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Final Fact-Finding Appellate Authority Also Going Faceless w.e.f. 1.4.2021
This Article penned by our Founder Director Sh. Mayank Mohanka, FCA has been published in renowned website taxmann.com with the citation (2021) 124 taxmann.com 42 (Article). Knowledge is meant for sharing, so this Article is shared here also, for the benefit of our Readers.
Well Yes Friends, the Final Fact-Finding Appellate Authority i.e. Income Tax Appellate Tribunal (ITAT) is also going Faceless w.e.f. 1.4.2021.
Clause 78 of the Finance Bill 2021, presented digitally by our hon’ble FM Smt. Nirmala Sitharaman, before the Parliament, on 1.2.2021, reads as under:
“78. In section 255 of the Income-tax Act, after sub-section (6), the following sub-sections shall be inserted, namely: ––
“(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—
(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.”.
The Explanatory Memorandum to Finance Bill 2021, in this regard, provides as under:
“Provision for Faceless Proceedings before the Income-tax Appellate Tribunal (ITAT) in a jurisdiction less manner
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.
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.
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…..”
The ‘Seed Thought’ of the idea of extension of the ‘faceless adjudication’ mechanism to the ITAT level was given by our Hon’ble PM Sh. Narendra Modi during the inauguration of the new state-of-the-art office-cum-residential complex of the ITAT Cuttack Bench on 11.11.2020.
In his inauguration speech on 11.11.2020, our Hon’ble PM has said,
“Friends
The role of tribunals is very important in achieving the goals of tax reforms in the country. The way you have carried out your work by utilizing your virtual time, I am hopeful that you will also think about a faceless system and whether the Income Tax Appellate Tribunal can move towards a faceless system on the lines of faceless assessment and appeals. Can priority be given to e-hearing instead of physical hearing? If it has been done during the corona period, it can be extended in future.
During this period of corona, we all have the experience that all things are being done in an equally transparent and effective manner through video conferencing. Today, when you're building campuses with modern amenities in Benches across the country, these reforms aren't difficult for you. It will save time, money and energy of taxpayers. The disputes will also be settled quickly.”
Well, the Finance Ministry has been quick enough to give this seed thought of our hon’ble PM, a concrete shape by proposing to insert a new subsection (7) in section 255 of the Income Tax Act, 1961 in the Finance Bill 2021 w.e.f. 1.4.2021.
As this section 255(7) has to be given effect from 1.4.2021 only, so we can expect a “Scheme for Faceless Proceedings before ITAT”, very soon, in line with and similar to the ‘Faceless Appeal Scheme, 2020’, which has already been implemented w.e.f. 25.9.2020.
However, it needs to be appreciated that ITAT is the last fact-finding appellate authority as the High Court & Supreme Court admits substantial questions of law only and not of facts, so it is very essential and desirable that the proposed “Scheme for Faceless Proceedings before ITAT”, should be drafted carefully and meticulously and not simply copied from the existing Faceless Appeal Scheme, 2020, so as to enable complete adherence to the principles of natural justice and the rule of ‘audi alteram partem’ (hear the other side), i.e. grant of suitable opportunity of being heard to the appellant.
In the Faceless Appeal Scheme, 2020, the appellant is not having any 'by-default' right of personal hearing and the appellant may only request for a personal hearing by way of videoconferencing/telephony, so as to make his oral submissions or present his case before the appeal unit under this Scheme. The Chief Commissioner or the Director General, in charge of the Regional Faceless Appeal Centre (RFAC), under which the concerned appeal unit is set up, may approve the request for personal hearing, if he is of the opinion that the request is covered by the circumstances as maybe notified by CBDT. The circumstances where the request of the appellant for personal hearing via video conferencing may be approved are yet to be notified by CBDT.
This burning and litigative issue of lack of suitable opportunity of being heard in the new faceless appeal scheme resulting in violation of Principle of Natural Justice and Article 14 of the Constitution of India, has become more critical in view of the admission of the writ petition of the taxpayer by the Hon'ble Delhi High Court in the case of Lakshya Buddhiraja on 16-10-2020, on this very issue.
Further the Right of Filing Rebuttal to the objections of NeAC/AO against the admission of additional ground of appeal & additional evidence by the appellant has also not been provided in the Faceless Appeal Scheme, 2020.
No doubt the primary objective of the faceless tax administration is the elimination of physical interface and as such physical visits and meetings between the assessee and the adjudicating authority are resisted be allowed, but nonetheless that objective can still be achieved by inserting an enabling legislative provision of the grant of by-default right of personal hearing via video conferencing or telephony to the appellant, if he/she asks for it, in the faceless assessment, appeal and penalty schemes and now the upcoming faceless proceedings before ITAT scheme.
No body can deny that it is far easier to explain the factual matrix and legal propositions of one’s appeal orally than by reproducing and conveying it in writing.
Grant of half an hour opportunity of personal hearing via video conferencing to the assessee/appellant or his/her authorised representative to enable him/her to represent his/her case, is far more effective, meaningful and productive than the electronic uploading of 1000 pages written submission paper book, which the adjudicating authority may choose to read or not.
Thus, in order to reduce litigations and tussles, the CBDT from the very beginning itself, should insert the legislative provision of grant of by-default opportunity of personal hearing via video telephony to the appellant, in all cases, wherein the appellant asks for it in writing, and not just in some limited notified circumstances, in the proposed ‘Scheme for Faceless Proceedings before ITAT’.
The proposed faceless regime for ITAT Appeals, if implemented carefully, incorporating all the above suggestions, can turn out to be a big game changer for the legal tax practice and timely adjudication of ITAT appeals. For the Tax Professionals though, it would mean missing out on ‘the run-of-the-mill’, engrossing, satisfying, demanding and intriguing representations and face to face personal interactions and interfaces with the Hon’ble Judges of the ITAT Benches and the nostalgic feel and ambience of the ITAT Court Rooms in Lok Nayak Bhawan, Delhi (since I am Delhi-based)…..
