[By Yash Jain and Jaskaran Singh Saluja]
The authors are students at the Institute of Law, Nirma University, Ahmedabad.
Introduction
The Income Tax Appellate Tribunal (“ITAT”) is referred to as the ‘Mother Tribunal‘ for being the oldest tribunal in the country. For years the ITAT has been discharging its role admirably and effectively. In view to transforming the taxation regime, the Commissioner of Income Tax (“CIT”) was made faceless. Subsequently, to reduce the cost of compliance, increase transparency and utilize resources efficiently, the Finance Bill, 2021 (“Bill”) proposes a National Faceless ITAT Centre. Clause 78 of the Bill shall be inserted by the Central government to dispose of appeals by the ITAT. The said clause seeks to amend Section 255 of the Income Tax Act, 1961 (“Act”) that provides for the powers and procedure of the ITAT. The amendment will impart greater efficiency, transparency, and accountability to eliminate the interface between the ITAT and related parties. That means all procedures relating to ITAT shall now be carried out electronically.
The faceless ITAT could broadly accelerate the rate at which disputes are settled. Apart from saving time and expenses, this system will bring more transparency and speedy justice to the litigants. However, a deeper analysis reveals flaws in the design and implementation of the new arrangement. The Bill heralds in the appearance of the supposed faceless Tribunal. The faceless ITAT raises certain legal ambiguities and concerns for the taxpayers regarding the nature and working of the structure.
In this article, the authors will discuss numerous incongruities enduring while the proposition of faceless ITAT comes into the picture. These inconsistencies include the violation of the fundamental rule of conducting oral hearings in ITAT, transgression of natural justice principle and ITAT being the final fact-finding authority. To conclude, the authors believe that such the proposition of establishing faceless ITAT is a serious attack against the autonomy of the judicial capacity.
Discrepancies in the Proposition of Faceless ITAT
a) Oral Hearing as a Fundamental Canon
The legal apparatus over the world are broadly categorized into two types, i.e., Common law system and Civil law system. The Common Law Nations emphasize oral hearings and evidence and rely on cross-examination of witnesses, whereas, the Civil Law Nations emphasize written communication and evidence during the proceedings.
As traced from the evolution of the Indian legal society, India has embraced the Common law system from the pre-independence era, which consequently affirms the strong rationale and opinion of the Indian judiciary to prevail the oral hearing and cross-examination over the written procedure. The same is also held by the Supreme Court in the case of Byram Pestonji Gariwala v. Union Bank of India & Ors.
Further, the faceless evaluation has an intrinsic issue of one-sided communication and the absence of interaction. It is apposite to say that written communications are made with a few presumptions that the receiver would comprehend what is tried to be told by the sender, as everybody evaluates his response based on his own grasp. This may create huge misunderstandings merely because of the inability to effectively explain a point of fact, whereas, in the case of oral hearings, it can be clarified through open discussions and thereby, consuming lesser time.
Numerous landmark judicial pronouncements have upheld the significant value of oral hearing as a fundamental standard in our Indian legal system. In Naresh Shridhar Mirajkar & Ors. v. State of Maharashtra, the Constitution bench of nine judges of the Supreme Court has well-settled that “all the cases brought before the courts, whether civil, criminal, or others, must be heard in open court. A public trial in open court is undoubtedly essential for the healthy and fair administration of justice and also serves as a powerful instrument for creating confidence of the public in the fairness of Indian judiciary”.
The bench further held that “public confidence in the administration of justice is of such great significance that there can be no two opinions on the broad proposition that in discharging their functions as judicial tribunals, courts must generally hear causes in open and must permit the public admission to the court-room”. The Apex court has also relied on the same rationale while passing the judgment in the matter of Pradyuman Bisht v. Union of India & Ors., wherein the court peculiarly directed the learned Additional Solicitor General to take up the matter pertaining to the installation of closed-circuit television (CCTV) cameras in the tribunals such as ITAT, where the open hearing takes place in the same manner as it happens in courts because the Tribunals stand tantamount to courts as far as the object of installing CCTV cameras is concerned.
Moreover, in the P. N. Eswara Iyer v. The Registrar, Supreme Court of India, the observations of the Supreme court are a jewel in the crown. The court strongly affirmed that oral hearing is a judicial process in the Indian legal system that is actively functional when there is the presence of viva-voce and it weakens if presented in written or printed form. Therefore, the orality in proceedings cannot be offered a permanent holiday. Notably, Rule 29 of the Income Tax Appellate Tribunal Rules, 2017, clearly denotes that the suits before the tribunal shall be heard in open court and it’s on the discretion of the Tribunal to decide that the proceedings in the exceptional situation will not be heard in an open tribunal. However, by the introduction of faceless ITAT, what was earlier the exception will now be the rule.
However, the proposed initiation of the national faceless ITAT has completely deviated from the well-established concept of the oral hearing in the Indian judiciary which will be rendered as a departure from the Common law tradition of the Indian legal system.
b) Contravention of Natural Justice Principle
One of the most celebrated principles of natural justice is audi alteram partem i.e. no one will be judged without ‘fair hearing’. It has two facets: firstly, an opportunity to make a representation must be given, and secondly, such an opportunity must be provided sufficiently. It requires that the individual who is affected by any judicial action must be given prior notice of what is submitted, to allow him to prepare and represent himself before the court to meet adequately the issues raised. The proposed faceless ITAT will make things more complicated in complex matters as it will bereave the assessing officer to comprehend the arrangement of a tax dispute and understand the tax implications which is easier in physical hearing. Similarly, it will be difficult for the taxpayer to explain his case to the assessing officer which is possible in a personal hearing. In such a circumstance, a physical hearing is an essential stepping stone towards delivering an all-around and prudent decision.
Further, the Supreme court in the case of Charan Lal Sahu v. Union of India, observed that “justice is a psycho-logical yearning, in which men seek acceptance of their viewpoint by having an opportunity of vindication of their viewpoint before the authority obliged to make a decision affecting their right”. The Apex court in P. N. Eswara Iyer v. The Registrar, Supreme Court of India, held that audi alteram partem is a fundamental appraisal of our judicial system and hearing the party concerned is too profoundly implanted in the consciousness of our constitutional order. Moreover, an option to a reasonable hearing incorporates giving a conceivable chance to an individual to introduce his/her case before the authority before settling the issue. With regards to a faceless hearing, this benevolent principle would be narrowed down to only written submissions and would cast a limited shape. Additionally, these principles of natural justice are enshrined under indestructible Article 14 and Article 21 of the Constitution. Depriving physical hearing will desolate the litigants of their fundamental rights and will violate the principles of natural justice.
c) ITAT: Ultimate Fact-Finding Body
The ITAT is the last fact-finding authority under the scheme of the Act. Any decision taken by the ITAT concerning the fact is final and it is outside the power of the High Court to re-evaluate such findings. Once the ITAT appeal is lost, no higher authority will entertain the appeal on facts of the case (unless otherwise needed). The High Court will only engage itself in substantial questions of law and will expect the appellant to contribute a large amount of time and cash to approach. Moreover, the disavowal of a hearing at the last stage of the fact-finding level may have disastrous impacts for the instance of the appellants. The very mechanism that has been set up to build transparency in the system has now been loaned to murkiness.
Conclusion
The advanced experiment of converting the ITAT into a National faceless ITAT Centre is a pragmatic evolution of judging any case as it may yield the outcomes in terms of proficiency, convenience, and effectiveness and further may help in ending the red-tapism. But as a legal practitioner or lawyer, it hits the base on which you stand through your profession and leaves the feeble pinch in your stomach. Additionally, history and lore validate the predominance of speech over words, as observed by the inevitability of Abraham Lincoln’s speech at Gettysburg, made more than a hundred years ago and still deemed as the most vital part of the political system of America. Speech is certainly an indispensable type of communication and denying such oral communication to lawyers and practitioners, would act like robbing a marksman of his thumb.
A withdrawal of oral hearings to the proposed faceless ITAT would unquestionably have radical impacts. Even oral proceedings are way less time-consuming as compared to the written proceedings because any confusion or misunderstanding that arises before the bench can be easily clarified by the assessee through oral discussions in the open court. The advantages that are guaranteed to the assessee, its simplicity, and ease are yet to be seen. It will assuredly forge the frame of tax law practice and neither the lawyers nor the assessees will act as mute observers. It will be interesting to watch how the Courts will analyze this experiment and considerably more intriguing with regards to how professionals will welcome this change. They say modifications are the only consistent thing on the planet; nonetheless, this modification may not be reckoned as the one.