‘The Ministry of Finance has over the years shown its lack of love for the Tribunal’.
With the 2021 Finance Bill, the future of the Income Tax Appellate Tribunal (Tribunal) is now on a virtual stake. Traditionally, the preparation of the Finance Bill is the preserve of the Department of Revenues, Ministry of Finance, with inputs for drafting obtained from the designated ministries. The several proposals in any Finance Bill are unmistakably to be attributed to the Finance Ministry. So too the changes proposed for the Tribunal in the Bill.
No one can be a judge in his own cause, so goes the old Latin maxim. That is the reality with the Tribunal. The Tribunal which settles facts finally in income tax disputes between the assessee and assessor is administered by the Ministry of Law & Justice. The Assessor hails from the Ministry of Finance. That secures for a Tribunal its status, independence and impartiality; for the assessee, it is unimpeded justice.
Since over 70 years of its existence, the Tribunal has won plaudits and encomiums from all those who mattered in administering, executing and / or consuming justice. That will indeed be an under-statement if one were to hear plenipotentiaries call the Tribunal as the mother of all Tribunals.
Quite recently, the present government provided to this august institution an able and sagacious head who, if one may say so, virtually bypassed the blockades to the hearings at the Tribunal caused by the Covid menace by adopting the novel video conferencing mode. It is a matter of record that this new procedure ushered into the justice delivery system has won innumerable favourable mentions and sumptuous praise from the stake- holders and administrators with the reputation and popularity of the Tribunal going up a dose two.
The Ministry of Finance, has over the past several years, openly shown its lack of love for the Tribunal. Despite its efficiency, proficiency, utility, all-round acceptability and the glorious reputation, several attempts have been made by different governments of the day to unnerve and emasculate it. These include the allowing of comparatively junior incumbents to man the Benches; abolishing the practice of appointing an in-house Vice President as its President; doing away with the crucial post of Senior Vice President; changing the terms and conditions of recruitment and service of members and many more such changes which may only go to debilitate the Tribunal.
Maximum damage was caused to the status and utility of the Tribunal in 1988 when its power for referring questions of law to the High Court was withdrawn. Instead, the statute was amended to provide for a direct appeal to the High Court against the order of the Tribunal. The rider of a substantial law question being referred to the High Court has not proved quite effective. With no definite parameters being set for couching perversity in the finding of facts by the Tribunal, and the dividing line between a question of law and substantial question also remaining too thin, the appeal route gets to become a thoroughfare–thanks to the relief provided by the monetary limits imposed on departmental appeals.
The new regime adopted for tax assessments and appeals at the Departmental level envisages making them faceless. The avowed aim inter alia is to promote efficiency, stoke transparency, ensure accountability and provide dynamic jurisdiction through the elimination of the interface of the assessee with the Department. Since the scheme itself has recently been launched, protests have not so far been heard. One reason for this silence could be that under the previous dispensation. the lack of accountability of the officials mostly went unreported and unpunished and so, at least, now with the promise of efficiency, transparency and accountability and perhaps also with the augmentation of the process with artificial intelligence at some stage or the other, positive improvement may ensue. It is too early, therefore, to assess the benefits of the new system. On that analogy to launch fresh schemes in other jurisdictions with a similar protocol is precipitous
Just as “right to life” breeds “life into the Constitution”, similarly an inviolable “right of hearing” breeds “life and validity” to the cause of justice. Norms of natural justice and the audi alteram partem rule constitutes the soul of any justice dispensation system. None to be condemned unheard. Failure to grant hearing and abide by due process runs the huge risk of rendering justice itself non est.
The Finance Minister in the 2021 Budget Speech announced that it is proposed to make the Tribunal faceless and to establish a National Faceless Income Tax Appellate Tribunal Centre. In the closing line, the Minister conceded that “where personal hearing is needed, it shall be done through video conferencing”. The Notes to the clauses read with the accompanying Memorandum explaining the Finance Bill say that to impart greater efficiency, transparency and accountability the interface between the Tribunal and the parties to the appeal is to be eliminated to the extent permitted by technology. The optimal utilisation of resources through economies of scale is also visualised. Breeding specialisation and putting in place a dynamic jurisdiction are also stated to be part of the underlying objectives.
In terms of the power vested in it by Sec. 255(5) of the Income Tax Act, the Statute provides for the Tribunal the right to regulate its own procedure. Where was then the need for a statutory amendment? Over the years, the Tribunal in terms of judicial propriety and decorum, has conducted open court hearings after duly listing the matters and hearing both the sides to the case. The decisions thereafter are pronounced in the open court. All protocols applicable to judicial proceedings are always strictly followed. Resultantly, the higher courts, the administrative authorities and the stake holders have all, without exception, praised the Tribunal for its efficiency and transparency. There can be no better testimony to the efficiency of the Tribunal than the fact that over the years, an overwhelming percentage of its orders have been affirmed by the Higher Courts. As to transparency, the conduct of hearings in open court publically and the pronouncement of the orders in a similar manner assures it. As for a dynamic jurisdiction, regular tours by Members of different Benches to other locations has secured that to a significant measure. The attempt to make the hearing faceless would be vis-a-vis the litigants. So far as the Benches are concerned, the identity of the litigant could not be kept away. With the power of attorney of the Counsel on record, the particulars of the party who are to represent the matter would also be readily available. Thus, it will be a faceless one-way traffic. A faceless scheme would be the graveyard for accountability.
The current proposal in the 2021 Finance Bill will cancel all advantages so laboriously accumulated over several decades of hard and sincere work by the Tribunal. The question of promoting efficiency, transparency and accountability will arise only if there is a deficit. In the absence of any known shortcoming or deficiency in those domains, any observation in that regard would be nothing, but an empty rhetoric.
Any judicial proceedings have to be based on principle of natural justice. Audi alteram partem rule is one of the fundamentals of those principles. A written statement is no substitute for an oral person to person exchange of points and ideas. Instantaneous interjection and interlocution have always resolved many bewildering complexities. Interactions through the interface are quick to block miscarriages due to misunderstanding or lack of understanding. Hearing is indispensable for rendering justice and it just cannot be wished away.
If the idea as propounded by the government in the 2021 Finance Bill is put to practise, then there would be no question of any interaction or exchange of knowledge or information between the members and the litigants.
The whole proposal falls foul on another important account. One may ask the question as to who are involved in tax litigation. Certainly, it is the assessee on one side and even more certainly, it is the department on the other side. The department which is the litigant in all tax cases has proposed a mechanism on dispute resolution to its own advantage, convenience and benefit by making the Tribunal not only faceless, but in the process also possibly baseless. That is being unfair to the hapless assessee.
The proposed amendments in the 2021 Finance Bill would irreparably impair and jeopardise the status and position of the Tribunal as the final fact-finding authority. Without personal intervention of the parties to the dispute, the Tribunal may not be able to sift through the voluminous factual data with supporting material contained in reams of papers filed by both parties, leaving disputes and controversies unresolved even on facts.
S. Krishnan is an advocate.