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Faceless ITAT Scheme Proposed in Finance Bill, 2021

Faceless ITAT Scheme Proposed in Finance Bill, 2021

While presenting the Union Budget 2021-22, the Finance Minister  Nirmala Sitaraman has announced Faceless Income Tax Appellate Tribunal (ITAT) for disposing of appeals filed before the ITAT.


The Finance Minister said that in the Direct Tax administration, the government had recently introduced the Faceless Assessment and Faceless Appeal. She now seeks to take further steps to simplify the tax administration, ease compliance, and reduce litigation.


Faceless ITAT


For ease of compliance and to reduce discretion, the government is committed to make the taxation  processes faceless.  The  Government had already introduced faceless assessment and appeal this year, she said in the Parliament.



She further added, “The next level of income tax appeal is the Income Tax Appellate Tribunal.  I now propose to make this Tribunal faceless. We shall establish a National Faceless Income Tax Appellate Tribunal Centre. All communication between the Tribunal and the appellant shall be electronic. Where personal hearing  is  needed,  it  shall  be  done  through  video-conferencing.”


In order to provide a transparent tax appellate mechanism, it is proposed to make the Income  Tax  Appellate  Tribunal faceless and jurisdiction-less. A National Faceless Income-tax  Appellate  Tribunal  Centre shall be established and all the communication between the Tribunal and the appellant shall be made electronically.  Wherever personal hearing is needed, it shall be done through video-conferencing.


Provision for Faceless Proceedings before the Income-tax Appellate Tribunal (ITAT) in a jurisdiction less manner


In order to impart greater efficiency,  transparency and accountability to the assessment process, appeal process and penalty process under the Act a  new faceless assessment scheme, faceless appeal scheme and faceless penalty scheme have already been introduced.   Further, vide Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 the Central Government has been empowered to notify similar schemes in respect of many other processes under the Act that require a physical interface with the taxpayers.


In order to ensure that the reforms initiated by the Department to reduce human interface from the system reaches the next level, it is imperative that a faceless scheme be launched for ITAT proceedings on the same line as faceless appeal scheme.  This  will  not  only  reduce  cost  of  compliance  for  taxpayers,  increase transparency  in  disposal  of  appeals  but  will  also  help  in  achieving  even  work distribution in different benches resulting in best utilisation of resources.


Therefore, it is proposed to insert new sub-sections in section 255 of the Act so as to provide that the Central Government may notify a scheme for the purposes of disposal of appeal by the ITAT so as to impart greater efficiency, transparency and accountability by,—


(a) eliminating the interface between the ITAT and parties to the appeal in the course of proceedings to the extent technologically feasible; 


(b) optimising utilisation of the resources through economies of scale and functional specialisation; 


(c) introducing  an  appellate  system  with  dynamic  jurisdiction.  It  is  also proposed to empower the Central Government, for the purpose of giving effect to the scheme made under the proposed sub-section, for issuing notification in the Official Gazette, to direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification. Such directions are to be issued on or before 31st March, 2023. 


It is proposed that every notification issued shall, as soon as may be after the notification is issued, be laid before each House of Parliament.


This amendment will take effect from 1st April, 2021.


For this purpose, section 255 of the Income Tax Act, 1961 is amended to provide for faceless ITAT Scheme in the following manner-


Amendment of section 255.


78. In section 255 of the Income-tax Act, after sub-section  (6), the following sub-sections shall be inserted, namely: –– 


“(7) The Central Government may make a scheme, by  notification  in  the  Official  Gazette,  for  the  purposes  of disposal of appeals by the Appellate Tribunal so as to impart greater efficiency, transparency and accountability by— 


(a) eliminating the interface between the Appellate Tribunal  and  parties  to  the  appeal  in  the  course  of appellate  proceedings  to  the  extent  technologically feasible; 


(b) optimising utilisation of the resources through economies of scale and functional specialisation; 


(c) introducing  an  appellate  system  with  dynamic jurisdiction.


(8) The Central Government may, for the purposes of giving effect to the scheme made under sub-section (7), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply to such scheme or shall apply with such exceptions, modifications and adaptations as may be specified in the said notification: 


Provided that no such direction shall be issued after the 31st day of March, 2023. 


(9) Every notification issued under sub-section (7) and sub-section (8) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.”.


Clause 78 of the Bill seeks to amend section 255 of the Income-tax Act relating to the procedure of Appellate Tribunal.  


It is proposed to insert sub-sections (7), (8) and (9) in the said section so as to, inter alia, provide for a scheme, by notification in the Official Gazette, for the disposal of appeals under that section.



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