Introduction:

The announcement of the Faceless Appeal Scheme, 2020 was made by the finance minister while presenting the Union Budget 2020 on 01.02.2020, with the objective to eliminate the physical interface between the taxpayers and the income tax authorities.

Faceless Appeal Scheme V/s Audi Alteram Partem:

♦ “Audi Alteram Partem” a Latin Maxim meaning “Hear the other side” or “the other side also heard as well”. This is a strong principle that no person shall be judged without a fair hearing. This principle is meant to give each party the opportunity to respond to the evidence against them.

♦ The essential elements of this maxim are:

  • Notice: Before any action is taken against the party who is affected. A notice must be provided to them in order to present a cause against the proposed action and pursue his
  • Hearing: If the order passed by the authority without hearing the party or without giving him an opportunity of being heard then it will be considered as an invalid.

♦ In the Faceless Appeal Scheme, 2020, on the request of the appellant or the authorised representative, the Chief Commissioner or the Director General of the regional faceless appeal centre “may” approve the request of personal hearing.

Supreme Court:

♦ In case of CBDT v. Lakshya Budhiraja – [2021], the appellant raised the following issues:

  • The grant of opportunity of hearing to all taxpayers/assessee and to hold that the same should not be at the discretion of the Chief Commissioner or the Director General as proposed in the Faceless Appeal Scheme, 2020.
  • The right to provide or not to provide a hearing in the matter is also against the principle of audi alteram partem. The aforesaid mechanism is discriminatory and is against the settled principles of law and in violation of the Article 14 of the Constitution of India.

♦ In response, the Learned Additional Solicitor General submits that the Department is having a second look at the matter on the issue of Faceless Appeal Scheme, 2020 and he may be granted a period of three months as it may require change of law. The Apex court deferred the matter for a period of three months as sought by learned Additional Solicitor General.

Faceless Appeal scheme and Audi Alteram Partem

Faceless Appeal Scheme 2021:

As the deadline for apex court hearing was approaching, the CBDT notified the Faceless Appeal Scheme 2021, on 28th December, 2021. Following are the Key Changes in this scheme:

  • Personal Hearing allowed to the appellant

> Appellant or his authorised representative, as the case may be, may request for personal hearing so as to make his oral submissions or present his case before the Commissioner (Appeals). The Commissioner (Appeals) shall allow the request for personal hearing and communicate the date and time of hearing to the appellant through the National Faceless Appeal Centre.

  • No Draft appeal order

> In the prevision scheme draft appeal order is to be passed by the appeal unit in the regional faceless appeal unit. But in the new scheme the there is no requirement of the draft appeal order.

> The Commissioner(A) shall prepare in writing, an appeal order in accordance with the provisions of section 251 of the Act stating the points for determination, the decision thereon and the reason for decision; and send such order after signing the same digitally to the National Faceless Appeal Centre along with the details of the penalty proceedings, if any, to be initiated therein;

  • Imitation of Penalty Proceeding by the same Commissioner (Appeals)

> Commissioner (Appeals) may, in the course of appeal proceedings, for non­compliance of any notice, direction or order issued under this Scheme on the part of the appellant or any other person, as the case may be, send a notice to the appellant through the National Faceless Appeal Centre for initiation of any penalty proceedings calling upon the appellant to show cause as to why penalty should not be imposed upon him under the relevant provisions of the Act.

  • No Regional Faceless Appeal unit

> In the previous scheme, NFAC assigns the appeal to any Regional Faceless Appeal Centre through automated random allocation system.

> In the new scheme the National Faceless Appeal Centre shall assign the appeal for disposal to a Commissioner (Appeals) of a specific appeal unit through an automated allocation system;

  • Appeal unit shall have only one Commissioner (Appeals)

> In the previous scheme, the appeal unit shall have one or more Commissioner (Appeals) & other income-tax authority, ministerial staff, executive or consultant to assist the Commissioner (Appeals) as considered necessary by the Board.

> In the New Scheme, the appeal unit shall have only one Commissioner (Appeals) & other income-tax authority, ministerial staff, executive or consultant to assist the Commissioner (Appeals) as considered necessary by the Board.

  • Orders shall be signed digitally by the Commissioner (Appeals):

> Under the new Faceless Appeal Scheme, all the orders (appeal order, penalty order, or rectification order) shall be signed digitally by the Commissioner (Appeals) before sending to the Centre. There were no such provisions of signing orders digitally by the Appeal Units in the previous Scheme.

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