. Mehta, Shri. S.E Dastur, Shri Y.P. Trivedi, Shri V.H. Patil and many more. All these seniors were an institution by themselves. It may be heartening to note that the seniors referred above have trained more than 75 juniors to the tax profession. Many of them are designated Senior Advocates and are appearing across the country and contributing to the development of tax law. This is one of the greatest contributions of ITAT Bar Association of Mumbai for the development of tax profession. However, the culture of Chamber in tax practice is diminishing. hence the young professionals are deprived of guidance from the Chambers. In a chamber apart from understanding of law, one will learn ethical values and convention of the profession which one will not find in any publication.
3. Observing the Court proceedings.
We have observed that many young tax professionals are appearing before the ITAT. Most of them are technically sound and know the law, however they lack the practical training of representation. In ITAT 90 percent of matters are decided on facts and only 10 percent on law. Young professionals must prepare more on the facts and they should able to address the questions put by the Bench and arguments put by the other side. The young professionals must attend the Court room and watch the proceedings. This will be the best way of learning the art of representation. Hon’ble Justice Mrs. Sonia Gokani, Judge Gujrat High Court and Hon’ble Justice Mr. Valmiki Menezes, Jude Bombay High court after judging the final round of Palkhivala Memorial National Tax Moot Court competition in their valedictory address advised the law students to attend the Court rooms and watch the proceedings. Hon’ble Shri. G.S. Pannu, President of the ITAT in his inaugural speech shared his experience and address gave practical advice to be followed by the young professionals while arguing the matters before the ITAT.
4. Check list
It may be desirable for professionals to follow the check list before appearing before the ITAT. Detailed check list is published in the website of the www.itatonline.org. This will save the precious time of the Court.
5. Code of ethics
ITAT Bar Association Mumbai, AIFTP, Ahmedabad ITAT Bar Association have adopted the code of ethics to be followed by their members which is part of the respective constitution
We make an appeal to the professionals who appear before the ITAT to follow the code of ethics.
The ITAT Bar Association Mumbai has strongly opposed the appointment of Hon’ble members on tenure basis.
However, the stake holders may have to wait and watch how the new procedure for appointment of members will benefit the Institution.
For maintaining the independency of this Institution, contribution of the Tax Bar, especially the ITAT Bar Association Mumbai in the case of V.K Agarwal v. ITAT (1999) 235 ITR 175 (SC), Ajay Gandhi v B. Singh (2004) 265 ITR 451 (SC) deserves to be acknowledged.
(b) Expectation from the Bench.
1. My ideal Tribunal Member.
Shri S.E. Dastur Senior Advocate and legend of tax profession has written an article titled My “Ideal Tribunal Member” (A reflection by Sohrab Erach Dastur) It was published on the occasion of 60 years of celebration. The Hon’ble members who have joined the Bench recently would find it worth reading this article.
Hon’ble members sitting on the Bench while hearing the appeals are not merely adjudicating on the issue before them but they are invariably deciding on the future of the assessee. One wrong decision against an assessee may ruin his life and relegate him to the position of pauper, the same against the Government may affect the coffers of the Government to an extent of a drop in an ocean. Such decision also becomes a precedent to follow in other cases. Now assessments and 1st appeals are faceless mode , hence the Tribunal has a greater responsibility to the citizens.
2. Code of ethics
It is noteworthy that the ITAT is the only institution where the Honorable members though governed by the service Rules have adopted the Code of ethics adopted by the Honorable Judges of the Apex Court and High Courts.
3. Observation of Courts
Based on the reported decisions, expectations from the Hon’ble Members while deciding the matters are as follows:
Neeraj Garg v. Sarita Rani and Others (2021) 9 SCC 92
While it is of fundamental importance in realm of administration of justice to allow Judges to discharge their functions freely and fearlessly without interference from anyone, it is equally important for Judges to exercise restraint and avoid unnecessary remarks on conduct of counsel which has no bearing on adjudication of dispute.
Google India Pvt Ltd v.CIT (2021) 433 ITR 284 (Karn)(HC)
Order passed based on the research in the chamber which was not brought on record was set aside.
CIT v. Dr. K. Kannagi (2020) 424 ITR 470 (Mad) (HC)
Even in affirming the findings of the authorities below, the burden was heavier for the higher appellate authority when it decided to reverse the findings of the authorities below.
PCIT v. M. J. Export Pvt. Ltd. (Bom)(HC), www.itatonline.org
The Tribunal should not make general observations that there are “contrary decisions”- Tribunal to be specific about the decisions and make a mention of the citation in the order and not make general observations.
Ritha Sabapathy (Smt) v. Dy.CIT (2019) 416 ITR 191/ 308 CTR 417 / 263 Taxman 84/177 DTR 178 (Mad) (HC)
Even if the assessee could not appear, the Tribunal could have decided the appeal on merits. Court also directed to send the copy of the Judgement to the President of the Tribunal as well as Law Secretary in the Ministry of law and Justice so that the same may be brought to the notice of all the Members of the Tribunal. (Referred Balaji Steel Re. Rolling Mills v. CCE&C (2014) 29 GSTR 502 (SC) / (2015) AIRSCW 426. (Ratio in CIT v. S. Chenniappa Mudaliar (1969) 74 ITR 41 (SC))
Shirpur Gold Refinery Ltd v. Dy. CIT (2019) 262 Taxman 390 (Bom) (HC)
Non speaking orders. The CIT(A) allowed the claim of expenditure and depreciation after verification of merits. Tribunal was not right in in law reversing the said conclusion without examination.
Co-Operative Centrale Reiffeisen-Boereleenbank B. A. v. Dy.CIT (2018) 170 DTR 41 / (2019) 411 ITR 699 (Bom.)(HC)
Court held that Tribunal could have summoned all records and thereafter should have arrived at categorical conclusion whether First Appellate Authority was right or AO. It failed to discharge it duties.
Cheryl J. Patel v. ACIT (Bom.)(HC), www.itatonline.org
The Appellate Tribunal should give an independent reason showing consideration of the submissions made on behalf of the assessee.
CIT v. Tara Ripu Dhamanpal Trust (2018) 409 ITR 102 (P&H)(HC)
Reasoned speaking order which is the mandate as laid down by the Supreme Court in Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan (2010) 9 SCC 496 and Canara Bank v. V. K. Awasthy (2005) SC 2090
DSP Investment Pvt Ltd v. Add. CIT ITA No 2342 of 2013 dt 8-03 2016 (Bom) (HC)
Tribunal is not justified in referring the Judgment not cited, to be considered as non-speaking order violation of natural justice, order was set aside.
Reliance Infrastructure Ltd v. Dy.CIT ITA No.701of 2014 dt.29-11-2016 (Bom) (HC) Referring the judgment in favor of assessee and not dealing with the case would make the order suspect. Ex facie, it is a breach of principle of natural justice. Order of Tribunal is set aside.
Dattani and Co v. ITO ITA No. 847 of 2013 dated October 21, 2013 (Guj) (HC)
Decision relied not considered; order of the Tribunal is remanded.
Bhavya Construction Co. v. ACIT (Bom)(HC), www.itatonline.org
Relying on the case laws not cited by both the parties and not dealing with the case law cited by the representative of the assessee. Matter remanded to the Tribunal to pass the fresh order
Kranti Associates Pvt Ltd v. Masood Ahamed Khan & ors (2010) 9 SCC 496
Order passed by a quasi-Judicial authority or even an administrative authority, affecting the rights of parties must be a speaking order supported with reasons. Summarized in (para 5.1) of the order
Canara Bank v. V.K. Awasthy (2005) 6 SCC 321
One essential requirement is that Tribunal should be impartial and have no personal interest in the controversy, and further that it should give ‘a full and fair opportunity ‘to every party being heard
4. Amicus curiae.
Where an important issue is involved and if it is affecting a large number of assesses it may be desirable for the ITAT to appoint amicus curiae to guide the Bench.
(c): Expectation from Judiciary.
1. Elevation of members to High Court – Institutionalisation of the process of elevation of Members to the High Court
ITAT has good number of judicial members who deserve to be elevated to the High Court. Once you practice in Direct taxes you will be able to practice any branch of law. Income tax Act is the only Act which refers 98 Central Acts and various State legislations. If one analyzes the development of the commercial laws, it is due to the interpretation of taxation laws. Eg. Hindu law, law of partnership, Transfer of property Act, Company law etc. 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 in a better manner. The speed of disposal would also increase. This will also attract young bright lawyers to join the Income Tax Tribunal. Not only members be elevated to the High Court but also this process be institutionalised, to be more systematic and transparent in elevating the Members. There are good number of judicial members in the ITAT who used to appear regularly before the High Court. The judicial members from one particular place cannot be posted in the place where he/she was practicing, hence their orders are not challenged in the High Court where they were practicing. There is no mechanism in the collegium of the High Court to know the competent and deserving Honourable Members of the ITAT from their respective State. It is suggested that the Honourable President of the ITAT may send the names of the deserving members of the ITAT to the respective High Court, and the collegium may consider their names on merits. This will bring an institutional process of elevation of Honourable Members of the ITAT to the respective High Court. There are good number of advocates who are regularly appearing before High Court in taxation matters , it is worth considering at least few of them for elevation to the High Court , which will help speedy disposal of tax matters .
(d)Expectation from the Legislature
The functioning of the ITAT cannot be compared with other Tribunals. Whenever any amendment is made which has the bearing on the functioning of the ITAT, it is desired that the Tax Bar Associations may be consulted; this will help to achieve the moto of the ITAT i.e., Nishpaksh Sulabh Satvar Nyay
Hon’ble Chief Justice of India, Dr. D.Y. Channdrachud is well conversant with the functioning of the ITAT and tax litigation. Hon’ble Chief Justice as a senior judge of the Bombay High Court has addressed the Members conferences . Hourable Chief Justice has a great vision for the judiciary and use of digitization for rendering speedy justice. If the ITAT and ITAT Bar association can request the Hon’ble Chief justice to address on the occasion of 82nd foundation day to address the tax Bar and bench on virtual or physical mode on the subject of “Digitisation of the ITAT and justice delivery system – Taxation matters”. This will benefit the Hon’ble Members of the ITAT and tax professionals who are practicing before ITAT. A thought for consideration.
The readers may have many more ideas for improving the justice delivery system in tax matters, they are requested to send their view to email@example.com which may enable the ITAT Bar Association to take up the issues with the appropriate forum.
Wish the foundation day all the success!