Merits demerits of Faceless regime in Income Tax appellate matter: A summary:

Happy Holi to all. Let us all be safe and fine.

There has been a big debate over the change in system of hearing under the Income Tax Act, 1961. The assessments have turned faceless. Appeal before the CIT (Appeals) has also become faceless. It is proposed that the hearings before the Appellate Tribunal shall again be faceless.

I have been in touch with the senior Officers of Income Tax Department, and have been taking on their views. Had been writing my views in this forum too. Some of my senior brothers in the profession have exchanged their ideas as to it. 

Whenever a new procedure comes, immediately constitutional challenges come out. When section 132 ie searches and seizure procedure was brought in the statute book, there was a challenge on the grounds that it is a violation of the fundamental rights, and likewise so many amendments took a test of constitutionality. Every time the court held that to be valid, and this time again, the while many writs have been admitted against the faceless hearing of the Tribunal, the Probable Hon’ble Chief Justice of India stated that the system of virtual hearings or faceless scheme looks to be a grand solution towards the disposal of matters before the Hon’ble High courts.

Apart from the changes in the income Tax proceedings, there is a big change in the judicial system also. The courts are promoting conciliation, mediation and arbitration in a very large way. The scheme so promoted by  the government in Vivad se Vishwas tak has shown a good response, but a lot is needed to be done.

It looks that CIT (appeal) is disposing the B1 and B2 cases in small numbers, but they do not have huge financial implications. It is well understood that out of so many notices so issued, and reply so received by the department, the disposal of appeals are slow. If the disposals of the appellate proceedings would be slow, then how can the new procedural scheme succeed?

In course of my causal discussions with a few CITs and PCITS, countrywide, the following points come:

a.     Before bringing up the scheme, should the Income Tax Act, and all corroborative Acts, such as Evidence Act, CrPC, CPC, IPC, be not amended? Without the proper amendments, as per them, how will this scheme of faceless assessments or Appeals work out?

b.     Can all the decided issues on account of right of hearing, or right of representation, be answered and taken care of , at the time of conducting faceless assessments or appeals?

c.      Specially in matter of CIT (A), how can the independent mind of CIT (A) be applied, because now the CIT (A) would not be working as a deputed, but it will be working as an organization? Same rests in the matter of Tribunal too.

d.     It is further stated that the powers of the officers as provided in the Act, needs to be refined. Without the proper definition, will the appellate authority be able to work?

e.      The Government is trying to divide the unity of IRS officers and by doing this are they not dividing the officers and how the officers of Investigation and Assessment wing would be selected with transperancy?

And many others.

It looks clear, that even the concerned officers who are to deliver the results are not happy with the same.

Likewise, amongst the professionals, had discussions with our Senior Brothers in the profession. Two views emerge:

1.      That the scheme would work wonderfully well if the actions and results are immediate, by way of timely disposal of the appeals after the replies are received. As department promotesvarious schemes and motivates the officers concerned in the field, the disposals should also be motivated and linked with the ACRs. It should be based on the number of disposals done by the officers and test should be as to how many succeed the test of appeals. If this is done, then the appeals before the CIT (Appeals) as well as the Tribunal, would yield wonderful results.

2.      The second view, supported by many is that the faceless system should go away as the right of representation, naural Justice and others are eliminated. For this , they say that as far as the Income Tax is concerned, every person has a unique way of earning, and how can such practice be implemented which shakes the very basis of Tax Practice, where the hearings are conducted in the closed room and not in the open court. By doing so, the entire tax practice gets distorted.

Coming to the views from the both sides, and looking at the Anna Hazare Movement, which was supported by many of the persons, who wanted such changes and transparency,  the questions that come out are:

1.      If we do not adhere to the changes, should we not blame ourselves?

2.      Is it not the right time, to understand the changing times and become part of the change?

3.      The changes cannot be stopped , yes it shall delay. But the delay always changes the essence. Should we not promote the proposals so given by the senior brothers to the government and the department for motivating such changes?

4.      Will the change not bring better professionalism and respect both to the Department as well as adjudicators?