{"id":15955,"date":"2021-02-27T01:10:26","date_gmt":"2021-02-26T19:40:26","guid":{"rendered":"https:\/\/itatonline.org\/info\/?p=15955"},"modified":"2021-02-27T09:34:46","modified_gmt":"2021-02-27T04:04:46","slug":"the-finance-bill-2021-conceptual-issues-constitutional-challenges","status":"publish","type":"post","link":"https:\/\/itatonline.org\/info\/the-finance-bill-2021-conceptual-issues-constitutional-challenges\/","title":{"rendered":"The Finance Bill, 2021: Conceptual Issues &#038; Constitutional Challenges"},"content":{"rendered":"<p><strong>Hon&rsquo;ble Mr. Justice, P. P. Bhatt,  President of the ITAT &#8211; <em>Chalta hai<\/em>-approach must be discouraged. <\/strong><\/p>\n<p>All  India Federation of Tax Practitioners (<strong>AIFTP<\/strong>) has organized a two-day <a href=\"https:\/\/www.youtube.com\/channel\/UC5ZOm2oj4NNRuOeBjWTwvPA\">Virtual  National Tax Conference on 17th and 18th February, 2021<\/a> for an in-depth discussion on the Finance Bill, 2021 and its implications,  more than1,000 participants enrolled as delegates for the Virtual National Tax  Conference.<\/p>\n<p>The  Virtual National Tax Conference was inaugurated by Hon&rsquo;ble Mr. Justice, P.P.  Bhatt, President of the ITAT. He released the Souvenir and Directory of core  group committee.<\/p>\n<p>Speaking  on the occasion the Honorable Justice appreciated the role of the AIIFTP which  has completed 44 years. He further appreciated that the members are well  equipped in their knowledge. Technical subjects discussed are of Direct and  Indirect taxes and Brain Trust is chaired by eminent senior Practitioners.  Hon&rsquo;ble President stated that the <em>Chaltahai<\/em>-approach must be  discouraged.<\/p>\n<p><iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/57FGjwFM5MM\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen><\/iframe><\/p>\n<p>He  further stated that this is his third year as a President of the ITAT. With the  able assistance of the Hon&rsquo;ble Members of the ITAT, the virtual Court  functioning is a great success. The disposal of appeal more than the filing of  fresh appeals. They are in the process of improving the functioning of the  ITAT. At Ahmadabad,  the Government has allotted 11000 square feet for the proposed ITAT Building.<\/p>\n<p>One  of the subjects for discussion is the <a href=\"https:\/\/itatonline.org\/blog\/vision-2022-expectation-of-stakeholders-from-the-itat\/\">expectation  of the stakeholders<\/a> from the ITAT. The participants may send  their suggestions <\/p>\n<p>The  First Technical session was on the subject of Finance Bill, 2021. The said  session was chaired by Dr. K. Shivaram, Senior Advocate, Bombay High Court. His  presentation was titled &ndash; <strong>The Finance, Bill 2021:&nbsp; Conceptual issues &amp; Constitutional  Challenges<\/strong>. <\/p>\n<p>Mr.Pradip  Kapashi, Chartered Accountant,analyzed important provisions of the Finance  Bill, 2021.The presentations are published in the <a href=\"https:\/\/aiftponline.org\/wp-content\/themes\/the-bootstrap\/virtual-tax-conference\/\">e-souvenir  of the AIFTP, and the same is hosted here with for the benefit of the readers<\/a>. <\/p>\n<p>&nbsp;<\/p>\n<p align=\"center\"><strong>The Finance Bill, 2021: Conceptual  issues&amp; Constitutional Challenges<\/strong><\/p>\n<p align=\"right\"><strong>by  Dr.K.Shivaram, Senior Advocate &amp;Mr.Shashi Bekal, Advocate <\/strong><\/p>\n<p align=\"center\">Abstract<\/p>\n<p><em>The Hon&rsquo;ble Finance Minister, Smt. Nirmala Sitharaman,  presented the Union Budget on <\/em><em>February   1, 2021<\/em><em> <strong>(2021) 430 ITR 33 (St)<\/strong>&amp;<strong>(2021)  430 ITR 54 (St)<\/strong>. Several bold and unexpected amendments have been proposed  in the Finance Bill 2021 <strong>(2021) 430 ITR 74 (St)<\/strong> vis-&agrave;-vis the Income-tax  Act, 1961(<strong>Act<\/strong>); The intention of these proposed amendments is better  understood on perusing through the Notes on clauses of the Finance Bill <strong>(2021)  430 ITR 160 (St) <\/strong>and Memorandum explaining the provisions in the Finance  Bill, 2021 <strong>(2021) 430 ITR 214 (St)<\/strong>. This Article has attempt to explain  few key provisions of the Finance Bill, 2021, which may face the constitutional  challenges and open a pandora&rsquo;s box of unintended litigation. <\/em><\/p>\n<p>This  Article is divided into 8 parts<\/p>\n<ul>\n<li><span dir=\"ltr\">Introduction<\/span><\/li>\n<li><span dir=\"ltr\">Amendments  proposed to overrule well settled judicial pronouncements<\/span><\/li>\n<li><span dir=\"ltr\">Income escaping assessment and  search assessments<strong><\/strong><\/span><\/li>\n<li><span dir=\"ltr\">Interim Settlement Commission  Board<strong><\/strong><\/span><\/li>\n<li><span dir=\"ltr\">Dispute Resolution Committee <\/span><\/li>\n<li><span dir=\"ltr\">Board for  Advance Ruling <\/span><\/li>\n<li><span dir=\"ltr\">Faceless  Income -tax Appellate Tribunal<\/span><\/li>\n<li><span dir=\"ltr\">D&eacute;nouement<\/span><\/li>\n<\/ul>\n<p><strong>1. Introduction <\/strong> <\/p>\n<p><strong>1.1. Six Pillars (2021) 430 ITR 33 (St) 36<\/strong> <br \/>\n  The  Hon&rsquo;ble Finance Minister Mrs. Nirmala Sitharaman in her first digital budget which  was presented on February2021,shared her vision for the &ldquo;<strong>Amrut Mahotsav of 2022&rdquo;<\/strong>i.e.,  the 75thyear of our Independence. India  seeks to achieve the goal of <strong>&ldquo;AtamaNirbhar  Bharat&rdquo;<\/strong> wherein six Pillars are referred to, they are:<br \/>\n  i. Health  and Well -being,<br \/>\n  ii.  Physical and Financial Capital and Infrastructure,<br \/>\n  iii.  Inclusive Development for Aspirational India,<br \/>\n  iv.  Reinvigorating Human Capital,<br \/>\n  v. Innovation  and R&amp;D, and <br \/>\n  vi.  Minimum Government and, MaximumGovernance,<\/p>\n<p>For  the overall development of the economy, the innovative vision of the Hon&rsquo;ble  Finance Minister,deserves to be appreciated.However,thejudiciary is also one of  the pillars of Democracy anddeserves allocation of fundsfor infrastructure,  modernizationanddigitalization.The same was neglected in the Budget. All India  Federation of Tax Practitioners(<strong>AIFTP<\/strong>) has made representations from  time to time that every year a separate budget should be preparedfor allocation  of funds to the Judiciary.The infrastructureinlower judiciary is poor, and  requires immediate attention<\/p>\n<p><strong>1.2. Judiciary <\/strong><\/p>\n<p>Hon&rsquo;ble  Attorney General ofIndiaShri K.K. Venugopal, Senior Advocate -in his article titled <strong>&ldquo;Access to Justice the Indian  Experience&rdquo; <\/strong>on the occasion of Golden Jubilee Souvenir of the Income tax  Appellate Tribunal in the year1991is usefully extracted as under:<\/p>\n<p><em>&ldquo;Any number of laws may be passed by the legislatures  for the welfare of the people but if non-implementation of the same or wrongful  implementation cannot be remedied except 10 or 15 years, then surely the  judicial system itself needs drastic overhaul.<\/em><\/p>\n<p><em>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&nbsp; 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.&rdquo;<\/em><\/p>\n<p>The  most effective manner to convince the government on this issue should be made a  matter of debate.Professional Organizations like AIFTP shouldmake  representation every year until the Government&rsquo;s attention is drawn towards  this. <\/p>\n<p><strong>1.3. Amendments  &#8211; <em>The maddening instability of Income tax Law<\/em><\/strong><br \/>\n  There  are 93 &nbsp;clauses in the Finance Bill 2021,<strong>(2021)  430 ITR 74 (St)<\/strong>some of the provisions proposed in the Billwill have far  reaching implications.<\/p>\n<p>Mr.N.A.Palkhivala,Senior  Advocate in his article, published in the Souvenir of the ITAT in the  year1991titled<strong>&ldquo;The maddening instability  of Income tax Law&rdquo;, <\/strong>reads as under: <br \/>\n    <em>&ldquo;To day the Income -tax Act, 1961, is a national  disgrace. There is no other instance in Indian Jurisprudence of an Act  mutilated by more than 3300 amendments in less than thirty years. Simple  provisions like sections 11 to 13 (Which deals with exemption of charitable  trusts) have suffered no less than fifty amendments.&rdquo;<\/em><br \/>\n    <em>&ldquo;A telling example of the total absence of a sense of  time in our tax admiration isafforded by the Supreme Court&rsquo;s decision rendered  last Novemberin the case of Sutlej Cotton Mills Ltd v. CIT (1990) 2 SCALE  931.It was a case under Business Profits Tax Act, 1947. The accounting period  was 1946 -47. The amount involved was a paltry sum of a few lakhs of rupees.  The High Court&rsquo;sjudgement was renderedin 1965. The Supreme Court sent the  matter back to the Tribunal to re hear the appeal 44 years after the close of  the accounting period. Is there any other civilized country wherea tax payer  would not knowthe quantumofhis liability for 44 Years.?&rdquo; <\/em><br \/>\n    <em>&ldquo;India is waiting for a Finance Minister who will have  the courage, caliber and vision to put a stop to the maddening instability of  our Income -tax law&rdquo;<\/em><\/p>\n<p>Most  of the amendmentswhichproposed in the Finance Bill 2021 areto overturn the  decisions of the Hon&rsquo;ble Supreme Court or High Courts which are in favour of  the Assesses, further some amendments have the retroactive implications.Former  Hon&rsquo;ble Finance Minister, Late Shri Arun Jaitley whileaddressing the  Parliamenton July 18, 2014 has stated that, India will not levy any tax with  retrospectiveeffect that createsadditional burden and existing anomalies in  this regard would be corrected, he stated<strong><em>&ldquo;One thing we have made very  clear: No retrospective tax creating fresh liabilities will be imposed&rdquo;<\/em><\/strong><strong>.<\/strong>The Former Minister also stated that<strong><em>&ldquo;At  this juncture I would like to convey to this august house and also the  investors community at large that we are committed to provide a stable and  predictable taxation regime that would be investor friendly and spur growth&rdquo;<\/em>.<\/strong><strong><\/strong><\/p>\n<p><strong>2. Amendments proposed  to overturn settled judicial pronouncements<\/strong><\/p>\n<p><strong>2.1. <\/strong><strong>Clause  3: seeks to amend section 2(11) of the Act, &lsquo;Block of assets&rsquo;<\/strong><strong>&ndash; Goodwill is  proposed to be excluded from the Block of assets.<\/strong> <\/p>\n<p>As per the decision of the Hon&rsquo;ble  Supreme Court in the case of <strong>CIT v. Smiff Securities Ltd. (2012) 348 ITR 302 (SC)<\/strong> on merger Goodwill isvalued and  depreciation is provided as an intangible asset. The goodwill is merged with  the block of intangible assets and loses its independent identity.However, on  account of this amendment, taxpayers will have to remove the goodwill from the  Block of assets, and not claim depreciation on the same.Working capital of the  taxpayers may be affected and for this year the assessee&rsquo;s calculation of  advance tax may lead to levy of interest. The amendment has been made  applicable retrospectively with effect from assessment year 2021-22<\/p>\n<p>In <strong>CIT v. <\/strong><strong>National Dairy Development  Board [2017] 397 ITR 543\/ 249 Taxman 61 \/ 83 taxmann.com 109 (Guj)(HC)<\/strong>held that where  there was no shortfall in advance tax payment when such liability arose, and  advance tax liability arose later on only due to retrospective amendment in  statute, no interest could be charged on advance tax.<strong><\/strong><\/p>\n<p>The legislature could have stated no  depreciation would be available on any goodwill acquired after April 1, 2021 the depreciation is not available.<\/p>\n<p>Further, bifurcation on what constitutes  as goodwill or an intangible asset will be a matter of litigation.<\/p>\n<p><strong>2.2. Slump  Exchange is held to be taxable <\/strong><strong> <\/strong><\/p>\n<p><strong>Clause 3.<\/strong>The definition  of the term Slump sale by amending the provision of clause (42C) of section 2  of the Act so that all types oftransfer as defined in clause (47) of section 2  of the Act are included within its scope. The amendment has been made applicable  retrospectively with effect from assessment year 2021-22<\/p>\n<p>This has  overruled the decision of the Hon&rsquo;ble High Courts in the case of <strong>CIT&nbsp;v.&nbsp;Bharat  Bijlee Ltd. [2014] 365&nbsp;<\/strong><strong>ITR<\/strong><strong>&nbsp;258 (Bom.) (HC),<\/strong><strong>Areva T &amp; D  India Ltd. v. CIT[2020] 428 ITR 1 (Mad)(HC). <\/strong> <\/p>\n<p>The intention of  the legislature in providing clarity and plugging colourable transaction, is  appreciated. However, the retrospective application of the law will lead to  unintended litigation.<strong><\/strong><\/p>\n<p><strong>2.3. <\/strong><strong>Clause 6: Section 11 of the Act Charitable Trust carried forward of  losses <\/strong><\/p>\n<p><strong>Carry forward of deficit of earlier year and its set off against the  surplus of subsequent years is allowable.<\/strong><\/p>\n<p>The  law laid down in the case of <strong>CIT v.Shri Plot SwetamberMurtiPujak Jain Mandal  [1995] 211 ITR 293 (Guj) (HC),CIT v. Institute of Banking Personnel Selection  (IBPS) (2003) 264 ITR 110(Bom.)(HC), <\/strong>and <strong>CIT (E) v.Subros Educational Society (2018) 303 CTR 1 \/ 166 DTR 257  (SC)<\/strong>have been reversed. <\/p>\n<p>As per new explanation to Section 12AB of the Act, no set off of  or deduction or allowance of any excess application of any year preceding the  previous year shall be allowed. For the purpose of this sub-section,it is  hereby clarified that the calculation of income required to be applied or  accumulated during the previous year shall me made without any set off or  deduction or allowance of any excess application of any of the year preceding  previous year. As per notes on clauses these amendments will take effect from 1st April, 2022 and will, accordingly, apply in relation to the assessment year  2022-23 and subsequentyears.<\/p>\n<p>The issue for considerationis whetherearlier years deficit if any  cannot be set off from the AY 2022-23. One argument could be that any deficit  of earlier years should be allowed and any deficit from the AY. 2022-23 will  not be allowed to be carried forward.Debatable issues would give rise to  litigations.<\/p>\n<p><strong>2.4. <\/strong><strong>Clause 8 &ndash; Section 36 (1)(va) of the Act&ndash;<\/strong><strong>No deduction on employee&rsquo;s contribution made after the due date<\/strong><\/p>\n<p>Notes on clauses suggests some courts  have applied the provision of section 43B on employeecontribution as well. By  late deposit of employee contribution, the employee gets unjustly enriched by  keeping the money belonging to employees, clause (va) of sub section (1) of  Section 36 of the Actwas inserted to the Actvide Finance Act, 1987 as a measure  of penalizing employers who mis-utilizeemployee&rsquo;s contribution.Amendment is  effect from Ist April 2021, will apply to the assessment years 2021-22.<br \/>\n  There were around eight Courts in favour  and around threeagainst and some of the cases SLP of the revenue was dismissed.<\/p>\n<p><strong>&#8211; <\/strong><strong>Favour: <\/strong>Popular Vehicles &amp;Services (P.) Ltd. CIT (2018)  406 ITR 150 (Ker.)(HC), CIT v. Manglam Arts (2017) 398 ITR 594 (Raj) (HC), PCIT  v. Rajasthan State Beverages Corpn. Ltd. (2017) 250 Taxman 32 (Raj) (HC) SLP of  revenue is dismissed, PCIT v. Rajasthan State, Beverages Corpn. Ltd. (2017) 250  Taxman 16 (SC), Bihar State Warehousing Corporation Ltd. v. CIT (2017) 393 ITR  386(Patna) (HC), CIT v. Nuchem Ltd. (2015) 371 ITR 164 (P&amp;H)(HC), CIT v.  Kichha Sugar Co. Ltd. (2013) 356 ITR 351 (Uttarakhand) (HC), CIT v.  NipsoPolyfabriks Ltd. (2013) 350 ITR 327 (HP)(HC),&nbsp; CIT v. GhatgePatil Transport Ltd. (2014) 368  ITR 749 (Bom.)(HC) Kashmir Tubes v. ITO (2017) 85 taxmann.com 299 (2018)  (J&amp;K)(HC), Sagun Foundry (P.) Ltd. v. CIT (2017) 291 CTR 557 (All.) (HC)  CIT v. Sabari Enterprises (2008) 298 ITR 141&nbsp;(Karn) (HC) <\/p>\n<p><strong>&#8211; <\/strong><strong>Against<\/strong>: CIT v. Gujarat State Road Transport Corporation  (2014) 366 ITR 170 (Guj) (HC), Unifac Management Services (India) Pvt. Ltd. v. DCIT (2018) 409 ITR 225 (Mad) (HC), CIT v. Bharat Hotels Ltd. (2019) 410 ITR  417 (Delhi)(HC) <\/p>\n<p><strong>2.5. Clause<\/strong><strong> 14&ndash; Section 45  (4) Partnership firm reevaluation.<\/strong><\/p>\n<p>The Hon&rsquo;ble Supreme Court in the case of <strong>AddankiNarayanappa v.  Bhaskar Krishnappa <\/strong><strong>AIR<\/strong><strong> <\/strong><strong>SC<\/strong><strong> 1300 <\/strong>held that share in the partnership firm  is moveable property.<\/p>\n<p>In<strong>CIT v. Dynamic Enterprises (2013) 359 ITR 83 (Karn.)(HC)(FB) <\/strong>held  that where Cash towards the value of shares, there is no transfer of capital  asset and, therefore, no profits or gains chargeable to tax in the hands of the  assessee-firm.<\/p>\n<p>In <strong>D. S.  Corporation v. ITO (TM) (Mum.)(Trib.)<\/strong><a href=\"http:\/\/www.itatonline.org\/\"><strong>www.itatonline.org<\/strong><\/a> held thatthe revaluation of asset being land held by the partnership firm  which results into enhancement of value of asset and this enhanced amount  credited in capital account of partners and when a retiring partner takes  amount in his capital account including enhanced value of asset, it does not  give rise to Capital gains. <strong><\/strong><\/p>\n<p>In India most of the  business is carried on through the mode of partnership.<br \/>\n  Types of  litigation that may arise is very difficult to imagine.<\/p>\n<p>Whether mere  change in the profit-sharing ratio in the amended provisions is applicable is  debatable. Reference is drawn to the decision in the case of<strong>S. Srinivasan  v.CIT (1967) 63 ITR 273 (SC)<\/strong>.<\/p>\n<p>Amendments will  take effect from 1stApril 2021 and will apply in relation to  assessment year 2021 -22 <\/p>\n<p><strong>3. Income escaping assessment and search assessments(2021) 430 ITR  110 (St) <\/strong><\/p>\n<p><strong>Clauses 35, 36, 37, 38, 39, 40,4142, 43<\/strong><\/p>\n<p>Memorandum  explaining the provision (2021) 430 ITR 250 (St), states that due to  advancement of technology, the departmentis now collecting all relevant  information related to transactions of taxpayers from third parties under  section 285A of the Act(Statement of financial transaction or reportable  account). Similarly, informationis also shared with the tax payer through  Annual Information Statement under section 285BB of the ActDepartment uses this  information to verify the informationdeclared by a taxpayer in the return and  to detect non-filers or those who have disclosed the correct amount of total  income. Therefore, assessment or reassessmentor re-computation of income  escaping assessment, to a large extent, as information-driven.<\/p>\n<p>Inview of above,  there is a need to completely reform the system of assessment or reassessment  or re-computation of income escaping assessment andsearch related cases.<\/p>\n<p>The Bill  proposes a completely new procedure of assessment of such cases. It is expected  that the new system would result in less litigation and would provide ease of  doing business to tax payers as there is reduction in time limit by which a  notice for assessment or reassessment or re computation can be issued. The  salient features of new procedure are as under:<\/p>\n<p>(i). The  provisions of section 153A and section 153C, of the Actare proposed to be made  applicable to only search initiated under section 132 of the Actor books of  accounts, other documents or any assets requisitioned under section 132A of the  Act, on or before 31st March 2021.<\/p>\n<p>(ii) Assessments  or reassessments or in re -computation in cases where search is initiated under  section 132 or requisition is made under section 132A, after 31st March 2021  shall be under the new procedure.<\/p>\n<p><strong>New Procedure <\/strong><br \/>\n  (i) Section 147  of the Act proposestoallow the Assessing Officer to assess or reassess or  re-compute any income escaping assessment for any assessment year (Called  revenant assessment year)<br \/>\n  (ii) Before  issue of notice u\/s 148 when there is information the Assessing Officer has to  get the prior approval of specified authority.<br \/>\n  (iii)  Information flagged is in accordance with risk management strategy formulated  by the Board shall be considered as information. The flagging would largely  done by the computer bases system <br \/>\n  (iv) Objection  raised by the Comptroller and Auditor General of Indiais also considered as  information <br \/>\n  (v) Search,  survey or requisition cases initiated or conductedon or after 1st April  2021shall be deemed that the Assessing Officer has the information.<br \/>\n  (vi) Section  148A new provisionbefore issue of notice under section 148 of the Act, Except  search and requisitioned cases.<\/p>\n<p>Further, <br \/>\n  (i) Before issue  of notice u\/s148shall conduct enquiries, if required and provide an opportunity  of being heard to the assessee. <br \/>\n  (ii) Before  Conducting an enquiry, the Assessing Officer has to obtain approval of  specified person<br \/>\n  (iii) After  receiving the replythe assessing Officer shall pass an order and serve the  order along with the notice to the assessee, with the approval of the Specified  authority.<br \/>\n  (iv)Thereafter  the regular proceedings will be initiated.<br \/>\n  (v) The  specified Authority is Principal Commissioner orPrincipal Director or  Commissioner or Director if three years or less than three yearshave elapsed<br \/>\n  (vi) Principal  Chief Commissioner or Principal Director General, if more than three years have  elapsed from the end of relevant assessment years.<\/p>\n<p><strong>Limitation: <\/strong><br \/>\n  &#8211; In normal cases, no notice shall be issued if there years have  elapsed from the end of the relevant assessment year <\/p>\n<p>&#8211; Beyond three yearsbut not  exceeding 10 yearsfrom the end of relevant assessment years can be in a  specified cases<\/p>\n<p>&#8211; Where the Assessing Officer has  in his possession evidence in the form of asset amounts to or likelyto amount  to fifty lakh rupees or more <\/p>\n<p>&#8211; There are exceptions to the  search initiated before 31stMarch2021.<\/p>\n<p>&#8211; Except search and Requisitioned  cases mandate of section 148A has to be followed.<\/p>\n<p><strong>Issues for  consideration:<\/strong><\/p>\n<p>&#8211; The concept of &ldquo;borrowed satisfaction&rdquo; or &ldquo;Reason to believe&rdquo; is  done away with, and may not hold good in the future.<\/p>\n<p>&#8211; Whether assessment is under  section 143(1) of 143(3) of the Act assessment cannot be reopened beyond the  period of three years, unless it falls in the exceptionclause. Which is a  welcome provision <\/p>\n<p>&#8211; Even for with in there years or  beyondthree years, mandate of section 148A has to be followed,except search and  requisitioned cases. In built mechanism of sanction form the prescribed  authority has to be obtained at three times.<\/p>\n<p>&#8211; Guidelines prescribed in <strong>GKN  Driveshafts (<\/strong><strong>India<\/strong><strong>) Ltd  v.ITO (2003) 259 ITR 19 (SC)<\/strong> is prescribed in the provision of  section 148A of the Act.<\/p>\n<p>&#8211; Once the order on the basis of  the notice u\/s 148 is passed, the said order may be challengedbefore the High  Court by writ if the sanction is not proper or the order is not speaking order <br \/>\n  &#8211; Judicial pronouncement on the  issue of sanction, not passing of speaking order will hold good. <\/p>\n<p>&#8211; The ratio laid down by the High  Courts that after passing the order disposing the objectionsthe Assessing  Officer may have to wait four weeks to proceed with regular assessments. <strong>Allana  Cold Storage Ltd v ITO 287 ITR 1 (Bom) (HC), Kamlesh Sharma (Smt)  v.B.L.Meena,ITO (2006) 287 ITR 337 (<\/strong><strong>Delhi<\/strong><strong>) (HC)<\/strong>should  stillhold good.<\/p>\n<p>&#8211; objections not properly dealt  withas held in the case of <strong>Scan Holding P Ltd v. <\/strong><strong>ACIT<\/strong><strong> (2018)  402 ITR 290 (Delhi) (HC), Ankita A.Chokssey v.ITO ( 2019) 402 ITR 207 ( Bom)  (HC),Swastic Safe Deposit and Investments Ltd (2019) 263 Taxman 303 (Bom) (HC)  (SLP rejected (2020) 270Taxman 8 (SC)<\/strong>may still be good law.<\/p>\n<p>&#8211; While giving the sanction the  prescribed Authority has to apply their mind &ndash; Sanction granted by writing  &ldquo;Yes, I am satisfied&rdquo; is not sufficient to comply with the requirement of  section 151 of the Act will also hold good for the provision of section 148A of  the Act.<br \/>\n    <strong>[Gernman Remedies Ltd v.Dy CIT (2006) 287 ITR 494 (Bom) (HC) <\/strong><br \/>\n    <strong>CIT v. Suman Waman Chaduahry (2010) 321 ITR 495 (Bom) (HC) <\/strong><br \/>\n    <strong>Central India Electricity Supply Co Ltd v.ITO (2011) 333 ITR237 (<\/strong><strong>Delhi<\/strong><strong>) (HC)]<\/strong><\/p>\n<p>&#8211; The Hon&rsquo;ble Bombay High Court in the case of <strong>CIT v. Jet Airways  (I) Ltd. [2011] 331 ITR 236  (Bom)(HC) <\/strong>held that  if after issuing a notice under section 148, he accepts contention of assessee  and holds that income, for which he had initially formed a reason to believe  that it had escaped assessment, has, as a matter of fact, not escaped  assessment, it is not open to him to independently assess some other income.  This proposition should continue to hold good under the new law as well. <\/p>\n<p>&#8211; Whether specific Survey for TDS will lead to  deemed information for reassessment is another debatable issue <\/p>\n<p>At present 80 % of  Writs before the Bombay High Court on the issues relating to reassessment. If  the tax administrationfollowsthe due process of the law, we are of the view  that the tax litigation on the issue of reassessment may be minimised.<\/p>\n<p><strong>4. Interim Board &#8211; Settlement Commission <\/strong><\/p>\n<p>The Settlement  Commission was set up with effect from 1-4-1976as per the recommendation of the  Direct Taxes Enquiry Committee headed by the Former Chief Justice of Supreme  Court of India, Shri K.N.Wanchoo.In <strong>CIT v. B.N. Bhattachargree (1979) 118  ITR 461 (SC)<\/strong>,the honourable Supreme Court discussed in detail the objectand  purpose of introducing the provision.<br \/>\n  Section 245B  (3)reads as under:<br \/>\n  <em>&ldquo;The Chairman, Vice Chairman and others members of the Settlement  Commission shall be appointed by the Central Government from amongst persons of  integrity and outstanding ability, having special knowledge of, and experience  in problems relating to direct taxes and business accounts.&rdquo; <\/em><\/p>\n<p>The AIFTP was  making representation to the Honourable Finance Ministry from time to time  thatan ideal Forumof Settlement Commissionshould be one from the Department,  One from the legal profession and One from the Accountancy profession.We have  made representation that the follow the procedure of appointment as per the methodology  adopted by the Government for appointment of Honourable Members of the ITAT,  the Committee consists of Sitting Judge of Supreme Court, as Chairman and  nominees from Ministry of law, Ministry of financeand a nominee from the  Attorney General. By inviting applications, having interviews etc.However, the  CBDT has appointed only theCommissioners from the Department as members, that  is why nowthe Govt has abolished the institution itself.<\/p>\n<p>Relevant clauses  of the Bill, are, 54, 55, 56, 57,58, 59,60.All amendment will take effect  retrospectivelyfrom IstFebruary 2021. Clauses 61, 62, 63, 64 of the Bill seeks  to amend sections 245DD, 245F, 245Gand 245H of the Actso as to provide that  powers and functions of Settlement Commission under the said sections shall be  exercised or performed by the Interim Board on or after 1st day of February  2021 and all the provisions of the said sections shall <em>mutatis mutandis<\/em>apply  to interim Board as they applied to Settlement Commission.<\/p>\n<p>The decision of the Hon&rsquo;ble Supreme Court in the  case of<strong> UOI v. Star Television News Ltd. (2015) 373 ITR 528\/231 Taxman 341  (SC)<\/strong>affirmed the decision of the Hon&rsquo;ble Bombay High Court in the case of<strong>Star Television News Ltd. v. UOI [2009] 317  ITR 66 (Bom.) (HC) <\/strong><\/p>\n<p>On petitions challenging the validity of sections  245HA(1)(iv) and (3) of the Income-tax Act, 1961, as amended by the Finance  Act, 2007,provision for abatement of  proceedings where no order passed by cut-off date-Discrimination likely among  applicants for factors not under their control-Provisions arbitrary. High Court  read down so that proceedings treated as abated only where failure owing to  reasons attributable to applicant-Direction to proceed with applications as if  not abated where delay not attributable to applicant the High Court  found the provisions violative of Article 14 of the Constitution, but did not  invalidate the provisions, and instead, read them down, in particular, the  provisions of section 245HA(1)(iv), so that only where the application could  not be disposed of for any reasons attributable on the part of the applicant  would proceedings abate under section 245HA(1)(iv) of the Act. The court  directed the Settlement Commission to consider whether the proceedings had been  delayed on account of reasons attributable to the applicant and if they were  not, to proceed with the application as if not abated. On appeal to the Supreme  Court: <\/p>\n<p>Held, affirming the decision of the High Court,  that the judgment of the High Court was a well-considered one and did not call  for any interference. <\/p>\n<p>Clause 54  -Amendment isproposed to section 245A, there will be interim Board, Section  245AA member of the Interim Board.<\/p>\n<p>Clause 55- New  Section 245AAonly deciding pending application by the Interim Board <\/p>\n<p>Clause 56 &ndash;  Seeks to amendmentsection 245Bso as to provide that the Settlement shall cease  to operate on or after the Ist day of February2021 <\/p>\n<p>Clause 57 &ndash;  Seeks to amend section 245BCof the said Actshall not apply on or after the Ist  day of February, 2021.<\/p>\n<p>Clause 58 &ndash;  Seeks to amend Section 245BD of the Actexisting provisionsshall not apply on or  after the Ist day of February, 2021.<\/p>\n<p>Clause 59 Seeks  to amend Section 245C of the Actso as to provide that no application shall be  made under this section on or after I st day of February, 2021.<\/p>\n<p>Clause60 seeks  to amendsection 245D of the Act saving clause for passing the pending  ordersrectifications etc. All amendmentsare procedural.<\/p>\n<p>There could be  some challenges on the provisions, how the taxpayers will gain the confidence  of the tax payers, the time will decide the fate of the new forum.<br \/>\n  -Some of the  assesses might have paid the tax on the proposed application to be filed, the  consequences of the same is not known, can they approach the High court stating  that they may be allowed to approach the Interim Board <br \/>\n  &#8211; Some of the  assessee might have written to the Assessing Officers informing that they are  approaching the Settlement Commission hence their matters to be kept in  abeyance.<br \/>\n  &#8211; Finance Bill  has not became an Act hence restraining the SettlementCommission with effect  from 1-2-2021 may not be  constitutionally valid.<\/p>\n<p><strong>5. <\/strong><strong>Dispute Resolution Committee (DRC)for Small and medium tax payers-Chapter  XIX-AA ( 2021) 430 ITR 124 ( St) <\/strong><\/p>\n<p><strong>5.1. Background<\/strong><\/p>\n<p>The Honourable Supreme Court in the case of <strong>National  Co-Operative Development Corporation v.CIT (2020) 427 ITR 288<\/strong><strong> (SC)<\/strong>observed as under:<strong><\/strong><br \/>\n    <em>&ldquo;A number of litigations arise inter se the Government and its  bodies. One of the main impediments to such a resolution, plainly speaking, is  that bureaucrats are reluctant to accept responsibility of taking such  decisions, apprehending that at some future date their decision may be called  into question and they may face consequences post retirement. In order to make  the system function effectively, it may be appropriate to have a committee of  legal experts presided over by a retired judge to give their imprimatur to the  settlement so that such apprehensions do not come in the way of arriving at a  settlement. It is our pious hope that a serious thought would be given to the aspect  of dispute resolution amicably, more so in the post-COVID period.<\/em><br \/>\n    <em>In so far as taxation matters are concerned, they are consistently  sought to be carved out as a separate category of cases. A vibrant system of  advance rulings can go a long way in reducing taxation litigation. Instead of  first filing a return and then facing consequences from the Department because  of a different perception which the Department may have, an advance ruling  system can facilitate not only such a resolution, but also avoid the tiers of  litigation which such cases go through as in the present case. In 2000 public  sector companies were added to the definition of &ldquo;applicant&rdquo;, and in 2014, it  was made applicable to a resident who had undertaken one or more transactions  of the value of Rs. 100 crores or more. In so far as a resident is concerned,  the limit is so high that it cannot provide any solace to any individual, and  it is time to reconsider and reduce the ceiling limit. The aim of any properly  framed advance ruling system ought to be a dialogue between taxpayers and  revenue authorities to fulfil the mutually beneficial purpose for taxpayers and  revenue authorities of bolstering tax compliance and boosting tax morale. This  mechanism should not become Anr. stage in the litigation process.<\/em><br \/>\n    <em>Thus, the Central Government must consider the efficacy of the  advance tax ruling system and make it more comprehensive as a tool for  settlement of disputes rather than battling it through different tiers, whether  private or public sectors are involved. A council for advance tax rulings based  on the Swedish model and the <\/em><em>New Zealand<\/em><em> system may be a  possible way forward.&rdquo; <strong><\/strong><\/em><\/p>\n<p>The Finance  Bill, 2021 has proposed an amendment vide clause 66 to introduce a new section  viz. section 245MA to the Act under Chapter XIX-AA. vide clause 54-65. It can  be understood that DRC is constituted as the ITSC did not cater to the small  and medium tax payers. The idea for DRC was envisaged in the Union Budget,  2020.<\/p>\n<p>The DRC will be  an alternative dispute mechanism, the taxpayer will be given an option to opt  foror not out of this mechanism. The DRC will provide cost effective and easy  access to justice than to be drawn into the rigorous appellate system. The DRC  shall have the powers to reduce or waive any penalty imposable under the Act or  grant immunity from prosecution for any offence under the Act. Further, on  account of early resolution of dispute, the interest costs would be relatively  lesser.<\/p>\n<p>Similar to the  other faceless schemes that have leveraged technology and modern science, the  Government shall introduce a scheme for DRC in a faceless manner and the same  shall be issued on or before March 31, 2023. <\/p>\n<p><strong>5.2. The Proposed Law<\/strong><\/p>\n<p>For an in depth  understanding of the proposed law, the amendment shall be explained clause-wise  in light of the Memorandum explaining the Finance Bill, 2021. <\/p>\n<p><strong>Section 245MA  (1) &#8211; Constitution<\/strong>: This sub-clause empowers the Central Government to constitute,  one or more DRCs, as may be necessary, in accordance with the rules made under  this Act. The DRC is empowered to entertain such persons or class of persons,  as may be specified by the Board. Further, the tax payer has the option to opt  for dispute resolution under this Chapter in respect of dispute arising from  any variation in the specified order in his case and who fulfils the specified  conditions.<\/p>\n<p>&ldquo;Specified  conditions&rdquo; means the following:<\/p>\n<ul>\n<li><span dir=\"ltr\">A person in respect of whom an  order of detention has been made under the provisions of the Conservation of  Foreign Exchange and Prevention of Smuggling Activities Act, 1974.<\/span><\/li>\n<li><span dir=\"ltr\">A person, in respect of whom  prosecution for any offence punishable under the provisions of the Indian Penal  Code, the Unlawful Activities (Prevention) Act, 1967, the Narcotic Drugs and  Psychotropic Substances Act, 1985, the Prohibition of Benami Transactions Act,  1988, the Prevention of Corruption Act, 1988 or the Prevention of Money  Laundering Act, 2002 has been instituted and he has been convicted of any  offence punishable under any of those Acts.<\/span><\/li>\n<li><span dir=\"ltr\">A person in respect of whom  prosecution has been initiated by an income-tax authority for any offence  punishable under the provisions of this Act or the Indian Penal Code or for the  purpose of enforcement of any civil liability under any law for the time being  in force, or such person has been convicted of any such offence consequent upon  the prosecution initiated by an Income-tax authority.<\/span><\/li>\n<li><span dir=\"ltr\">A person who is notified under  section 3 of the <\/span>Special Court (Trial of  Offences Relating to Transactions in Securities) Act, 1992.<\/li>\n<li><span dir=\"ltr\">Any such conditions, as may be  prescribed.<\/span><\/li>\n<\/ul>\n<p>&ldquo;Specified  Order&rdquo; means such order, including draft order, as may be specified by the  Board, and:<\/p>\n<ul>\n<li><span dir=\"ltr\">Aggregate sum of variations  proposed or made in such order does not exceed ten lakh rupees.<\/span><\/li>\n<li><span dir=\"ltr\">Such order is not based on search  initiated under section 132 or requisition under section 132A in the case of  assessee or any other person or survey under section 133A or information  received under an agreement referred to in section 90 or section 90A i.e. the  order is not emanating from a search &amp; seizure action or information  obtained from other countries under the DTAA.<\/span><\/li>\n<li><span dir=\"ltr\">Where return has been filed by the  assessee for the assessment year relevant to such order, total income as per  such return does not exceed fifty lakh rupees.<\/span><\/li>\n<\/ul>\n<p><strong>Section 245MA  (2) &#8211; Powers<\/strong>: The DRC shall have the powers to reduce or waive any penalty  imposable under this Act or grant immunity from prosecution for any offence  punishable under this Act in case of a person whose dispute is resolved under  this Chapter.<\/p>\n<p><strong>Section 245MA  (3) &#8211; Scheme<\/strong>: The Central Government may make a Scheme for the purpose of DRC  so as to impart greater efficiency, transparency and accountability by:<\/p>\n<ul>\n<li><span dir=\"ltr\">Introducing a Faceless procedure  for the functioning of DRC<\/span><\/li>\n<li><span dir=\"ltr\">Optimising utilisation of the  resources through economies of scale and functional specialisation<\/span><\/li>\n<li><span dir=\"ltr\">The DRC shall have a dynamic  jurisdiction<\/span><\/li>\n<\/ul>\n<p><strong>Section 245MA  (4) &#8211; Power to make changes: <\/strong>The Central Government may, for the purposes  of giving effect to the scheme by notification direct that any of the  provisions of this Act shall not apply or shall apply with such exceptions,  modifications and adaptations as may be specified in the said notification. <\/p>\n<p><strong>5.3. Challenges<\/strong><br \/>\n  Some of the  challenges, or provisions that require clarification are as under:<\/p>\n<p><strong>a) <\/strong><strong>Appeal Mechanism<\/strong>: From a reading of the proposed  section 245MA to the Act, it appears that the eligible tax payer can approach  the DRC after the receipt of the order of ld. AO\/ Faceless Assessment. <\/p>\n<p>It is yet to be understood whether, the  assessee\/ tax payer waives off his right of first appeal before the CIT(A) upon  making an application before the DRC.<\/p>\n<p>Further, if the assessee is aggrieved by the  order of the DRC, does the assessee have the right to appeal against such  order. Since section 253 of the Act, &ldquo;<strong>Appeals to the Appellate Tribunal<\/strong>&rdquo;,  does not acknowledge an order passed under the proposed section 245MA of the  Act. It appears that there is no prescribed appeal under the law. <\/p>\n<p>In the event there is no alternative  efficacious remedy in place, the small-medium assessee will have no choice but  to exercise the extra ordinary jurisdiction of the Hon&rsquo;ble High Court by way of  a Writ Petition, this will be an expensive and cumbersome exercise which would  defeat the intention of the legislature i.e., to reduce the tax litigation for  the small &amp; medium tax payers.<\/p>\n<p><strong>b) Waiver of Interest: <\/strong>The ITSC  had the power to waive interest and penalty. However, the Hon&rsquo;ble Supreme Court  in the case of <strong>Kakadia Builders (P.) Ltd. v. ITO (<\/strong><strong>(2019) 412 ITR 128\/103  taxmann.com 53 (SC) <\/strong>held that Settlement Commission in exercise of  its power under section 245D(4) and (6) of the Act does not have power to  reduce or waive interest statutorily payable under sections 234A, 234B and 234C  of the Act. <strong><\/strong><\/p>\n<p>On the other hand, as per section 6 of the  Direct-tax Vivad se Vishwas Act, 2020, the designated authority shall not  institute any proceeding in respect of an offence; or impose or levy any  penalty; or charge any interest under the Income-tax Act in respect of tax  arrear.<\/p>\n<p>Since the Memorandum explaining the Finance  Bill, 2021 has emphasised on the indicative success of the Direct-tax Vivad se  Vishwas Scheme while explaining the DRC. It would be imperative to understand  the nature and powers of the DRC.<\/p>\n<p><strong>c) Rectification  Application: <\/strong>A rectification application under section 154 of the Act is  preferred when there is an apparent mistake or error on the face of the Order.  It needs to be understood, whether the taxpayer-assessee would have the option  to simultaneously avail the benefit of section 154 of the Act as well as the  proceedings before the DRC. Ideally, as followed under the Direct tax Vivad Se  Vishwas Scheme, a rectification application must be given effect and then the  declarant was allowed to declare the rectified order under the Scheme.  Similarly, a rectification application should be allowed before giving effect  to the order of the DRC.<strong><\/strong><\/p>\n<p><strong>d) Capitalisation: <\/strong>Under the  ITSC, the appellant would be granted the benefit of capitalisation of the  undisclosed income offered before the ITSC, in the event its prayed for, and  allowed. There is no clarity on such provisions before the DRC.<strong><\/strong><\/p>\n<p><strong>e) Repetitive application  before the DRC: <\/strong>An application can be made by an assessee for settlement before  the Commission only once in a lifetime. There is no such explicit mention of  any such mention under the proposed section 245MA to the Act. <strong><\/strong><\/p>\n<p><strong>f) Effect of DRC order on  other years: <\/strong>Under the Direct-tax Vivad Se Vishwas Scheme and before the ITSC, the adjustments had no effect on the other  assessment years. <strong><\/strong><\/p>\n<p>Section 8 of Direct-tax Vivad Se Vishwas Act  is usefully extracted as under: <br \/>\n    <em>&ldquo;Save as otherwise expressly  provided in sub-section (3) of section 5 or section 6, <strong><u>nothing contained  in this Act shall be construed as conferring any benefit, concession or  immunity on the declarant in any proceedings other than those in relation to  which the declaration has been made.<\/u><\/strong>&rdquo;<\/em><br \/>\n  Emphasis supplied<\/p>\n<p>Similarly,  the it would be expected from the Scheme to throw some light on this issue of.<\/p>\n<p>g) <strong>Departmental Appeal\/ Writ<\/strong>:  Since DRC is akin to the ITSC. The purpose of ITSC was to avoid long drawn  litigation in complicated matters and the order of the ITSC was binding on the  tax payer and the Department. However, both the department and the tax payers  have been approaching the High Courts in form of a Writ Petition against the  order of the ITSC. The Hon&rsquo;ble High Court of Kerala in the case of <strong>CIT v.  ITSC(2017) 391 ITR 374 (Ker) (HC)<\/strong>wherein Writ Petition filed by the  Commissioner of Income Tax against the Order of Settlement Commission was held  Maintainable as theSettlement Commission had not properly considered issue of  addition or genuineness of claim of advances from others, matter was remanded  to Settlement Commission.<\/p>\n<p>Would the DRC challenge the order of the DRC  before an appropriate forum? The binding nature of the Order of the DRC on the  department is not yet known.<\/p>\n<p><strong>h) Settlement or  Adjudicating<\/strong>: Would the DRC be in the nature of a forum for settlement of  disputes or would there be an element of adjudication involved? Further, in the  event of adjudication, it is important that the DRC be bound by the Judicial  pronouncements, Circulars, Notifications etc.<\/p>\n<p>The Hon&rsquo;ble Supreme Court in the case of <strong>CIT  v. B.N. Bhattacharjee [1979] 118 ITR 461 (SC)<\/strong> held that settlement  commissions are Tribunals and section 245l declares all proceedings before  settlement commission to be judicial proceedings.<\/p>\n<p>The decision of the Honourable Supreme Court is binding on all  courts, Tribunals and tax authorities across the country as per the provisions  of Article 141 of the Constitution of India. Reference is drawn to the decision  of the Hon&rsquo;ble Supreme Court in the case of <strong>CWT v Aluminium Corporation of  India Ltd (1972) 85 ITR 167 (SC)<\/strong>. <\/p>\n<p>Similarly, in respect of the High Courts, the High Courts has the  power of superintendence over the Tribunals and authorities under Article 227  of the Constitution. The Hon&rsquo;ble Supreme Court in the case of <strong>East India  Commercial Co Ltd v Collector of Customs AIR 1962 SC 1893<\/strong> observed that the  law declared by the highest court in the State is binding on authorities or  Tribunals under its superintendence and they cannot ignore it. Similar view was  also expressed by the Honourable Supreme Court in the case of <strong>Baradakant  Mishra v. Bhimsen Dixit AIR 1972 SC 2466<\/strong>.<\/p>\n<p>Similarly, Circulars of CBDT explaining the Scheme of the Act have  been held to be binding on the Department repeatedly by the Hon&rsquo;ble Supreme  Court in a series of judgments including <strong>Union of India v. Azadi  BachaoAndolan [2003] 263 ITR 706 (SC)<\/strong>, <strong>Navnit Lal C. Jhaveri v. K.K. Sen  IAC [1965] 56 ITR 198 (SC)<\/strong> and <strong>UCO Bank v. CIT [1999] 237 ITR 889 (SC).<\/strong><\/p>\n<p>Therefore, the DRC should consider the prevailing law of the land  and the biding instructions while adjudicating matters before it.<\/p>\n<p><strong>i) <\/strong><strong>Faceless Scheme<\/strong>: It has been abundantly clarified  that the DRC would perform in a faceless manner and with dynamic jurisdiction.  This raises two important queries. <\/p>\n<ul>\n<li><span dir=\"ltr\">Whether the tax-payer would be  granted an opportunity of being heard in person i.e., via virtual mode?<\/span><\/li>\n<li><span dir=\"ltr\">Whether it would be possible for  such small-medium tax payers to avail the required infrastructure to contest  the matter in a faceless manner?<\/span><\/li>\n<\/ul>\n<p><strong>5.4. Conclusion<\/strong> <\/p>\n<p>The constitution  of DRC is a welcoming legislation. The administration should be effective in  communicating to the tax payers the benefits of the DRC. As on date, a Scheme  of DRC is awaited. Several questions viz. time limit for approaching the DRC,  time limit for passing the Order, manner of providing additional evidence,  issues emanating from TDS etc. cannot be evaluated at this stage.<\/p>\n<p>Any conclusion  at this premature stage would be myopic. However, the proposed amendment  appears to be promising, and capable resolving &amp; mitigating tax litigation. <\/p>\n<p><strong>6. <\/strong><strong>Board for Advance Rulings ( 2021) 430 ITR 126( St)&nbsp; (Authority for Advance Rulings)<\/strong><\/p>\n<p>Clauses, 67,68,  69, 70, 71, 72, 73, 74 75,76, all are procedural applicable with effect from  1st April 2021.Clause77 of the Bill seeks to insert a new section 245W to the  Income-tax Act relating to Appeal. According to the proposed amendment,any  ruling pronounced or order passed by the Board for Advance Rulings; The  appellant or the Assessing Officer,on the directions of the Principal  Commissioneror Commissioner appeal to the High Court with in sixty days from  the date of Communication of such ruling or order,in such form and manner as  may be provided by the Rules.<\/p>\n<p>In the case of<strong>CIT v.  Mohd. Farooq (2009) 184 Taxman 191 \/ 317 ITR 305 (FB)(All.)(HC)<\/strong>and<strong> CIT  v. Grasim Industries Ltd. (2009) 319 ITR 154(Bom.)(HC)<\/strong> has held thattheperiod of limitation prescribed for filing an appeal under section  260A(2) of the Income Tax Act, 1961, is not subject to the provisions contained  in section 4 to 24 of the Limitation Act, 1963 as provided under section 29(2)  of the Limitation Act, therefore, High Court has no power to condone the delay  in filing the appeal.Section 260A(2A) was inserted by the  Finance Act, 2010 w.r.e.f. 01.10.1998 to give the High Court the power to  condone delay. <\/p>\n<p>There is no  clarity whether the receipt is relevant or not or published in the website of  the Department is to be considered.Whereas Section 260A appeal to High Court  against the order of the Appellate Tribunalrefersorder passedreceived by the  assessee. In Bombay High Courtappeal which was admitted in the year 2000are  still pending for final hearing.At present the Authority for Advance Ruling is  chaired bytheRetired Judge of the Hon&rsquo;ble Supreme Court.<\/p>\n<p>Ideally, the  power should have been given to the ITAT, which has the infrastructure, highly  experienced members who have the knowledge of the International taxationwho are  functioning under the Ministry of law and justice is most suited for  discharging thefunction asmembers of the Board for Advance Ruling.<\/p>\n<p>Right of appeal  is given to the assessee as well as the Department. In Mumbai the appeal for  admission it takes minimum three years and after admission for final hearing  another minimum of 10 years. The appealsadmitted in the year 2002 still pending  for final hearing. The purpose of Advance ruling has lost its importance.<\/p>\n<p><strong>7. Faceless Income tax Appellate Tribunal (  2030) 430 ITR 130( St) <\/strong><\/p>\n<p><strong>Clause 78 of the Bill,  seeks to amend the section 255 of the Income-tax Act, 1961relating to procedure  of the Tribunal &ndash; Provision for Faceless Proceedings before the Income-tax  Appellate Tribunal (ITAT) in a jurisdictional less manner. (2021) 430 ITR 253 (St)<\/strong><\/p>\n<p>Relevant  extracts ofthe speech of the Hon&rsquo;ble Finance Minister<strong>(2021) 430 ITR 55 (st)<\/strong> is reproduced as follows: <\/p>\n<p><strong><em>Faceless ITAT<\/em><\/strong><br \/>\n    <em>Para<\/em><em>. 158. For  ease of compliance and to reduce discretion, weare committed to make the  taxation processes faceless. The Government has already introduced faceless  assessment and appeal this year.<\/em><\/p>\n<p><em>Para<\/em><em> 159. The next level of income tax appeal is  the Income Tax Appellate Tribunal.I now propose to make this Tribunal faceless.  We shall establish a National Faceless Income Tax Appellate Tribunal Centre.  All communication between the Tribunal and the appellant shall be electronic.  Where personal hearing is needed, it shall be done through video-conferencing.<strong><\/strong><\/em><\/p>\n<p><strong>Provision for  Faceless Proceedings before the Income- tax Appellate Tribunal( ITAT ) in a  jurisdiction less manner .Relevant extracts ofthe Memorandum to the Finance  Bill are reproduced as follows follow<\/strong>.<strong>( 2021) 430 ITR 253 (St)<\/strong><\/p>\n<p><em>In order to impart greater efficiency, transparency and  accountability to the assessment process, appeal process and penalty process  under the Act a new faceless assessment scheme, faceless appeal scheme and  faceless penalty scheme have already been introduced. Further, vide Taxation  and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 the  Central Government has been empowered to notify similar schemes in respect of  many other processes under the Act that require a physical interface with the  taxpayers.<\/em><\/p>\n<p><em>In order to ensure that the reforms initiated by the Department to  reduce human interface from the system reaches the next level, it is imperative  that a faceless scheme be launched for ITAT proceedings on the same line as  faceless appeal scheme. This will not only reduce cost of compliance for  taxpayers, increase transparency in disposal of appeals but will also help in  achieving even work distribution in different benches resulting in best  utilisation of resources. <\/em><\/p>\n<p><em>Therefore, it is proposed to insert new sub-sections in the  section 255 of the Act so as to provide that the Central Government may notify  a scheme for the purposes of disposal of appeal by the ITAT so as to impart  greater efficiency, transparency and accountability by,&mdash;<\/em><br \/>\n    <em>(a) eliminating the interface between the ITAT and parties to the  appeal in the course of proceedings to the extent technologically feasible; <\/em><br \/>\n    <em>(b) optimising utilisation of the resources through economies of  scale and functional specialisation; <\/em><br \/>\n    <em>(c) introducing an appellate system with dynamic jurisdiction. It  is also proposed to empower the Central Government, for the purpose of giving  effect to the scheme made under the proposed sub-section, for issuing  notification in the Official Gazette, to direct that any of the provisions of  this Act shall not apply or shall apply with such exceptions, modifications and  adaptations as may be specified in the notification. Such directions are to be  issued on or before <\/em><em>31st March,   2023<\/em><em>. It is proposed that every notification issued shall, as 52 soon  as may be after the notification is issued, be laid before each House of  Parliament.<\/em><\/p>\n<p>This amendment will take effect from Ist April, 2021 <\/p>\n<p><strong>&nbsp;Clause. 78. Relevant extract of the proposed  Amendment to the Income-tax Act, 1961, are reproduced as follows<\/strong> .<strong>( 2021) 430 ITR 130 ( St)<\/strong><br \/>\n    <em>&ldquo;In section 255 of the Income-tax Act, after sub-section (6), the  following sub-sections shall be inserted, namely: &ndash;&ndash; &ldquo;(7) The Central  Government may make a scheme, by notification in the Official Gazette, for the  purposes of disposal of appeals by the Appellate Tribunal so as to impart  greater efficiency, transparency and accountability by&mdash; (a) eliminating the  interface between the Appellate Tribunal and parties to the appeal in the  course of appellate proceedings to the extent technologically feasible; (b)  optimising utilisation of the resources through economies of scale and  functional specialisation; (c) introducing an appellate system with dynamic  jurisdiction. (8) The Central Government may, for the purposes of giving effect  to the scheme made under sub-section (7), by notification in the Official  Gazette, direct that any of the provisions of this Act shall not apply to such  scheme or shall apply with such exceptions, modifications and adaptations as  may be specified in the said notification: Provided that no such direction  shall be issued after the 31st day of March, 2023. (9) Every notification  issued under sub-section (7) and sub-section (8) shall, as soon as may be after  the notification is issued, be laid before each House of Parliament.&rdquo;.<\/em><\/p>\n<p>According to us the proposed amendmentmay not be in  the interest of tax payers, on following reasons:<\/p>\n<p><strong>a) Acceptance  of the orders of the ITAT <\/strong><br \/>\n  ITAT has completed 80 years  on January 25, 2021, total  pendency as on January 1, 2021 in Mumbai is only 12,000 appeals whereas highest  pendency in the year 1998-99 was 3,04,594. 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.<\/p>\n<p>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.<\/p>\n<p>The figures clearly  demonstrate that the ITAT is discharging its duty to the satisfaction of the  tax payers as well as the Tax Department.<\/p>\n<p><strong>b) Final  fact-finding Authority and transparency in hearing <\/strong><\/p>\n<p>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&rsquo;ble Members have visited the actual fields to verify  whether the agricultural activities are carried on or not! In some cases, the  Hon&rsquo;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.<\/p>\n<p>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 80 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.<\/p>\n<p>Recent decision of the Hon&rsquo;ble Supreme Court in the case of&nbsp;<strong>Pradyuman Bisht  v. UOI &amp;Ors. (2020) 1 SCC 443.<\/strong>The Hon&rsquo;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,&nbsp;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. <\/p>\n<p>c) <strong>ITAT was  established by continuous study and considering the various reports.<\/strong><\/p>\n<p>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. <\/p>\n<p><strong>d) <\/strong><strong>Opportunity<\/strong><strong> of Hearing &ndash; Tribunal has the trapping of  court.<\/strong><\/p>\n<p>Section 254(1) of the  Income -tax Act,1961 reads as under:<br \/>\n    <em>&ldquo;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.&rdquo;<\/em><\/p>\n<p>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:<\/p>\n<p><strong><em>&ldquo;Proceedings  before the Tribunal.<\/em><\/strong><\/p>\n<p><em>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.&rdquo;<\/em><\/p>\n<p>In the case of <strong>Ajay  Gandhi v. B. Singh (2004) 265 ITR 451 (456)<\/strong> the Supreme Court observed that  the Income tax Appellate Tribunal exercises judicial functions and has the  trapping of a court. <\/p>\n<p>In the case of <strong>ITAT v.  V. K. Agarwal (1999) 235 ITR 175 (SC),<\/strong> 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. <\/p>\n<p>The Hon&rsquo;ble Supreme Court in the case  of <strong>Rajesh Kumar v. DCIT [2006] 287 ITR 91 (SC)<\/strong> 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 &ldquo;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&rdquo;. It continues to state that &ldquo;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&rdquo;. 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 &lsquo;quasi-judicial&rsquo; 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. <\/p>\n<p>In the case of <strong>NareshbhaiBhagubhai&amp;Ors  v. UOI (2019) 15 SCC 1, <\/strong>The Hon&rsquo;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.<\/p>\n<p>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&rsquo;ble Supreme Court from time to  time.<\/p>\n<p><strong>e) <\/strong><strong>Functioning of the ITAT cannot be compared with the functioning of  the Commissioner (Appeals). <\/strong><\/p>\n<p>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. <\/p>\n<p><strong>f) Oral hearing &ndash; A statutory right  -Cannot be dispensed with <\/strong><\/p>\n<p>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.&nbsp; In <strong>Automotive Tyres Manufacturers&rsquo;  Association v. Designated Authority (2011) 2 SCC 258<\/strong>, 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.&nbsp; 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&rsquo;s  doubt and by answering the question. In <strong>P.N.EswraIyer v.Registrar , Supreme  Court of <\/strong><strong>India<\/strong><strong> (1980) 4 SCC 680<\/strong>, 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 &ldquo;Emergency&rdquo;  can jettison the vital breach pf spoken advocacy in an open forum and there is  no judicial cry for extinguishment of oral argument all together.<\/p>\n<p>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.&nbsp; <br \/>\n  Not providing 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. <\/p>\n<p><strong>g) <\/strong><strong>Power to constitute the Bench with Honourable President of the  ITAT <\/strong><\/p>\n<p>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 <strong>Madras Bar Association v. UOI <\/strong><strong>(2014) 109 DTR 273\/ 227 Taxman 151<\/strong>, 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 &ldquo;Basic structure&rdquo; of Constitution of India and the said ratio  is also applicable to the Income tax Appellate Tribunal. Weare of the opinion  that the dispensation of justice an open court hearing is a must in before the  ITAT.<\/p>\n<p><strong>h) <\/strong><strong>Proposed amendment of faceless hearing without deliberation and  without taking in to feedback from the stake holders. <\/strong><\/p>\n<p>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 taxpayers. <\/p>\n<p><strong>Suggestions<\/strong><\/p>\n<p>1. The proposed amendment may be  dropped. <\/p>\n<p>2. In case the Government is keen  to introduce the faceless ITAT, the following procedures may be followed:<\/p>\n<p>(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.<\/p>\n<p>(b) After receipt of the report the proposed amendment may be  referred to a select committee.<\/p>\n<p>(c) After receipt of the report from the Parliament committee the  suitable amendment if any desired may be introduced.<\/p>\n<p>We make an  appeal to all the stakeholders to write to the Hon&rsquo;ble Finance Ministry to drop  the proposal.<\/p>\n<p><strong>8. <em>D&eacute;nouement<\/em><\/strong><\/p>\n<p>Ease of doing business  cannot be achieved by increasing the compliances. When the TDS provisionwas  introduced only threetypes of payments were covered i.e., Section 192 &#8211;  Salary,Section 193 &#8211; Interest on Securities and Section 194 &#8211;  Dividendsprovisions; now there are more than 30sectionswhere the assessee is  required to deduct tax at source. As per the Proposedprovision 194Q of the  Actthe assessee has to deduct the tax even on purchases. The failure to deduct  tax atsource or delay in depositing the tax at source, the assessee is made  liable to pay interestpenalty and some offences may lead toprosecution.Once the  prosecution is launchedfor reaching finality it will take more than two  decades. Unless the procedure compliance is reduced the investors may not get  the confidence to invest in India.The legislature is trying toimplement  newprovisionspertaining to commercial laws and labour legislation that is the  reason the Income-tax Act is becoming more complications which lead to  unintended litigation.We hope the Government will also interactwith  theprofessional organisations and consider their views.The readersare requested  to send their objective suggestions to the <a href=\"mailto:aiftpho@gmail.com\">aiftpho@gmail.com<\/a>which will enable to them  their suggestions to the CBDT.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>All India Federation of Tax Practitioners (AIFTP) has organized a two-day Virtual National Tax Conference on 17th and 18th February, 2021 for an in-depth discussion on the Finance Bill, 2021 and its implications, more than1,000 participants enrolled as delegates for the Virtual National Tax Conference<\/p>\n<div class=\"read-more\"><a href=\"https:\/\/itatonline.org\/info\/the-finance-bill-2021-conceptual-issues-constitutional-challenges\/\">Read more &#8250;<\/a><\/div>\n<p><!-- end of .read-more --><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1,8,7,4],"tags":[],"class_list":["post-15955","post","type-post","status-publish","format-standard","hentry","category-all-information","category-itat-related","category-others","category-proceduresguidelines"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/info\/wp-json\/wp\/v2\/posts\/15955","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/info\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/info\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/info\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/info\/wp-json\/wp\/v2\/comments?post=15955"}],"version-history":[{"count":0,"href":"https:\/\/itatonline.org\/info\/wp-json\/wp\/v2\/posts\/15955\/revisions"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/info\/wp-json\/wp\/v2\/media?parent=15955"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/info\/wp-json\/wp\/v2\/categories?post=15955"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/info\/wp-json\/wp\/v2\/tags?post=15955"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}