As we all know, in order to simplify  Direct Tax Laws, the Govt. had published and widely circulated DIRECT  TAX CODE for the purpose of public debate and suggestions .The proposed bill was wisely and intelligently debated.
Many suggestions made by professional bodies and Industry have been found meritorious and accepted and incorporated in the recently tabled Direct Tax Code Bill 2010.However in the Direct Tax Code Bill 2010 certain provisions relating to the INCOME-TAX APPELLATE TRIBUNAL have been incorporated which were not in the earlier draft and therefore we do not have the benefit of any  intelligent or meaningful debate  in the hands of stake holders. The professional bodies such as  trade associations,  chambers of commerce and industry, Bar associations , lawyers, chartered accountants etc are yet to come out with their  opinions on these provisions but I assume, considering the importance of these provisions, the Bar associations connected with ITAT at least are debating them and may come out with their  view point shortly.

One of the two proposed provisions relating to the ITAT is the provision relating to  appointment of the president of the ITAT .As per the existing provision one amongst the Sr. Vice-president and the vice-presidents is chosen on merit to be the president. Sub section (6) of section of section 182 of the Direct Tax Code Bill 2010 proposes a fundamental change in regard to the appointment of the President of ITAT .It is proposed in the DTC Bill 2010 that a sitting or a retired chief Justice of a High Court will be the president of the Income-Tax Appellate Tribunal. It may be argued that several tribunals in the country are headed either by a retired High Court Judge or retired chief Justice of a High Court and therefore the provision is to bring uniformity with other tribunals. In my humble view comparison of Income-tax Appellate Tribunal with some other tribunals would not be justified for the simple reason that the Members of the Income-tax Appellate tribunal are permanent employees of the Government and gain considerable experience (between 18 to 20 years ) before they become eligible to head the institution. Most of the other tribunals are constituted of retired employees/ judges who are appointed for fixed tenure for periods ranging between ( 3 to 5 Years ) . In such tribunals we will hardly find members/ vice-chairman of long standing to justify his appointment as president/chairman of such tribunal .Therefore there is justification for appointment of a retired judge of the High Court to Head such tribunals.

In my humble view the existing law relating to the appointment of president of the ITAT is far more advantageous for the administration of the tribunal than the proposed provision.. As mentioned earlier the president is appointed out of sr-vice-president and vice- presidents. Any member of the tribunal is appointed a vice-president on the basis of seniority/ merit. The selection is done by a committee headed by a judge of the Supreme Court. Again the president is also appointed by a committee headed by a judge of the Supreme Court. Thus apart from the screening process for appointment of the president the existing system gives the president the advantage of knowing the background of various members of the ITAT who are drawn from different states with different cultures, different streams such as legal and accountancy professions, judiciary  legal service Indian Revenue Service etc. He would have worked with them and therefore is in a better position to assess their equipment, work, calibre and reputation. As pointed out earlier it takes 18 to 20 years for a member to become the president of the ITAT. Thus under the present system the president is in a position to be familiar with the personal problems of the Members, their families their peculiar requirements regarding transfer/postings. The Members of the Income-tax Appellate Tribunal are drawn from several streams and from all over the country. They are not a homogenous group like the judges of the High Court who are mostly from the same state (either from the bar or judiciary) At full strength the ITAT has 126 members (63 Benches) spread all over India. Having served the institution for more than two decades as member and vice-president of the Income-tax Appellate Tribunal I dare say without fare of any contradiction that INSIDER-PRESIDENT as per present system is in an advantageous position to handle the administration of the tribunal. Any sitting chief justice or retired chief justice of a High court in view of short tenure in the tribunal is bound to be dependent on others.

Moreover, since the provision has been proposed in the last minute the Finance ministry does not seem to have considered the embracing situation which a sitting or retired chief justice of a High Court is likely to face as President of the ITAT .As we know the orders of the Income-tax Appellate Tribunal are subject to Appeal to the High Court on substantial questions of law. Thus the order passed by the president of the Tribunal (former chief Justice of a High Court) will be subject to scrutiny by the High Court which can be quite embarrassing to him. If it is the same High Court of which he was once the Chief Justice the embarrassment is bound to be more. A former chief Justice President of ITAT might find himself in a situation where he has to take views which are opposite to the views which he had taken while in the High Court because of the binding judgement of the High Court. (Tribunal is bound to follow the jurisdiction High Court).It needs to be seriously considered as to whether a sitting or retired chief justice should be asked to put himself in such embarrassing situation. It is likely to shake the confidence of public in the judicial system where a person who has held a constitutional post (chief Justice of a High Court) is asked to Head a quasi-judicial Tribunal which is subordinate to the High Court With the proposed move to increase the age of retirement of High Court Judges to 65 years from the present 62 years, I do not see how a sitting Chief Justice of a High Court will be willing to come down a few notches to occupy the post of the President of the ITAT (a tribunal subordinate to the High Court when he also retires at the age of 65.

Moreover the Present procedure for appointment of the President of the ITAT has been followed ever since the inception of the tribunal in 1941 and no flaws of any fundamental nature have been found or pointed out. . The functioning of the Income-Tax Appellate Tribunal in the past nearly 70 years has come in for praise from Higher Courts of India and of late its orders are noted with respect by courts / tribunals in other countries while deciding issues involving international taxation. Several judges and jurists have showered praise on the Income-tax Appellate Tribunal for its balanced approach and the well reasoned orders. The ITAT has been regarded as the “mother Tribunal “ and a model for all the other Tribunals in India due to its successful functioning Therefore I fairly concede that I am unable to comprehend and appreciate the necessity of change in the well established successful system of appointment of the president of the ITAT.

Thus in my humble view, no particular advantage is to be gained by appointing a sitting or retired chief Justice of a High Court as the president of the ITAT The existing system of appointment of the President is merit based and because of that there is incentive for honest and hard working members for something to aspire for in their career. The proposed change may dampen their enthusiasm.

The other provision in the Direct Tax Code 2010 Bill relating to the Income-tax Appellate Tribunal is section 186(5). The proposed provision empowers the Board ( CBDT) to make a reference to the president for constituting a 5 Member Bench to review an earlier decision .Under the proposed provision when such a reference is made by the Board the president shall constitute the 5 Member Bench to review an earlier decision. Under the existing law a special bench constituted of 3 or more members can be constituted by the president at the request of any party to the appeal (on the recommendation of the Bench) or suo-moto. Admittedly the president has the discretion to constitute or not to constitute the special Bench. But it is well settled law that the discretion has got to be exercised judicially. Though technically Board is not the party before the tribunal yet it cannot be denied that it is interested party in any dispute before the Tribunal. In other words CBDT is an interested party before the Tribunal. I really fail to understand as to why a right to compel the president to constitute a special Bench of 5 Members is given to one of the parties and no such right is given to the tax payer – the main litigant. Parties should have equal rights before the Appellate Forum. This provision, apart from being discriminatory, is unnecessary. If at all any amendment is considered necessary laying down certain criteria for constitution of special Benches at the request of either party could be considered.

As I have stated earlier the aforesaid amendments have been inserted without any debate and discussion and in the last moment. These provisions did not find place in the draft code 2009 or discussion paper published in June 2010.As such these provisions could not have been discussed country-wide. No justification has been shown and Public have not been taken into confidence as to the need for the amendments. Even in the memorandum accompanying the DTC 2010 Bill no reasons are given for the proposed amendments of far reaching consequences. These provisions have been inserted in haste and without the benefit of debate and discussion by the professionals. Since by the aforesaid provisions fundamental changes are proposed these in my humble view should have been placed before the Hon’,ble Judge of the Supreme court in charge of the ITAT as well as before Hon’ble Chief Justice of India.

Fortunately the bill is yet to become the law of the land. Therefore professional have an opportunity to express their view point on the proposed amendments I am sure valuable suggestions will be made to the Hon’ble Finance Minister/ and select committee if any.


Author: Manzoor Ahmad Bakshi


(Former Vice-President, Income-tax Appellate Tribunal)

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