It is unfortunate that Governments have not been setting apart the necessary funds in the financial budgets for expanding the Court system to keep space with veritable litigation explosion. The advance planning that Governments do in the regard to the economy generally, including the industries run by it for meeting the increasing demands for its products is absent when it comes to the area of litigation which, by and large, receives a step -motherly treatment at the hands of the Government.
The Judiciary is one of the pillars involved in the process of Nation building and it has not been given its deserved recognition. On the auspicious occasion of Azadi ka Amrit Mahotsava in 2022, i.e., 75 years of Independency, it is hoped that the Hon’ble Minister of Law & Justice will put forward the cause of Judiciary which is essential to improve administration, attract foreign investment and enhance the economic growth of our Nation.
During the Union Budget speech on July 24, 1991, Hon’ble Shri Manmohan Singh, the then Finance Minister (1991) 190 ITR 89 (St) stated that, “The foreign exchange crises constitutes a serious threat to sustainability of growth process and orderly implementation of our development programs. Due to the combination of unfavorable internal and external factors, the inflationary pressures on the price level have increased very substantially since mid-1990. The people of India have to face double digit inflation which hurts most of the poorer sections of our society. In sum, the crises in the economy are both acute and deep. We have not experienced anything similar in the history of independent India”.
The Economic Liberation of 1991, has helped the country to grow in right direction. India has attracted foreign investments ever since. Indian entrepreneurs are also able to build tech-companies which are recognized globally.
One must also acknowledge that the successive Governments have embraced the liberal economic policies. The recent, Taxation Laws (Amendment) Bill, 2021 introduced to nullify the retrospective tax demand vide Finance Act, 2012 is a brilliant move, which will fortify the MNC’s trust to invest in the India. Further, digitalization has helped India to face the challenges during the pandemic induced lockdown. Hon’ble Finance Minister Smt. Sitharaman during her budget speech on February 01, 2021 (2021) 430 ITR 33 (St) has expressed her vision for Atma Nirbhar Bharat, to be achieved when we celebrate Azadi ka Amrit Mahotsava in 2022, on the occasion of 75 years of independence. Hon’ble Finance Minister stated that budget proposal for 2021-22 rests on 6 pillars:
i. Health and Wellbeing
ii. Physical & Financial Capital and infrastructure
iii. Inclusive Development for Aspirational India
iv. Reinvigorating Human Capital
v. Innovation and R& D
vi. Minimum Government and Maximum Governance
Vision of the Government is acknowledged and appreciated by professionals and industry leaders. However, the moot question is whether the vision is achievable ignoring the development of the Judiciary.
If one reads the Budget speeches of the successive Finance Ministers since 1991, there is no reference or discussion on the future of the Judiciary. The Hon’ble Supreme Court in the case of Noor Mohammed vs. Jethanand and Anr. AIR 2013 SC 1217 observed that expeditious justice is a Constitutional command. Therefore, speedy Justice is mandated under Article 21 of the Constitution of India.
In 1999, on the occasion of Golden Jubilee of the Income tax Appellate Tribunal, Shri. K. K. Venugopal, Senior Advocate (Present Attorney General of India), in the souvenir of the ITAT, published an article titled, “Access to Justice the Indian Experience”, few lines from the Article are reproduced below:
“Any number of laws may be passed by the legislatures for the welfare of the people but if non-implementation of the same cannot be remedied except 10 or 15 years, then surely the judicial system itself needs drastic overhaul.
It is unfortunate that Governments have not been setting apart the necessary funds in the financial budgets for expanding the Court system to keep space with veritable litigation explosion. The advance planning that Governments do in the regard to the economy generally, including the industries run by it for meeting the increasing demands for its products is absent when it comes to the area of litigation which, by and large, receives a step -motherly treatment at the hands of the Government.”
Further, Shri Harish Salve, Senior Advocate while sharing his views on the subject of on the subject of “Constitutionality of tax laws” before the ITAT Bar Association Mumbai on June 25, 2021, had expressed the view that Financial Independency to the judiciary is the need of the hour.
Professionals have on several occasions made an attempt to highlight the difficulties faced by the judiciary along with their humble suggestions before the Hon’ble Prime Minister, Hon’ble Finance Minister and the Hon’ble Minster for Law & Justice with a view to have a road map for the Judiciary and achieving mandate of the Constitution.
1. Appointment of Judges
One of the road blocks for the development of the economy is the huge pendency of litigation before various courts. No doubt the Government is taking measures to reduce the litigation, however the process is very slow and is not able to achieve its desired objects. One of the reasons for delay in disposal of matters is in not appointing the required judges on time. As the Government is aware of the requirement of judges on a year-on-year basis, the process of appointment can be done well in advance so that vacancies do not affect dispersion of justice and transition is smooth.
Mumbai is considered as financial capital of India. For disposal of tax matters in Direct and Indirect taxes, the High Court needs at least three tax benches i.e., one for Direct taxes, one for Indirect taxes and the other one for disposal of Writ Petitions.
The tax appeals which are admitted in the year 2000 are still pending for final disposal. On account of shortage of judges, the High Court is not in a position to have even two tax benches. There are more than 5,000 tax appeals which are pending for final hearing and more than 5,000 tax appeals are pending for admission. Some of the matters which are pending for final hearings may require considerable time. It may be practically difficult to dispose more than five matters per day. One cannot comprehend as to when an appeal admitted in the year 2021 will be fixed for final hearing.
The Government could also consider on the elevation of meritorious members of the Tribunal to the High Court. Their expertise and experience would help in speedy disposal of tax matters.
Further, as per Section 245R (6) of the Income-tax Act, 1961 (Act), Authority for Advance Rulings has to pronounce its ruling in writing within six months of the receipt of application. However, the Authority for Advance Ruling could never decide the issue as per the mandate of the Act due to non-appointment members, Vice-Chairman and Chairman. It can be observed in some of the recent reported cases where an application for Advance Ruling which was filed in the year 2012, admitted in the year 2017 and decided in the year 2020. (2021) 434 ITR 441 (AAR). How can a taxpayer can decide their tax liability if the Authority for Advance Ruling takes eight years an issue to decide instead of six months?
The Finance Act, 2021 abolished then Authority for Advance Ruling and introduced the new section 245-OB of the Act, Board of Advance Rulings. Time will tell the efficacy and effectiveness of the new Board.
Shri N.A Palkhivala, Senior Advocate in his Article titled, “The Maddening Instability of Income tax law” which was published in the Souvenir of the Members conference 1991, reads, “One of the main reasons for India’s backwardness and stunted development is that we as a nation have no sense of time at all. We are individually intelligent and collectively foolish. It is characteristic of us that in our national language the word ‘kal’ is used both to denote yesterday and tomorrow. I attribute this absence of time sense to two factors. We were the first country in the world to evolve the concepts of eternity and infinity: against the backdrop of eternity what does the waste of even several decades matter? Secondly, we were the first to evolve the doctrine of reincarnation: if you waste this life, you will have several ‘more in which to make good.”
In the year 1999, Income tax Appellate Tribunal had pendency of 3,00,597 cases; as on July 2021 it is only 65,000 cases. The interview for appointment of new members were held on July 6, 2018, selection process was completed in November 2019. Hon’ble Supreme Court in the case of Madras Bar Association v. UOI 2020 SCC Online 962 dated November 27, 2020 has directed the Union of India to appoint the Judicial and Accountant Members with in period of three months. The Hon’ble Supreme Court once again in the case of Madras Bar Association v. UOI (2021) 128 Taxmann.com 218 (SC) (Order dated July 14, 2021) directed that the vacancies in the Tribunals are filed up, without delay. The Hon’ble Court observed that “Access to justice and confidence of the litigant public in impartial justice being administered by Tribunals need to be restored”.
Recently, the Centre has introduced the Tribunal Reforms Bill, 2021. A third round of litigation between the Madras Bar Association and the Union can be anticipated.
If the Government appoints the required members, the pendency may reduce to less than 50,000 cases. The tax payers will be able to get the justice from the ITAT which is Final Fact Authority within six months of the filing of an appeal before the Appellate Tribunal. All India Federation of Tax Practitioners (AIFTP) in their letter addressed to the Hon’ble Law Minister made an appeal to the Hon’ble law Minster to appoint the Hon’ble Members at the earliest.
2. Appointment of Retired Judges and re-appointment of Members of the Appellate Tribunal.
Article 224A of the Constitution of India gives power to Chief Justice of a High Court with the prior consent of the President to request any person who held the office of a Judge to sit and act as a Judge. One of the suggestions made by the tax professionals before the Government from time to time is for appointment of Retired judges for disposal of taxation matters. Former Chief Justice of India Hon’ble Justice Mr. Shard A. Bobde had suggested for appointment of Retired Judges with expertise on hose fields of laws as an ad hoc judge.The term of such a judge could be extended.
The Government has introduced new uniform policy of the Members of the various Tribunals. As per the new policy the appointment of members will be on tenure basis and retirement age will be 67 years and the President will retire at the age of 70. At Income tax Appellate Tribunal there are a good number of members whose knowledge and integrity are beyond doubt. As those members who are appointed on prior to The Tribunals Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 will retire at the age of 62 years and similarly, the President at the age of 65 years, it is worth considering that selection committee may reappoint these honorable members till the age of 67 years and the Hon’ble President till the age of 70 years, if all other conditions are satisfied. Further, the current members need not be subjected to an interview which would be applicable to fresh applicants. Further also, the current Hon’ble members’ seniority should not be impacted upon the enactment of the Tribunal Reforms Bill, 2021. This will help to reduce the pendency of matters before Income Tax Appellate Tribunal.
3. Financial Independency for the judiciary
AIFTP has made number of representations to the Government for a separate allocation of funds to be made for the Judiciary, as in the case of Defense and other Sectors. This will help the judiciary to improve their infrastructure and better the administration of justice. The Hon’ble Law Minster could interact with various Bar Associations and consider the needs of the Judiciary. India can only progress if villages are made self-sufficient, similarly the basic infrastructure must be improved in the Courts that are situated in smaller cities and towns.
One of the topics for the Dr. Nani Palkhivala Research Paper Competition is on “Access to Justice in Tax matters (Direct taxes, Indirect taxes (With special reference to GST) and Prosecution)”. AIFTP will be inviting research article from law students from more than 300 law colleges. A consolidated paper with the best ideas will be presented to the Government for consideration.
4. Linking of Supreme Court with High Courts – E Benches of the Supreme Court to deal with direct and indirect taxes.
E-bench of the Supreme Court can be an effective alternative for the regional benches of the Apex Court. The E-Benches of the 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 cannot think of approaching the Apex Court for justice as it is beyond his reach. The minimum cost for single adjournment costs about Rs. 1 lakh rupees. Thus, one can fathom how expensive it would be for a citizen to approach the Supreme Court. One may consider constituting e-benches of the Supreme Court. The hearing of the 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. The Supreme Court can take up issues location wise e.g., a day could be for matters arising from the Hon’ble Bombay High Court, another day could be for matters from the Hon’ble Madras High Court or other High Courts, etc. Initially, an option may be given to the parties to hear the matters through the e-Bench or the regular Bench.
The ITAT has started the e-proceedings at Mumbai through which the matters of the Nagpur Bench are heard by the Hon’ble Members situated at Mumbai. The experience has been satisfactory for both the tax payers and the Department. The E-Bench of Supreme Court may initially be started for hearing on SLPs related to tax matters. One Court room of each High Court may be converted in to an E-Bench of the Supreme Court.
Due to Pandemic, several matters are argued through the virtual mode. Many advocates & assessee representatives will believe that the future of tax litigation will be through a combination of virtual as well as physical mode.
5. Goods and Service tax (GST)
GST is one of the major reforms in the taxation of Indirect taxation the concept being One Nation One Tax. Though the new Act was introduced in the year 2017, till date the Government is not able to establish a GST Tribunal, which is the need of the hour. The decisions rendered by the Appellate Authority for Advance Ruling has brought an amount of uncertainty. Writ Petitions are filed before various High Courts across the Country; this shows the difficulties faced by the traders. The need of the hour is to constitute the GST Tribunal at the earliest. Similar to the Hon’ble ITAT, the GST Tribunal should be made functional under the Ministry of law & Justice.
The Hon’ble Supreme Court in the case of Amit Sahni vs. Union of India on August 06, 2021 questioned the Centre on non-creation of a GST Tribunal although the Act was introduced 4 years ago.
Dénouement
All those who are concerned with judicial independency may share their thoughts with AIFTP so that the Representation Committee can take up the cause with the Hon’ble Ministry of Law & Justice. Views can be shared at aiftpho@gmail.com
About the Author: Details are awaited
Pdf file of article: Click here to Download
Posted on: August 11th, 2021
23-7-2021
To,
Shri Kiren Rijiju
The Hon’ble Minister of Law and Justice,
Government of India,
New Delhi
Subject: Request to fill the pending vacancies of
the Hon’ble Members in the Income-tax Appellate Tribunal.
Respected Sir,
We wish to bring it to your honours kind attention, that The Hon’ble Income tax Appellate Tribunal (ITAT) has 63 benches at 27 stations across the Country and a sanctioned capacity of 126 members.
On July, 06, 2018 an advertisement was issued by the Central Government seeking appointment of 21 Judicial Members and 16 Accountant Members. Accordingly, the search cum selection committee made its recommendations in November 2019.
Thereafter, the Central Government notified the Tribunal, Appellate Tribunal and other Authorities (Qualification, Experience and Other Conditions of Service of Members) Rules, 2020. The said rules were challenged on Constitutional Grounds.
The Hon’ble Supreme Court in the case of Madras Bar Association v. UOI & Anr 2020 SCC Online SC 962 passed an order dated November 27, 2020 directing the Union of India to appoint Judicial Members and Accountant Members to the Hon’ble ITAT, inter alia, within a period of 3 months.
The period of 3 months expired on February 27, 2021.
Honourable Sir, the Honourable Supreme Court of India in Madras Bar Association v. UOI Madras Bar Association v. UOI (2021) 128 Taxmann.com 218 (SC) (Order dt. 14-7-2021) has held that some of the provisions of the Ordinance as unconstitutional and also observed that para. 59. “The judgement in MBA-III was passed after a detailed dialogue with the learned Attorney General. Existence of large number of vacancies of Members and Chairpersons and the inordinate delay caused in filling them up has resulted in emasculation of Tribunals. The main reason for tribunalisation, which is to provide speedy justice, is not achieved as tribunals are wilting under the unbearable weight of the exploding docket. Undoubtedly, the legislature is free to excise its power to make laws and executive is the best judge to decide policy matters. However, it is high time that a serious effort is made by all concerned to ensure that all the vacancies in the Tribunals are filed up without delay. Access to justice and confidence of the litigant public in impartial justice being administered by Tribunals need to be restored.”
Hon’ble Sir, now the Department of Revenue also issued notification dt. 30-6-2021 C.S.R. 458(E) wherein in the Explanatory Memorandum it has been clarified that in order to give effect the Judgement of Supreme Court in W.P.(C) No 804 of 2020.
Sir, as on date, the Hon’ble ITAT consists of only 74 Members, out of sanctioned strength of 126 members (52 vacancies). By the end of the calendar year 2021 the vacancy will rise to 54 positions.
Therefore, with a view to fill the vacancy in the Hon’ble ITAT and thereby improve the efficiency of the Tribunal, we request your Honours to kindly address the pending vacancies.
Trust our requests shall be acceded to.
Thanking You.
Yours sincerely,
For All India Federation of Tax Practitioners
M. Srinivasa Rao,
National President
CC : 1. Prof. S. P. Singh Baghel, Hon’ble Minster of
State in the Ministry of Law and Justice
2. Hon’ble Shri Anoop Kumar Mendiratta,
Law Secretary of India
3. Hon’ble Justice Mr. P. P. Bhatt,
President, ITAT
23-07-2021
To,
Shri Kiren Rijiju
Honble Minister of Law and Justice,
Government of India
New Delhi.
Re: The proposed ‘Faceless Income-tax Tribunal’ in the Finance Act, 2021. Section 255 (8), 255 (9) of the Act. (2021) 432 ITR 52 (St)(113)
Sub: An appeal to not to bring the proposed amendment without consulting the stake holders before the Income-tax Appellate Tribunal.
Respected Sir,
About All India Federation of Tax Practitioners (AIFTP)
The All India Federation of Tax Practitioners (AIFTP) is an Apex body of Tax Practitioners of India which was established on November 11, 1976, which is registered under Bombay Public charitable Trust Act, 1950 as well as Society Registration Act, 1860. The members of the AIFTP include Senior Advocates, Advocates, Solicitors, Chartered Accountants, and Tax practitioners who actively practice on Direct and Indirect Taxes laws. AIFTP is the only voluntary professional organisation in our country which has 138 Professional Organisations as its affiliated members and more than 10,000 individuals as Life members from 27 States and 7 Union Territories.
The main object of the AIFTP is “To educate it’s members and the public towards a better compliance with Direct tax laws and also to provide an effective forum for discussion of the matters pertaining to tax laws and other laws, accountancy and to aid the collection and dissemination of information relating to there to”. One of the other objects of the AIFTP is also “To strive and work for independence of Honourable Courts, Quasi-judicial authorities, Appellate Authorities, the Settlement Commission, Tribunals, the Authority for Advance Ruling or other similar Authorities”
Hon’ble Sir, at the National Executive Committee meeting of the AIFTP which was held on 17-2-2021 where in 69 members of the National Executive Committee from across the Country who were present at the meeting have passed the unanimous resolution to drop the proposed Clause 78 of the Bill, (2021) 430 ITR 130(St) that seeks to amend the section 255 of the Income-tax Act relating to procedure of the Tribunal may not achieve its desired objects. However, the law has been passed and received the Assent of the President on the 28th March, 2021, (2021) 432 ITR 52 (St)(113) incorporating Section 255(8) and 255(9) wherein the Central Government may introduce a team-based mechanism for appeal to the Appellate Tribunal with dynamic jurisdiction and the scheme will be notified in due course of time, framing the rules for the proposed faceless appeal proceedings before the Income tax Appellate Tribunal.
We respectfully submit our reasons why the proposed Notification may not achieve the desired objectives, as under:
1. A brief background of the Income-Tax Appellate Tribunal
The Income-tax Appellate Tribunal (ITAT) was established on January 25, 1941, has completed 81 years of its purposeful existence on January 25, 1921, in 81 years it has gained the confidence of both the taxpayers and the Revenue authorities alike by rendering the impartial decisions in very transparent manner.
2. Pendency of the Appeals before the ITAT
The pendency of Appeals before the ITAT as on 1-7-2021, is only 68,000 appeals all across the country. This pendency was 3,00,597 appeals as on 1998-99. The total sanctioned strength of the ITAT is 63 benches and 126 members whereas the number of members as on 11-7-2021 is only 74. There are vacancies and accordingly, by the end of 2021 there will be a vacancy for 52 members. If the vacancy of the members is filled, the tax payers can get the justice from the ITAT within six months of the filing of Appeals. This is one of the only Tribunals where the pendency has reduced on a year-on-year basis by adopting a case management system.
3. Acceptance of the orders of the ITAT.
As per the data published in the Platinum Jubilee Souvenir of the ITAT on January 25, 2016, at Page No 37 it has shown that on an average 96.10 % of the Orders of the Tribunal are accepted.
Even after insertion of appeal provision under Section 260A of the Act with effect from October 1, 1998, 70% of the appeals from the order of the Tribunal were dismissed by the various High Courts at the stage of admission itself.
The figures clearly demonstrate that the ITAT is discharging its duty to the satisfaction of the tax payers as well as the Tax Department.
4. Final fact-finding Authority and transparency in hearing
Under the Act, the ITAT is the final fact-finding authority as per Section 254 (4) of the Act, except as provided in Section 260A where orders passed by the Appellate Tribunal are considered final. The assessee or the department can file an appeal before the High Court as per Section 260A (1) of the Act and this appeal can be entertained by the High Court only if the Court is satisfied that the case involves a substantial question of law. According to us, more than 80% of matters which are argued before the ITAT on facts. There are instances where for ascertaining facts, the ITAT has had to requisition the original record of recorded reasons, the sanctions given by the tax authorities, and in some of the instances, the Hon’ble Members have visited the actual fields to verify whether the agricultural activities are carried on or not! In some cases, the Hon’ble members have summoned witnesses and examined them in the witness box. Often, the paper-books filed before the Tribunal are of more than 1000 pages, and an appreciation of most of the pages if not all, may be required to ascertain the correct facts. At present the arguments of opposing representatives are made in open court. When the argument of the appellant is over, the respondent gives their reply and the appellant has right to bring correct facts or positions of law on record in rejoinder. In the course of hearing, the case laws cited by the both the sides are discussed often intricately about the provisions of law and the interpretation to be given to them.
The present system is working very smoothly following the honour, dignity and convention of the open Court, which is so integral to the common law system. There is complete transparency in the proceedings of the ITAT. The assessee as well as the public can watch proceedings as then happen. The tax payers have reposed their confidence in the institution for over 81 years due to continuous efforts on the part of the institution to improve the justice delivery system. The times have evolved and so has the Tribunal.
We wish to draw your attention to the recent decision of the Hon’ble Supreme Court in the case of Pradyuman Bisht v. UOI & Ors. (2020) 1 SCC 443. The Hon’ble Court was observing the question of closed-circuit television cameras to be put up in courts. The Court specifically brought out that the installation of CCTV cameras would be in the interest of justice and specifically asked the learned Additional Solicitor General as to why the Union of India had not installed CCTV cameras in Tribunals where open hearing takes place like Court such as ITAT, CESTAT, etc. as the Tribunals stand on the same footing as far as object of CCTV camera is concerned. It was further observed that recordings would help the constitutional authorities and the High Courts exercising jurisdiction under Articles 226 and 227 of the Constitution over such Tribunals if required. The bench directed that this aspect be taken up by the then learned Additional Solicitor General with the authorities concerned so that an appropriate direction is issued by the authority concerned for installation of CCTV cameras in Tribunals in same manner as in courts and an affidavit filed in this Court.
5. ITAT was established by continuous study and considering the various reports.
The idea of setting up the Income -tax Appellate Tribunal was first mooted in the Income-tax Enquiry Report 1936, which was submitted to the Government of India. The select committee was appointed to consider the Bill to amend the Indian Income-tax Act 1922. The report was presented to the Legislature Assembly on 10th November 1938. In pursuance of these recommendations, Section 5A was introduced in the Income-tax Act, 1922 and on 25-1-1941 was notified as the appointed date from which that section came in to force. The section remained unchanged in its essentials till the repeal of the Income-tax Act 1922, with effect from April 1, 1962. In the Income-tax Act, 1961, the Constitution and functions of the Tribunal have been set out in sections 252 to 255 of the Act. There is no fundamental change either in the constitution or functions of the Tribunal due to enactment of the new Income tax Act, 1961.
6. Opportunity of Hearing – Tribunal has the trapping of court.
Section 254(1) of the Income-tax Act, 1961 reads as under:-
“The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.”
Further, Rule 33 of ITAT Rules, 1963, clearly states that the proceedings before the Tribunal shall be open to the public. Relevant portion of the rule is usefully extracted as under:
“Proceedings before the Tribunal.
33. Except in cases to which the provisions of section 54 of the Indian Income-tax Act, 1922, and/or section 137 of the Act are applicable and cases in respect of which the Central Government has issued a notification under sub-section (2) of section 138 of the Act, the proceedings before the Tribunal shall be open to the public. However, the Tribunal may, in its discretion, direct that proceedings before it in a particular case will not be open to the public.”
In the case of Ajay Gandhi v. B. Singh (2004) 265 ITR 451 (456) the Supreme Court observed that the Income tax Appellate Tribunal exercises judicial functions and has the trapping of a court.
In the case of ITAT v. V. K. Agarwal (1999) 235 ITR 175 (SC), before the Court the counsel for Union of India conceded that the Income Tax Appellate Tribunal performs judicial functions and was a court subordinate to the High Court. The Court held that the Tribunal is competent to initiate contempt proceedings under Contempt of Courts Act, 1971.
The Hon’ble Supreme Court in the case of Rajesh Kumar v. DCIT [2006] 287 ITR 91 (SC) has re-iterated based on Section 136 of the Income-tax Act, 1961, that proceedings before Income-tax Authorities are judicial proceedings. Section 255(6) states that “The Appellate Tribunal shall, for the purposes of discharging its functions, have all of the powers that are vested in the Income-tax authorities referred to in Section 131”. It continues to state that “any proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of Section 193 and 228 and for the purpose of Section 196 of the Indian Penal Code and the Tribunal proceedings shall be deemed to be a civil court for all the purposes of Chapter XXXV of the Code of Criminal Procedure, 1898”. The language employed in the latter part of Section 255(6) is virtually identical to that used in Section 136 of the Act. Section 293 of the Act provides for a specific bar of suits in the civil court. An extension of the logic seems to make it clear that the Court exercises at least ‘quasi-judicial’ function. It is therefore important that the independence of the Tribunal is zealously preserved. Section 254 (1) of the Income -tax Act 1961 states that Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.
In the case of Nareshbhai Bhagubhai & Ors v. UOI (2019) 15 SCC 1, The Hon’ble Supreme Court has held that the right to be heard even in an administrative decision-making process is not mere formality. The right of hearing is mandatory and substantive right and must be strictly followed and not following the same is violative of principle of natural justice.
When an assessee approaches the ITAT Justice must not only be done but also be seen to be done. The current open court system is in consonance with the said principles said down by the Hon’ble Supreme Court from time to time.
7. Functioning of the ITAT cannot be compared with the functioning of the Commissioner (Appeals).
The proceedings before the Commissioner (Appeals) are a continuation of assessment proceedings, whereas appeal before the ITAT is an independent adjudicating body. The former proceedings are internal proceedings in as far as the Income tax Department is concerned. The Tribunal is the first truly independent body free from pressures of the Income tax Department in the process of adjudication of tax disputes, allowing them to be empowered to administer justice.
The not giving an opportunity of personal hearing before the Tribunal is a violation of principles of natural justice and contrary to the safe guard guaranteed by the Constitution of India under Articles 14, 19 and 21 of the Constitution of India. It is imperative to meet the test of Constitutional validity.
8. Power to constitute the Bench with Honourable President of the ITAT
As per section 255(5) of the Income -tax Act, 1961 it is the Appellate Tribunal that shall have the power to regulate its own procedure and procedure of the Benches thereof, in all matters arising out of the exercise of its powers or in the discharge of its functions, including the places at which the Benches shall hold their sittings. The ITAT functions under the Ministry of Finance whereas the ITAT functions under the Ministry of law and Justice. The Income tax department is always one of the parties before the ITAT either as appellant or respondent. If at all any scheme is to be framed it should be by the Ministry of law and Justice and not by the Ministry of Finance headed by the CBDT. In the case of Madras Bar Association v. UOI (2014) 109 DTR 273/ 227 Taxman 151, the Court held that the dispensation of justice by the Tribunals can be effective only when they function independent of any executive control. The Court also observed that the Parliament must ensure new Tribunal conforms to salient characteristics and standards of court sought to be substituted. A failure to do so will be violative of “Basic structure” of Constitution of India and the said ratio is also applicable to the Income tax Appellate Tribunal. We therefore make an appeal that that the dispensation of justice an open court hearing is a must in before the ITAT.
9. Oral hearing – A statutory right – Cannot be dispensed with.
One will appreciate that since the establishment of the ITAT in the year 1941, the appeals have been disposed by orally hearing the parties in appeal. In Automotive Tyres Manufacturers’’ Association v. Designated Authority (2011) 2 SCC 258, the Honourable Court has held that even written arguments are no substitute for an oral hearing. A personal hearing enables the authority concerned to watch the demeanour of the witness etc. and also clear up his doubts during the course of arguments. In G.N Rao v. Andhra Pradesh State Road Transport Corporation AIR 1959 SC 308 the Court held that personal hearing enables a party appearing at such hearing to persuade the Authority concerned by reasoned arguments to accept his point of view by removing the authority’s doubt and by answering the question. In P. N. Eswra Iyer v. Registrar, Supreme Court of India (1980) 4 SCC 680, the Court held that the normal rule of judicial process is oral hearing and its elimination an unusual exception. The Apex Court further held that justicing is an art even as advocacy is an art. It was held that no judicial ‘Emergency’ can jettison the vital breach of spoken advocacy in an open forum and there is no judicial cry for extinguishment of oral argument all together.
Accordingly, the decision to deny oral hearing at the Income Tax Appellate Tribunal stage needs to be reconsidered as otherwise the same shall not only be in violation of principle of natural justice but the same shall also suffer from the vice of unfairness.
10. Proposed Notification of faceless hearing without deliberation and without taking in to feedback from the stake holders.
The proposed amendment to face less hearing is proposed without consulting various stake holders. Now, while the ITAT is hearing the Virtual hearing of matters, a number of technical problems, such as poor internet connectivity and other technological and technical difficulties are often encountered. The filing of appeal by email is not implemented even as of today. The assesses must first be made aware of the use of technology, development of software etc in order for them to have confidence in the system. Both the faceless assessment and faceless appeals [before the Commissioner of Income tax (Appeals)] are yet to be tested and stand the trial of time. When Virtual hearing themselves have not proven to be confidence inspiring, the proposed Faceless functioning of the ITAT may prove to be a step that does not benefit the taxpayer. The desire for speedy disposal of cases cannot be at the cost of fairness. Speedy disposal of cases does not mean that one should decide the case in violation of principle of natural justice and fairness.
11. Suggestions.
1. The proposed notification may be dropped.
2. In case the Government is keen to introduce the faceless ITAT, the following procedures may be followed:
(a) The law commission may be requested to prepare the report on the Virtual and face less hearing of the ITAT, after interacting with the stake holders across the country.
(b) After receipt of the report the proposed amendment may be referred to a select committee.
(c) After receipt of the report from the Parliament committee the suitable amendment if any desired may be introduced.
Sir, we request your good self to consider our representation and we also request for a personal hearing to consider our representation at Delhi or any other place for put forward our suggestions
Thanking you,
For All India Federation of Tax Practitioners
M. Srinivasa Rao
National President
As per the report published in Times of India dt .7-8.-2021 in a PIL Filed by Advocate Amit Sahni ,honourable Supreme Court directed Central Govt to fill up the vacancies and posted for hearing on August 16. . We hope the Govt will take action at the earliest .
I do agree with the learned Senior Advocate that govt should consider very seriously for allowing the funds and appointment of judges , so that the assesses can get the justice at the earliest
We do agree that tax professionals and legal professionals must make an appeal to the GOVT to appoint the judges at the earliest .
On the occasion of 75 th Independence Day honourable prime minister has unveiled a Rs 100 crore national infrastructure plan Gati Shakti to spur growth in jobs ,increase in use of green fuels and help local manufacturers to become globally competitive. Which is highly appreciated . We hope as recommended by the learned senior Advocate in his article , the judiciary also be granted required financial support to boost the infrastructure which is one of the strong pillars of our democracy
We are of the opinion that various suggestions made by the learned senior Adocate may be considered by various Tax Bar Associations and it is worth sending to the Government.
Learned Senior Advocate has made suggestions for elevation of members of the ITAT to High Court . As per the information available ,we are pleased to know that collegium has recommended the name of Smt .P.Madhavi Devi as Judge of Telegana High Court . On behalf of AIFTP we wish her all the best .
AIFTP has made representation to Govt and Judiciary that there has to be institutional process for elevation of members of the ITAT. We hope many members of the ITAT may be elevated to High Court in the years to come
Sir, speedy justice is most certainly the need of the hour. I felt humbled as a citizen when the Attorney General of India in 2020 had recommended the constitution of benches of a new Court of Appeal in order to reduce the burden of the Supreme Court. Upon reading this piece of news i thought it was definitely a positive step forward, but i am saddened that the necessary steps to implement the aforesaid have not been carried out. I do believe in addition to what has been stated in your prestigious Article that this additional reformative change as recommended by the Attorney General ought to have been considered. In the alternative, there ought to be benches of co-ordinate strength of the Supreme Court in different cities now, to obviate delay. In know this will happen one day, but i am unsure when.
Learned Senior Advocte has made very valuable suggestion for appointment of ado hoc judges and for appointment of retired members as as as – hoc members on tenure basis to clear the pendency of matters . Honourable Supreme Court in Lok Prahari through its General Secretary S.N .Shukla ( Retd ) v UOI AIR SC 2039 ( WPno 1236 of 2019 dt 20 -4 2021 has laid down the various suggestions for disposal of pending matters and also appointment of Ad- hoc judges . We hope the Govt will accept the suggestions
Times of India dated 24 -10 -2021 page no 6 reads as under “ Financial autonomy & adequate infra essential for judiciary : CJI.
Similarly the Economic Times published an article on the same day , Titled “CJI : Poor Infra Derailing Justice Deliver, Need Fin Autonomy”
Honourable Chief Justice of India Mr. N.V.Ramanna on Saturday while inaugurating the annexe buildings for the Bombay High Court .’s Aurangabad Bench , said the present system of “ ad-hoc and unplanned” manner of dealing with the judiciary’ s infrastructure needs has to be done away with .
We are of the opinion that the Govt must consider the suggestion of the Hounourable Chief Justice and try to implement the same at the earliest
The Union Law Minster Kiren Rijiju has stated that the Government will play proactive role in filling of vacancies by the end of 2021.