Exploring and evaluating the proposal to introduce faceless ITAT, R.E.Balasubramanyam, (Partner, Balu & Anand, Chartered Accountants) states that the COVID pandemic ensured that all of us had a taste of virtual proceedings before it becomes the norm and has only hastened the process. The author discusses the SC decision in Gullapalli Nageswara Rao v. A.P.S.R.T. Corporation, AIR 1959 SC 308 which elaborated on the rule of “the one who decides must hear” and explained the usefulness of a personal hearing. The author opines that with the advancement of technology, if a person is enabled to put forth his arguments from any place without being physically present before the judges, then there is no reason why such a facility should not be treated as equivalent to a personal hearing. On this note the author expresses his hopes that “when the Finance Minister talked about  faceless proceedings of the tribunal, she was in fact actually meaning a virtual hearing.”

Budget 2021: Faceless ITAT

The announcement by the Finance Minister that the ITAT would also go faceless has created a buzz. Admittedly it is not out of the blue or unexpected as the  process of automation and reduced human interaction in Income tax  matters started about fifteen years back with the corporates required to file their returns electronically. The process has evolved since then to include all kinds of assesses through to the  creation of the CPC and faceless assessments and appeals mechanisms. The COVID pandemic in fact only ensured that all of us had a taste of virtual proceedings before it becomes the norm and has only hastened the process.

The performance of and experience with the CPC ( as also the GSTIN) has been less than satisfactory. This is in spite of them being designed and maintained by the company which is often regarded as the face of IT industry of India. However, the faceless assessments that one is seeing of late has shown a marked improvement. The queries raised are to the point and  well worded with the AO often quoting judicial precedents to press home his views. The draft assessment order also goes a long way in crystallizing the disputes to specific issues. The faceless appeals have not really got off the ground as yet with the assessee, so far only receiving a polite communication asking him whether he intends to go for the VsV Scheme, and fixing a date for uploading the submissions. One hopes that the quality of interaction in the faceless appeal would be such that the taxpayer comes out with the feeling he has made his point.   

A similar faceless tribunal however is not something that inspires much confidence in me. Although the ITAT is a creation of the statute, it is structured to function like a court of law and it is also the final fact finding authority being empowered to call for and inspect records, summon and examine persons under oath etc.   Thus, in discharging its duties, it is imperative that the principles of natural justice are followed.

The universally accepted rule is that every litigant  shall have a right of being heard. In Lord Loreburn's oft-quoted words the duty to afford a fair hearing is "a duty lying upon everyone who decides anything."  The  Supreme Court in the case of Gullapalli Nageswara Rao v. A.P.S.R.T. Corporation, AIR 1959 SC 308 while elaborating on the rule of “the one who decides must hear” observed that  a personal hearing enables the authority concerned to watch the demeanour of the witnesses and clear up his doubts during the course of the arguments, while at the same time also enabling the party appearing to persuade the authority by reasoned argument to accept his point of view. Quoting these decisions, the Kerala High Court in  Union Of India  And Anr. vs E.K. Andrew, 95 Comp Cas 537    observed that every citizen is entitled to know as to by whom and how the dispute is going to be adjudicated. The authority designated to decide the dispute shall not remain anonymous. It must be certain and definite.

Thus a “faceless”  tribunal may not be doing justice to its own existence and motto of “Sulabh Nyay and Satvar Nyay” by passing orders merely by examination of documents uploaded electronically. The ITAT Rules, 1963 has sufficient provisions within  that provide a robust mechanism whereby the appellant and respondent are heard in person. Rule 23 provides for the Appellant to be heard first after which the respondent may be heard  with a right of coming up with a rejoinder again to the appellant. Rule 33 provides that except in rare cases, the hearings by the tribunal shall be open to public.

Having said this much, one may also ask as to what can be the modes of personal hearing. There is no presumption that the terms ‘personal hearing’ and ‘physical hearing’ are synonymous. The virtual hearings in which all of us have participated during the last few months have been by and large as effective as physical hearings and successful too.  With the advancement of technology, if a person is enabled to put forth his arguments from any place without being physically present before the judges, then there is no reason why such a facility should not be treated as equivalent to a personal hearing. On this note one hopes that when the Finance Minister talked about  faceless proceedings of the tribunal, she was in fact actually meaning a virtual hearing. One may also note that even in the faceless assessment scheme, an option is given to the assessee to demand a hearing via video conferencing.  

The amendments proposed in sec 255 mention introducing an appellate system having dynamic jurisdiction. If by ‘dynamic jurisdiction’ we are looking at a scenario whereby our matters are going to be heard any two members in a remote location via video  conferencing then there should not be any objections to it. However, such a facility demands a massive investment in terms of both hardware and software by the government. The system should have sufficient bandwidth and capacity to enable the litigants to upload their submissions and  evidences in full  which are currently given in the form of paper book compilations without any limitation on size.  There  should be facility for the parties to share any decision  or document on real-time basis during the hearing which may not be part of the paper book. This is essential since many a time, we come across decisions that support our stand after the paper book is submitted but before the matter is heard.  The   system should be such that it would enable the judges too to access the relevant page or document which the AR/DR is referring to.  On its part the Income tax Department too needs to pull its socks up. Too often we hear the DR pleading before the court that he has not received the required files from the field formations or that he is only on rotation and that he is not fully acquainted with the matter. With the proposed dynamic jurisdiction, the department needs to put in place a system that would enable its officers to effectively and promptly represent the case of the government.

There have been apprehensions that we would all be reduced to ensuring only compliance of law and that the days for representational practice is over. I would rather take the middle path  of cautious optimism. It is said change  is the only constant in this world and we need to accept changes when it is inevitable. A few months back, my radius of  operation was mostly confined to within Bengaluru with an occasional matter argued in Cochin or Chennai. Today if  there is a realistic opportunity and the facility of arguing a matter before the Cuttack or the Jaipur or any other bench of the ITAT of an assessee residing in Jalandhar or anywhere in the country, then it is a change about which I am not going to complain.