With the new world order of physical distance and the need to adapt quickly to the digital environment, the Government of India has recently taken several steps to introduce a digital interface at the level of direct tax administration. Introduced Faceless Penalty Mechanism as well as Faceless Assessment and Appeal Scheme.
The Finance Bill, 2021, proposes to make the Income Tax Appellate Tribunal (ITAT) faceless. This action will reduce the taxpayer compliance cost, increase transparency when disposing of appeals and help achieve work distribution in different benches with optimal utilization.
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He spoke about personal inquiries to be conducted via videoconferencing where budget speech is needed. In most cases, submissions are lengthy, needing to be able to go into several hundred pages and therefore need to be nicely articulated to explain the taxpayer’s point of view.
The tribunal has the power to find the ultimate fact, the subtleties of the tax law and the members have a better understanding of the taxpayer’s perspective to appreciate its relevance to a case. The Appellate Forum is responsible not only for the extension of the Assessment Proceedings, but also for the detailed examination of the issue at hand and the reconciliation of the actual matrix with applicable tax laws.
In such a situation, personal hearing is a fundamental step in the process of making a good-sounding and fair judgment. Rajesh Kumar vs DCIT 157 Taxman 168 (SC) case in Supreme Court S Sahara India (Company) v. As approved by the SC in the case of CIT  300 ITR 403 two emphasizes the principles of natural justice based on two fundamental pillars, (i) the unheard (audi alteram partem) (ii) no one should be judged for his own cause (Nemo Debt Essay Judex Propria Su Cazalo).
PN Ishwara Iyer vs. Registrar, SC, (1980) In the case of SCR (2) 889 the Supreme Court also emphasized the importance of oral hearing and noted that the ‘Audi Altram Partem’ is a fundamental value of our legal system and is embedded very deeply in our constitutional order. It is not just judicial orders, but also administrative orders requiring appropriate inquiry, as handled by the Supreme Court in the case of SL Kapoor vs Jagmohan & Ors. 1981 AIR 136 State of Orissa v. Dr. Miss Binapani de AIR 1967 SC 1269 When deciding, ““ .. The rules of natural justice must remain consistent despite the administrative order with civil consequences. “.
Therefore, the level of tax administration as stated in the budget speech may not be exactly in line with ‘natural justice’ on an individual basis, especially at the ITAT trial stage.
In the wake of the faceless appeal scheme, when notified in September 2020, a writ petition was filed regarding the right to discretion (through the VC) under the scheme. It is our understanding that the Delhi High Court has issued a notice to the Government on hearing this matter and is awaiting judgment in that matter. While a good print of the ITAT scheme is still awaiting, if the hearing (personal / virtual) problem is not resolved, we may see an increase in litigation. Therefore, it is imperative to clarify about the ‘opportunity to hear’ (via physical or VC) in every case where the question arises as to whether ITAT is faceless.
While the wave of digitization has not yet had a far-reaching impact on all sectors of our country, perhaps, it is appropriate to gain experience from previously launched projects and address various barriers such as infrastructure in different forms in different cities.
Although a statement has been issued regarding the faceless ITAT scheme, fine printing is not yet part of the law, it remains to be seen to see the fine details of this scheme. There is also mention of the introduction of an appellate system with dynamic jurisdiction. What the dynamic jurisdiction is and what it means to function as a national entity will only be known once the scheme is formulated. Consider also the need to integrate the entire ITAT forum into dynamic jurisdiction in all respects to achieve the goal of simplified tax administration, ease of consent and litigation reduction.
(Sanjeev K. Chaudhury Chartered Accountant)