Tax Professionals Strongly Oppose The New Rules For Appointment Of Members Of The ITAT

Leading legal experts like Justice R. V. Easwar (Retd), Shri Arvind Datar and others have expressed strong reservations with regard to the new rules formulated by the Government for the appointment of Members of various Tribunals, including the ITAT. The experts have opined that the rules violate the law laid down by the Supreme Court with regard to maintaining the integrity and independence of the ITAT. They has also pointed that the short tenure of appointment will discourage good professionals from joining the ITAT.

According to experts, the New Rules 2020, will benefit only the retired personals who are in government service and it will affect the smooth & independent functioning of the appellate Tribunal. Functioning of the Income Tax Appellate Tribunal cannot be compared with that of the Electricity Tribunal or the Environmental Tribunal. Some of the issues which affect the independency of the functioning of the ITAT are:

(1) The term of office for four years as prescribed by the Schedule to the said Rules and the Qualifications for appointment of Judicial and Accountant Members are in violation of the principle laid down by the Hon’ble Supreme Court in Rojer Mathew and Union of India v. R. Gandhi (2010) 11 SCC 1 and against the doctrine of separation of powers in as much as it does not prescribe any concrete guidelines for re-appointment of the Members of the Tribunal upon the expiry of their short tenure and that this may inadvertently compromise the functioning and independence of the said Tribunal, as the Central Government is a party to every litigation before the said Tribunal. The enhancement of the period of practice for CAs and Advocates shall discourage well settled professionals from joining the Bench, and this criterion is higher than the minimum prerequisite for an Advocate to be appointed as a High Court Judge. This could have the effect of retired bureaucrats and other eligible functionaries close to retirement from public service to look at the Tribunal as a means to extend their careers considering the enhanced age of retirement as per the new rules.

(2) There is no legal or logical reason or justification in the term of office of four years as prescribed by the Schedule to the impugned Rules or the maximum limit of five years as prescribed by Section 184 of the Finance Act, 2017, and the said limits to the tenure and unconstitutional and disregard the dicta of the Supreme Court in Rojer Mathew (supra).

(3) Though the said Tribunal carries out Judicial functions, the Judiciary is inadequately represented in the ‘search cum selection committee’ for the appointment and reappointment of Members which leads to a primacy of control of selection and reappointment in the Executive in violation of the guidelines framed by the Constitutional Bench of the Hon’ble Supreme Court in Rojer Mathews (supra) and the presence of the Secretary, Ministry of Finance (Department of Revenue) on the search-cum-selection committee that is a party to every appeal before the Tribunal is a clear conflict of interest and against the principles of independence of Judiciary.

(4) That the Rules cannot override the ratio and dicta laid down by the Supreme Court as they are not specifically formulated by an act of the Parliament and are liable to be struck down.

(5) That the said Rules are violative of the fundamental concept of separation of powers in as much they provide for the Central Government to be the leave sanctioning authority for the President of the Income-tax Appellate Tribunal and also for the other Members of the said Tribunal in the absence of the President.

(6) The changes brought about by the impugned Rules cannot be made applicable to those candidates that have applied to be appointed as Members of the Income-tax Appellate Tribunal, given the interview for the same and fulfilled all other formalities but have not yet been notified as Members of the said Tribunal. Similarly, the new rules can be seen as an inducement for the existing members who may be eligible for reappointment to the tribunal after retirement under current rules as the retirement age is revised to 65 and no upper limit of age is prescribed for appointment to the Tribunal.

Experts view

A prima Facie reading shows that these rules contain the same vice which the earlier rules of 2017 contained which were struck down by the Supreme Court. In fact, these rules appear worse to me and in my opinion meet the same fate.

– Hon’ble Justice Mr. R. V. Easwar (Retd.) Senior Advocate Delhi

It is unfortunate that the Central Government has again openly flouted the mandatory directions of the Supreme Court which were laid down in 2010 and a review against the same was also dismissed. In para 120 of the order of the Madras Bar Association, which was given in 2010, clear guidelines have been set out as to the composition of the selection committee, the term of office of the particular member, and so on. This guideline was once again sought to be disobeyed by an act of parliament, when the new Company Law Tribunal was formed, that was struck down. When a Parliamentary law itself is struck down for not complying with Supreme Court directions, it is quite shocking that the Central Government keeps on framing the same guidelines in complete disobedience and defiance of the Supreme Court’s order. We will have no option but to once again challenge this guideline before, either the Supreme Court or the respective High Court. My sincere wish is that, all associations throughout the country should take it up as a National issue and challenge these provisions which completely in brazen opposition to the Supreme Court’s decisions. We should make sure that the Tribunals are as independent as the Judiciary.

• Mr. Arvind Datar, Senior Advocate Chennai

I have perused the Notification dated 12th February 2020 issued under Sec. 184 of the Finance Act 2017 and the rules made thereunder.
I feel that some of the provisions of the said rules can have serious repercussions.
Short Duration Judgeship is a dangerous proposition. Firstly, it does not encourage young talents, seeking a career in judiciary to opt for temporary postings and secondly a dishonest person can use the post for amassing money by corrupt means, in short tenure.
Therefore, the phrase in Para 9 of the said rules “Whichever is earlier” should be worded as “whichever is Later”

• Dr. Y. P. Trivedi, Senior Advocate Mumbai .

"AMENDMENT IN THE ITAT AMENDMENT RULES IS GROSSLY ARBITRARY-WHY CHANGE IN THE APPOINTMENT OF HON’BLE MEMBERS OF THE ITAT IS NEEDED WHEN THE SYSTEM IS WORKING WELL FOR MORE THAN 79 YEARS.”

The ITAT Appointment Rules, 2020 is grossly arbitrary as the same has been framed without following the mandate of the Hon’ble Supreme Court in the case ofRojer Mathew vs. South India Bank &Ors., AIR 2015 SC 1571. As per Article 124 (3) (b) of the Constitution of India, an advocate is qualified to be appointed as a High Court Judge on completion of 10 years practice whereas, as per the ITAT Appointment Rules 2020, an advocate is eligible to be appointed as a member of ITAT on competition of 25 years of practice, which is not only unconstitutional but also arbitrary. If an Advocate is fit to be appointed as a High Court Judge on completion of 10 years practice, can it be said that to be eligible for appointment as a member of the Tribunal, one needs twenty five years of practice, whereas an appeal lies before the High Court against the order of the Tribunal. I feel such an amendment is not only funny but also degrades the position of the High Court. Tax professionals across the country should strongly oppose the new rules of appointment of the member of ITAT.

• Dr. Ashok Saraf, Sr Advocate, Guwahati

Appointment of the members of the ITAT on tenure basis of four years erode the very foundation and the independent of the Mother Tribunal.
The changes regarding the appointment of members of the ITAT on tenure basis for four years, will cause tremendous harm to one of the finest institutions of India and would irreparably damage judicial independence.
Such a change will also act as a barrier for many deserving professionals, who could otherwise be good members, as any deserving professional would not prefer to sacrifice his/her career for an appointment which is only for term of 4 years. Further, when a professional is appointed, he/she will be appointed from the city in which he /she practicing and on completion of the tenure these members will not allowed to practice before the any ITAT in India. Thus, there is no incentive for deserving people to join the institution with such conditions.

Appointment for limited period of four years will seriously erode the independent functioning of the Tribunal. The professionals who accept such limited tenure will have little commitment towards the institution, this will affect the very foundation of the institution. When the present system of appointment of members is working satisfactorily, there is no need to change. If the Govt desires to bring the uniformity let the retirement age of all the members, the same may be fixed at 65 years instead of present retirement age of 62 years.
We hope the Govt will continue with present system of appointment of members of the ITAT, those who have been selected and those who will be appointed hereafter.

• Dr. K. Shivaram, Senior Advocate, Mumbai

AIFTP is strongly opposed to the appointment of Honourable members of the ITAT on tenure basis of four years and proposing to file writ petition challenging various provisions of the Appointment Rules, 2020.

In the year 2009, there was a move to appoint the members of the ITAT on tenure basis of five years. A detailed representation was sent by the AIFTP to then Honourable law Minster, Dr. M. VeerappaMoily. The proposal for appointing the members of the Tribunal on tenure basis was dropped. In the year 2017, when the proposal was to merge with the service conditions of the various forums, the AIFTP once again strongly opposed and sent a detailed representation to the then law Minster Honourable Shri Ravi Shankar Prasad. One of the eligible criteria for the appointment of Judicial Members and Accountant Members is 25 years of the practice as a lawyer or Accountant. New rule is arbitrary, and neither in the interest of the institution nor in the interest of the profession.

• Mrs. Nikita Badheka, Advocate , National President AIFTP