Income Tax: Faceless Appeal Scheme Sees A Makeover But Concerns Remain
The tax department has made several tweaks to its faceless appeal scheme that's currently facing a constitutional challenge before the Bombay High Court. The Central Board of Direct Taxes has now addressed one of the key concerns of taxpayers, that is the discretion given to the tax office vis-à-vis requests for personal hearing.
But the industry body that's challenged the scheme before the high court maintains the changes aren't sufficient.
The changes are quite favorable but not enough, Ketan Vajani, president of Chamber of Tax Consultants, told BloombergQuint. More changes are required. So the plea before the Bombay High Court will remain, he said.
The scheme is a piece of delegated legislation. Ideally, it should be introduced in the Parliament. This is one of our fundamental grounds challenging the scheme.Ketan Vajani, President, Chamber of Tax Consultants
Further, Vajani said, the department has still not addressed a key aspect of the scheme relating to introduction of new evidence during appeal stage.
As per the newly notified scheme, during appeal proceedings, the commissioner (appeals) while making enquiries, can direct the taxpayer or authority, whoever has filed the appeal, to produce additional documents or evidences. A similar provision was present in the previous scheme as well.
Vajani says this is problematic since the income tax rules specifically say fresh evidence cannot be introduced at the appeal stage except in certain specific circumstances, for instance if the taxpayer was prevented from producing it before the assessing officer.
While the new scheme allows either party - the assessing officer or taxpayer - to submit additional evidence if asked for, practically it's likely to work to the detriment of the taxpayers, Vajani opined.
Allowing assessing officers to submit fresh evidence at the commissioner (appeals) stage is giving then an opportunity to improve their assessment orders, which is not permitted under the law. This will definitely cause some difficulty for taxpayers.Ketan Vajani, President, Chamber of Tax Consultants
That being said, the CBDT has addressed some of taxpayers' concerns in the new scheme. Here are the top changes:
Allowing Request For Personal Hearing
The Faceless Appeal Scheme, 2021, now mandates the commissioner (appeals) to allow all requests for personal hearing via video conference when a tax demand is raised by the department. The date and time of hearing will need to be communicated to the taxpayer via the National Faceless Appeal Centre.
The personal hearing can now take place via video conference as well. There's no need for taxpayers to physically appear before the income tax authority at the National Faceless Appeal Centre.
The earlier version of the scheme gave discretion to the chief commissioner or director general handling a regional faceless appeal centre to grant a personal hearing. Once it was allowed, the taxpayer was required to appear in-person at the centre.
Simpler Procedures For Tax Disputes
The revised scheme also simplifies the procedures with regard to tax disputes. Such disputes will be first assigned by the National Faceless Appeal Centre to a commissioner (appeals) of a specific appeal unit through an automated allocation system.
After which they go to the Income Tax Appellate Tribunal and then to a high court or the Supreme Court, if not resolved.
Though, this has been the procedure since last year, the previous scheme did not explicitly specify the procedure for appeals. The new scheme now takes away any confusion.
In the previous scheme, all power to condone delay in filing appeal, admitting additional grounds and additional evidences was with the "appeal unit". And, an appeal order would also need to be prepared by the appeal unit as a draft order, which would be reviewed by another "appeal unit".
This has been replaced in the new scheme.
The revised scheme vests all power of condonation of delay, additional evidence and additional grounds with the commissioner (appeals).
Vajani is of the view that the new system is better. Earlier, these powers were with the "appeal units". This is going away and now, these powers are vested with an individual commissioner.
The concept of peer review has also been taken out, said Vajani.
In the previous scheme, Commissioner A will pass an order, which will go to Commissioner B, and if both of them are on different footing, it will go to Commissioner C. The scheme was permitting a vertical review. But in review, you can travel only upward.Ketan Vajani, President, Chamber of Tax Consultants
The new scheme will also expedite the appeal process, he said.
The new scheme also directs the CBDT to set up suitable facilities for video conferencing or video telephony at necessary locations to ensure that no taxpayer is denied the benefit of the scheme owing to no access to video conferencing facility.
Also, all notices, orders or any other electronic communication under the scheme should be delivered to taxpayers in their registered account or registered email address or by uploading a copy on the mobile app of the taxpayer followed by a real-time alert.
Such mobile application software will have to be developed by the tax department so that taxpayers can download and install the app on their registered mobile numbers.
These online facilities are truly in line with faceless appeal scheme, said Vajani. Ultimately, faceless schemes were brought about to tackle the menace of corruption and that's why, the identity of the authorities is not revealed.
In video conference hearing, under the scheme, the faces of authorities will be blurred. In a physical hearing, this isn't possible. Taxpayers had to physically visit their offices. So, keeping the identities of authorities discreet in a physical set up would have been a problem.Ketan Vajani, President, Chamber of Tax Consultants