Some Income Tax professionals are not happy with the Budget proposal in respect of introduction of the scheme of Faceless ITAT. These are the same people who had wholeheartedly & unequivocally welcomed the scheme of Faceless Assessment & Faceless Appeals before the CIT (Appeals).
It is common knowledge that Faceless Assessment & Faceless Appeals are a super success and have drastically reduced unwanted interaction of the department with the assessees, helped in speedier disposal & transparency and instilled an environment of mutual trust between the Department and the Assessees. Needless to elaborate that the underlying object of Faceless Assessments & Faceless Appeals has been achieved in the ‘Faceless Era’.
It is pertinent that when Virtual Hearing was introduced in the Apex Court & High Courts due to Corona pandemic, there was a lot of hue & cry by certain lobbies that the same is violative of the principles of Natural Justice in as much as Virtual Hearings do not provide proper & sufficient hearing of the issues being heard by the Courts and there was abundant fear that the quality of the judgements would be affected prejudicially. However thousands of cases have been decided by the top courts and in the same manner as they were heard physically and all fears & accusations have been belied and belittled. Infact, hybrid system of both physical & virtual hearing is likely to be adopted in post Covid-19 era in view of its efficacy, convenience & time saving.
The scheme of Faceless ITAT has been assailed on the ground that it is violative of the principles of Natural Justice. It is imperative to understand the scheme of Faceless ITAT and where the cardinal principles of Natural Justice are feared to be violated. Although the fine print of the same is not available but it is sure that an appeal to the ITAT would be required to be filed electronically. The memo of the appeal would have to be duly served on the Respondent i.e. the Departmental Representative or the assessee. Written Arguments would have to be uploaded, copy of which will automatically go to the Respondent, who would get proper time to for rebuttal and filing of counter written Arguments. The Appellant would also get reasonable time for filing his rejoinder arguments to meet out the case put forth by the Respondent. Thus, there is proper & sufficient opportunity of hearing afforded to both the parties and also giving them sufficient time and this process in no way can be termed as violative of the principles of Natural Justice.
We have all seen or have participated in proceedings in the ITAT. The members just pen down notes of the arguments in very short & few caselaws cited by both the parties. While dictating the orders, they go through the memo of appeal, written arguments, if any and a small note jotted down during arguments. The ITAT rules do not require recording of all arguments or meeting out each & every verbal argument addressed to the bench. On the contrary, each & every written argument made in the written arguments and all the caselaws relied in the written arguments would have to be dealt with & discussed/considered in the order else it would not sustain in the higher forum. The Law in this regard is well settled and submission of written arguments guarantee that the order of the ITAT would have to certainly deal with the caselaws cited.
Since Faceless ITAT is being assailed on the Doctrine of Audi Alteram Partem which is the foundation of the Principles of Natural Justice, it becomes imperative to understand it’s true import. Audi Alteram Partem implies that no man should be condemned unheard or in other words both the sides must be heard before passing any order. Under this doctrine, no order shall be made without giving reasonable opportunity to both the parties to present their own case.
The most important limb of audi alteram partam doctrine is the rule of hearing. If the order is passed by any authority without providing a reasonable opportunity of being heard to the litigants or the affected party, then the whole proceedings are bad in law and liable to be struck down/ set aside. The Apex Court has time & again held that adequate & reasonable hearing is sine qua non with the doctrine of Natural Justice.
The reasonable opportunity of hearing which is also well known as ‘fair hearing’ is an important ingredient of the audi alteram partem rule. The rule of ‘hearing’ may be complied by the authority by providing written or oral hearing which is the discretion of the authority. However, the above rule of fair hearing requires that the affected party should be given an opportunity to meet the case against him effectively and this may also be achieved by providing opportunity to the affected person by making ‘written representation’ instead of oral or personal hearing as was provided in the case of the Apex Court in Union of India v. J.P. Mitter 1971 AIR 1093, 1971 SCR (3) 483.
It is apposite to refer to the judgement of Apex Court in MP Industries vs. Union of India, AIR 1966 SC 671, which held thus:
“It is no doubt a principle of natural justice that a quasi-judicial tribunal cannot make any decision adverse to a party without giving him an effective opportunity of meeting any relevant allegations against him. Indeed Rule 55 of the Rules, quoted supra, recognizes the said principle and states that no order shall be passed against any applicant unless he has been given an opportunity to make his representations against the comments, if any, received from the State Government or other authority. The said opportunity need not necessarily be by personal hearing. It can be by written representation. Whether the said opportunity should be by written representation or by personal hearing depends upon the facts of each case and ordinarily it is in the discretion of the tribunal.”
The Apex Court in Assam vs Gauhati Municipal Board, Gauhati, AIR 1967 13928 held that unless such an oral hearing is expressly prescribed, the order would not be vitiated if personal hearing is not provided. The Court under the Assam Municipalities Act, 1957 held that it was enough that the government issued a notice and gave an opportunity to the board to explain and there was no necessity to give a personal hearing. In the Court’s opinion, the Board had been given adequate opportunity of being heard and the absence of an oral hearing did not vitiate the Government’s decision altogether.
The decision of the 5 member Bench of the Apex Court in P. N. Eswara Iyer vs The Registrar, Supreme Court of India 1980 AIR 808 laid that in first hearing before any Court, oral hearing is a must but in case of second hearing like a review petition before the same Court, oral hearing may be avoided. Since, ITAT is the third stage of the quasi judicial proceedings after the Assessing Officer & CIT Appeals, the facts of the case are ascertained and only question of law, if any, remains to be answered which can well be very well done through Faceless ITAT. Although, ITAT is the highest fact finding authority but it only draws inferences from the facts available at the time of assessment or first appeal to ascertain the facts.
It is true that Courts have held that where the relevant Act mandates oral hearing, mere filing of written arguments, would create gross infirmity in the judicial process and render the judgement unsustainable in Law. But in the Faceless ITAT, the same is duly mandated by Finance Bill 2021 by amending section 255 of the Income Tax Act, 1961.
From the above analysis of the legal position, it is beyond doubt that Faceless ITAT is nowhere violative of the Doctrine of Audi Alteram Partem or the Principles of Natural Justice and also that it would provide speedy, transparent & ‘Real’ Justice.