Faceless Appeal Scheme proposed to be Introduced in the functioning of the Income Tax Appellate Tribunal ( ITAT) – Representations
Income Tax Appellate Tribunal Bar Association Mumbai, All India Federation of Tax Practitioners( AIFTP) Income Tax Appellate Tribunal Bar Association Ahmedabad and Income Tax Appellate Tribunal Bar Association, New Delhi, have made representation before the Honourable Ministry of Finance, Prime Minister’s Office, and Ministry of Law & Justice expressing their dissatisfaction against the proposed amendment in the Finance Bill, 2021 to implement a Faceless-Income tax Appellate Tribunal (ITAT).
According to them, the ITAT has been working effectively and efficiently for the last 80 years and there is no reason to reinvent the wheel.
There appears to be a fundamental misconception as to the proposed objective for bringing the proposed amendments
They have expressed concerns if the proposed law scheme would meet the test of constitutional validity.
They fear a miscarriage of justice, and are of the strong opinion that such a radical change should not be proposed without research and feedback from the stake holders. Few proposals have been laid down in the representation.
They strongly made an appeal to drop the idea of faceless ITAT
Alternatively the virtual hearing may be implemented only in optional basis i.e .no virtual hearing may be conducted , unless the parties to the appeal expressly desire for virtual hearing .
It is sincerely hoped that the Administration should interact with the stakeholder.
Enclosed: Copies of Representations:
February 20, 2021
To,
Madam Nirmala Sitharaman
The Hon’ble Finance Minister
Govt. of India
North Block
NEW DELHI 110 001
Reg: Finance Bill 2021-22 – proposed insertion of section 255 in Income-tax Act, 1961 – faceless Tribunal – representation-cum-request for –
Hon’ble Madam,
We seek your kind attention and reference to clause no. 78 of the Finance Bill 2021-22 whereby it is proposed to amend the Income-tax Act, 1961 by inserting therein sub-section (7) to sec. 255. The proposed sub-section provides for enabling the Central Govt. to bring the functioning of the Income-tax Appellate Tribunal (“ITAT”) under a scheme of ‘faceless’ mechanism, for several reasons stated therein as also in the Explanatory Memorandum to the Bill.
We are an association of income-tax practitioners at the ITAT-Rajkot Bench. We must at the threshold clarify that we make this representation for our belief and in the interest of sound and fair justice delivery in direct tax matters and as an integral part thereof as a Bar and not with any personal or professional angles.
‘Faceless’ proceedings have already commenced in respect of income-tax assessments, penalties and appeals; probably covering the ITAT also therein may have been pondered to be a natural extension and widening of the scope of faceless methodology, which is now made reasonably feasible due to technological facilities. In the finance Bill, in respect of the proposed Interim Board (after disbanding of the Settlement Commission) and the proposed Board for Advance Ruling too, faceless scheme is proposed.
We do acknowledge that conceptually, faceless mechanism does have some merits to it which may outweigh its demerits in long run; more so when the emerging technological support is becoming stronger and available widely, despite the fact that faceless tax proceedings are in a nascent stage for everyone concerned. However, as an adjunct to the justice delivery system in our country, as one of the Bars of tax advocates representing interest of our taxpayer-clients, and more so, in the overall interest of classical judicial functioning in larger interest of those seeking justice (whether the taxpayer or the revenue dept.), we strongly believe and wish to hereby convey that the faceless proceedings concept need not be and should not be applied to the ITAT.
We have, we sincerely believe, good reasons for our view which we seek to hereby place and represent before you and the Government, in following words:
1. The ITAT has an established history of good functioning and it has earned the oft-quoted sobriquet of ‘Mother Tribunal’. The ITAT has deserved this accolade not just because of the number of appeals disposed of by it but because it is the final fact-finding body, irrespective of the quantum of stake in the cases before it. The ITAT already delivers justice relatively fairly speedily; matters before it are heard usually in one hearing only. You would no doubt be aware, but it merits a mention in this context that only ‘substantial question of law’ in income-tax matter can be raised and can be heard by the High Courts and the Supreme Court; on factual aspects, higher Courts can neither deal with nor do they interfere with the factual findings of ITAT. Essentially, realistically and practically therefore, on questions of facts, for both for the taxpayer and the revenue dept., ITAT’s rulings are final, binding and hence, as good as those of the Apex Court. Consequentially, it is of utmost importance that factual aspects and evidence are properly argued and presented before the ITAT and appreciated by it, which cannot be perceived to be always possible in a faceless mode. In this regard, it is also germane to note that not only is the revenue dept. the appellant in substantial number of matters but it is widely believed that only about ten to fifteen percent of appeals are admitted by High Courts as containing questions of law. This aspect itself lends credence and need for robust hearings by the ITAT and fair, equal and open accessibility to all stakeholders.
2. Viewed in above context and rightly so too, the ITAT is materially important in its judicial functioning, aside from a crucial aspect that the ITAT also functions as a Court, both in law and in practice. And at its core of the function of dispensing justice by any judicial body, is the open-court system wherein, not only the litigating parties but the public is also permitted to watch the proceedings. There are many sound, proven and acknowledged reasons behind this open court system, which has evolved over hundreds of years, if not longer, because justice should also ‘appear’ to be done and that too in the right setting and with full, fair and equal opportunities of hearings. This aspect itself is said to be a ‘transparent’ and a ‘fair’ system; hence one wonders whether the proposed faceless, closed, strictly virtual, non-Courtroom system can achieve these objectives which are stated in the Bill. Viewed in this light, the stated objectives in the Bill, in our humble submission, appear to be an antithesis to the aim of fair justice. We believe that here in lies the differentiation between faceless judicial proceedings and other faceless proceedings under the Act. All non-ITAT proceedings under the Act are to be conducted anyways by revenue officers; only the ITAT is a Bench of two/three members’ judicial forum composed of judicial and accountant members selected by Judges of Supreme Court; hence it deserves to be treated on a different footing by continuing its status as an open court. We humbly represent before you and strongly believe that this distinction being material, both kinds of proceedings should not be equated but instead, the core distinction must be respected and recognised under our parliamentary democratic system having well-entrenched constitutional framework, which
has all along followed and upheld the independence of and yet specific roles assigned thereunder to the legislature, judiciary and the executive.
3. Besides, appellate matters before the ITAT, for the adjudication of not just the facts but the law too, involves much more than just filing of written submissions only (as would happen in faceless mode); many times, even in ‘small’ matters, issues need to be argued verbally, they need to be explained, bare Acts are perused , interpretations are debated by verbal exchange and arguments between judges and parties, queries are raised by judges, and sought to be cleared by either side, caselaw volumes are opened and judges make us read out aloud relevant portions, points of law and facts are emphasised, specific material in paper-books/evidence are pinpointed, sometimes even concessions are made after all sides confront each other, case records are opened in Court and are offered for inspection, stay matters are debated, witnesses can be examined if need be and so on. The crux therefore that can easily be culled out, coupled with proven track is that all these aspects, which are so crucial to all stakeholders, cannot fit into a faceless system at all; thus, they should not (and need not) be fitted into it, notwithstanding the laudable objectives provided for in the proposed sec. 255. One finds it extremely difficult to imagine as to whether the same scenario in faceless mode would be more time-consuming or less? We believe it would be on the greater side.
4. Present provisions of Secs. 254 and 255 of the Act already provide for a ‘hearing’ before the Tribunal; but the hearings should regulated or circumscribed by an executive scheme as to whether hearing shall be allowed in a given case or not. If at all, this should be left to the choice of litigants and must be open hearings. Virtual / e-Benches of ITAT already functioning at some small places like at Rajkot have already been achieving similar objectives of remote appearances, reduced interface, optimisation of resources and cost reduction (due to less need for physical Bench stations), yet they contain all ingredients and benefits of a full hearing as narrated above. In e-benches too, taxpayer’ request for physical hearings are entertained by the Bench.
5. As per the proposed sec. 255, objectives for the faceless scheme are stated to be ‘greater efficiency, transparency and accountability, elimination of interface, functional specialisation, optimisation of resources and dynamic jurisdiction’. While these objectives are laudable, and could be achieved well in departmental proceedings, in our humble submission, except for the last of the above one, all other objectives are not necessarily defeated if the present system is continued and also, they shall need not be achieved only by dismantling the present system. Same objectives can be better achieved if virtual and physical hearings are made parallel and optional; and not driven by a predetermined, rigid scheme; in the interest of right to fair and equal justice and redressal, taxpayer should be granted the right to determine the methodology. Although the empowering law vide sec. 255 would be enacted by the Parliament, the contours of the faceless scheme are being left solely to the Executive Branch, which by its very core, denies the right to be heard openly. This would, we may reiterate, do harm rather than advance the very objective, when the arguments the way they should be conducted, would not be possible. If the objective is to facilitate remote appearance by a litigant, when technology is already available and is improving, in the same courtroom, physical and virtual hearings facilities can be created for simultaneous hearings at the choice of parties. At least in judicial proceedings, it is both impossible and unjust to conceive of a totally faceless hearing. Elimination of interface does not in any way, lead to elimination of identities, hence also the concept of faceless mode should not be extended to the ITAT.
6. In any case, besides the above, it is rather strange that only the ITAT is being sought to be made faceless whereas there are numerous other Tribunals functioning in the country. This creates a rather piquant situation that a junior-most judge of a small causes court in a tehsil town would hear cases in open/physical court conventionally whereas same setting would not be available to a judicial institution which decides matters of crores of rupees of tax liability as a final fact-finding authority and whose orders are not appealable in large number of cases? And isn’t it equally surprising that our country is implementing a large project of a new physical Parliament complex wherein laws of the country are to be debated and enacted but physical adjudication of laws by an important court of direct taxes is sought to be done away with?
In our respectful submission, therefore, while we do not have anything to debate about the technology and the need for cleanliness in all facets of tax law, insertion of sec. 255 to the Act and the faceless scheme provisions need a rethink and, in any case, it should not be made mandatory for all stakeholders before the ITAT. Similar objective as enshrined in the Bill can be achieved differently and may be thought over.
In all earnestness, we request you to consider our representation in the spirit in which it we seek to make.
Thanking you,
Sincerely,
For RAJKOT ITAT BAR ASSOCIATION
PRESIDENT VICE PRESIDENT SECRETARY
Dear Sir,
Thank you for sending me the representation on “Faceless Appeals”. All the points have been covered very well. As discussed with Shri Soparkar, if the Government is determined to work out this proposal, it is better that faceless appeals are tried on an experimental basis at three or four benches of the Tribunal and it can be ascertained whether this experiment is successful.
On my part, it is impossible to understand how an appeal, particularly at the Tribunal level, can be heard and disposed off on a faceless basis. It is still not clear as to what is meant by “Faceless Appeals”.
One cannot imagine the NCLT or other Tribunals becoming “faceless”. Interaction between the Bench and the Bar during the hearing is very critical.
Kind regards,
Arvind P. Datar.
We have sent copy of our representation to
Hon’ble Prime Minister of India
Hon’ble Finance Minister
Hon’ble Law Minister
Shri K. K. Venugopal, Attorney General of India
Shri Tushar Mehta, Solicitor General of India
Shri P. Chidambaram, Former Finance Minister
Shri Kapil Sibal, Former Law Minister
Shri Salman Khurshid,Former Law Minister
Shri Abhishek Manu Singhvi, Member of Parliament
Shri Arvind Datar, Senior Advocate
We have also sent the copy to all leading papers as press release.
I was present in the two days members conference at Gujarat, We have heard the valedictory speech of Hon’ble Law Minister, it seems the Hon’ble Law Minister, the faceless means use of technology for filing appeals, correspondence etc. and not to dispense the oral or physical hearing.
Our senior members from Delhi will take the appointment with the Hon’ble Law Minister and Hon’ble Finance Minister and put forward our suggestions.
Mr. M. Srinivasa Rao
National President
In my views,only assessment should be made faceless and not appeals, which necessitate a lot of personal touches and personal hearing should be allowed at the level of appeals.
The gamut of the representations are that the hearings be not faceless.SIMILARLY THE POINTS RAISED BE ALSO EXPLAINED FACE TO FACE TO THE CONCERNED ministries officials to bring the points home.
In 2021 end the vacancies in normal course shall be touching 55 be also attended and emphasised.
Ironically today completes 3 months,the time allowed to fill vacancies in tribunals by SC order dated 27/11/2020 for which process was in progress .
How hypocritical the Tax Practicers Associations are? They feel ITAT members can’t understand cases without oral hearing. Then how can they expect inferior authorities like AOs and CsIT to understand issues which can’t be understood by ITAT members. They don’t oppose faceless assessment and appeal but oppose faceless ITAT for obvious reasons. Their loss of fee.
It’s interesting that all such professional bodies were silent on implementation of faceless assessments & faceless CIT(Appeals) because their professional practice was not getting affected there. Very selective approach by such bodies. These Bodies should have made representations during implementation of faceless assessments & appeals before CIT(Appeals) also where younger professionals appear.
YOU ARE ABSOLUTELY CORRECT.