Greetings for the New Year

This Diwali and New Year festivities are different than the earlier years because of the corona pandemic still prevailing. The visits to temples were forbidden so also visit to friends and relatives. Yet we could enjoy the festival of Diwali with a greater sense of satisfaction and joy as valuable moments were shared with family and near and dear ones. I wish all the members a very happy, healthy and prosperous New Year, peaceful year yet full of fun.

Foundation Day Ceremony on 11th November 2020

The day was the completion of 44 years of establishment of AIFTP. At the National Conference organized under the team led by Late B.C. Joshi on 11th November 1976, the Federation was formed under the guidance of Hon’ble Justice J.C. Shah, Former Chief Justice of India and the distinguished Jurist, Padmabibhusan Dr. Nani A. Palkhivala, Senior Advocate and Mr. Ram Rao Adik, Sr. Advocate, Advocate General of Maharashtra. Mr. N.C. Mehta, renowned Chartered Accountant was selected to be the first National President and Mr. P C Joshi became the first Secretary General. I am happy to say although I was a college going student at that time, I do remember the famous advocates and personalities like Mr. Ram Jethmalani, Mr. Sushil Kumar Shinde and the likes being present in the function. The seeds of the Federation sowed in 1976 has culminated into a big banyan tree now. We must put on record our gratitude for the tremendous hard work and dedication by all the past office bearers who ensured that while growing and spreading the wings of Federation to each and every part of India, the bond of fraternity remained strong and the Federation continued to achieve its noble goal of educating the members and the public at large.

On account of Covid-19 pandemic and ongoing Diwali festival it was not possible to allow holding of multiple meetings on the Foundation Day. However, I am happy to inform that the East Zone under Chairman Sandeep Gadodia, Vice Chairman Dr. Ranjit Pandhi and Secretary Mr. Vivek Agarwal organized a digital foundation day celebration. In the West zone Mr. Santosh Gupta and Mr. Nitin Gautam active members from Nagpur celebrated the foundation day by unfurling the flag of the Federation at Nagpur.

I am sure, the flag of the AIFTP will be taken to greater heights by the future office bearers with the help and cooperation of the members of the Federation. The strength of the membership as on today is more than 8500. The membership fee is increased on recommendation of the National Executive Committee to ensure that prompt and effective service is rendered. Needless to add, the cost of administration has escalated manyfold. Nonetheless, the reputation and the activities of the Federation would attract many more professionals to become our life members. Let us adopt the principle that each member should bring one new member. The Federation would be able to achieve the mark of 15000 members by the end of next year.

Blessings by the Hon’ble Finance Minister, Smt. Nirmala Seetharaman

First time in the history of the Federation the Union Finance Minister consented to inaugurate the virtual National Tax Conference on 6th November 2020. In a nationwide address, the hon’ble Finance Minister Smt. Nirmala Seetharaman openly applauded and accepted the pivotal role played by the members of the AIFTP members; be the chartered accountant, advocates or tax practitioners, in being the valuable bridge between the Tax administrator and the taxpayers. The Hon’ble Finance Minister’s speech would be available on the website of AIFTP. I request all of you to please listen to it, if you were not present in the conference.

While we fully endorse the views expressed by the Hon’ble Finance Minister, it should also remind us about the onerous duty and responsibility cast upon us as tax Practitioners

GST – Alleged Fraud

Recently there has been much publicity about the fraud detected by the GST officials. It is stated that there was a fraud of around ` 5000 crore on account of new and easy procedure for registration under the GST Act. While I fully support the technicalities and formalities to be completed by the tax officials while granting the fresh registration I cannot help but comment on “alleged fraud”. Section 132(1)(b) and (c) of the CGST Act refers to the offences committed by issuing invoice or bill without supply of goods or services or both, thereby leading to wrongful availment of input tax credit or refund of tax. As I understand all the cases of alleged fraud are not of the same nature.

Traditionally a trader who purchases the goods on receiving the requisition from the buyer, never has the storage facility. The business has been run by traders for over decades of buying and selling of goods without taking actual delivery and directing the supplier to deliver the goods directly to their customers. In addition to not having the storage facility the business of the trader runs on very thin margin and hence they cannot afford the cost of loading, unloading and transportation. This has been the practice of almost all types of trading namely chemical, cotton metal and the likes. In such cases, the goods exist. Merely because the supplier of goods had not delivered the goods himself cannot be the reason to doubt such transaction and allege them as fraud to the Revenue. Take for example, the oldest case of trading in gunny bag by transfer of delivery order [Bayyana Bhimayya (12 STC 147); State of AP v. Kollasree Ramamurthy (13 STC 522); These 1961 judgments are confirmed in the year 2005 by the Hon’ble Bombay High Court in case of CST v. BM Shah & Co (142 STC 291) Bombay]. The judgment of Kolla sree is worth reading. The Constitution Bench of the Supreme Court has in case of Bayyana approved the tradition and stated that the goods can be transferred to number of persons by endorsing a single delivery order till the delivery of goods taken by the last person, all the traders in between have effected genuine transaction of sale and purchase. Therefore, as long as each and every person in the chain of event has declared the transaction in their books of account and paid the tax on value added, it cannot be labelled as fraud on the Revenue. The fact remains that the ultimate delivery of the goods is taken by the last person in the chain of event. This principle is accepted under the GST Act. Kindly see Section-10(1)(b) of the IGST Act 2017. The transaction which we normally call as ‘bill to’ ‘ship to’ are very common in the trading community. Therefore it is only when mere paper trading is done, without existence of the goods, that there can be a fraud on the revenue. Here also, I must immediately add that in the chain of transactions although everybody has disclosed the turnover and paid their share of tax, the GST authority are collecting full tax on the total turnover from each and every person in the chain which may result in unjust enrichment by the Government. In past under the VAT regime we had seen many such instances being adjudged by High Court and Supreme Court.

My purpose of pointing out the above types of transactions is not to support the fraudulent assessees but to stop the harassment to the genuine traders who have followed the traditional method of working. The Hon’ble Maharashtra Sales Tax Tribunal has in the year 2009 taken note of such genuine transactions in the case of Zenith Computers. As tax consultants therefore it becomes our moral duty to go deep into such transactions.

Physical hearing to commence

Recently I came across news that ITAT would commence the physical hearing from 23rd November 2020. While it can be an ideal move to restore the normalcy, we must all remember that the lockdown is lifted but Covid-19 has not gone. Therefore, when a consultant seeks adjournment on account of him being in the containment zone or being infected by corona virus, the Hon’ble Bench should take a lenient view to give adjournment. It is also equally true that the hon’ble High Court would continue to hear the matters virtually thereby reducing remote chance of spreading the virus. Whether in India we would have further critical wave of corona or not would depend on the responsible behavior of each and every citizen. As long as everybody continues to wear the mask, the chances of spreading the virus further would be minimized. I call upon each and every member to follow the Government guidelines and the protocol and be a responsible citizen.

23rd National Convention by South Zone

The 23rd National Convention for the first time would be held virtually by the South Zone on 5th & 6th December 2020. I request all of you to register in large number and make it successful.

Nikita R. Badheka
National President, AIFTP

Wishing all the readers of AIFTP Journal Very Happy & Prosperous New Year

Faceless Appeal

Backdrop

Furthering the trajectory the Government on the occasion of birth anniversary of Shri Deendayal Updhyay the leader of political party ‘Bhartiya Jan Sangh’ a forerunner to ‘Bhartiya Janta Party’, firmly placed a foot towards ‘Faceless Appeals’. Accordingly the Faceless Appeals as touted in the past has been finally brought into effect from 25/09/2020 as per the CBDT Press Release dated 25/09/2020. As can be gleaned from the press release, the motive is to reduce the hardships to the appellant by facilitating the taxpayers to file their submission from the comfort of their home and shall further save the time and resources of the appellant. The scheme also seems to reduce the time span in disposal of appeals and reduce the burden of pending cases, just to quantify 4.6 lakh cases are pending before the CIT(A). Ex-facie the year 2020 in the tax prospects seems to adopt the 20-20 cricket format for faster disposal of cases through online proceedings.

Under the Faceless Appeals Scheme just like the Faceless Assessments the physical interface between the appellant and the Department has been dispensed off. Moreover even the National e-Assessment Scheme or the Assessing Officer cannot directly communicate with the appellate unit. Therefore the complete process right from allocation of appeals, communication of notice/questionnaire, verification/enquiry to hearing and communication of appeal order shall be online.

Further the operandi of the faceless appeals has been determined to include allocation of cases through Data analytics and AI under dynamic jurisdiction with central issuance of notice bearing DIN. As part of dynamic jurisdiction the draft appellate order shall be prepared in one city and reviewed in another. This assures quality appellate order by subjugating it to a review before the final appellate order is passed.

Object

The shift towards Faceless Appeals was introduced vide amendment to section 250 by introducing sub-clause 6B & 6C to section 250 of Income Tax Act 1961. The said section is reproduced herewith to understand the framework for advancement towards the Faceless Appeals :-

[(6B) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of disposal of appeal by Commissioner (Appeals), so as to impart greater efficiency, transparency and accountability by—

(a) eliminating the interface between the Commissioner (Appeals) and the appellant 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 in which appeal shall be disposed of by one or more Commissioner (Appeals).

(6C) The Central Government may, for the purposes of giving effect to the scheme made under sub-section (6B), by notification in the Official Gazette, direct that any of the provisions of this Act relating to jurisdiction and procedure for disposal of appeals by Commissioner (Appeals) shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:

Provided that no direction shall be issued after the 31st day of March, 2022.

(6D) Every notification issued under sub-section (6B) and sub-section (6C) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.]

On perusal of the aforementioned amendment it is palpable that sub-section 6B & 6C enable the Government to introduce Faceless Appeals vide a Notification in the Official Gazette. However such Notification shall be subject to the approval in each of House of Parliament. Deriving powers from the said provision of Income Tax Act 1961 the Government on 25/09/2020 vide Notification No. 76/2020 introduced the Faceless Appeals Scheme, 2020 with immediate effect.

CBDT vide Notification No. 77/2020 dated 25.09.2020 issued directions for the purpose of giving effect to the Faceless Appeal Scheme, 2020 notified vide Notification No. 76/2020 dated 25.09.2020 under the Income Tax Act, 1961 (“Act”).

As per the directions, the National Faceless Appeal Centre (NFAC) shall assign the appeal to a specific appeal unit in any one of the Regional Faceless Appeal Centre (RFAC) through an automated allocation system.

The Appeal Unit shall decide on the condonation in filing the appeal by the appellant and shall communicate its decision to NFAC. The NFAC shall intimate the admission or rejection of appeal to the appellant.

On admitted appeal, the appeal unit shall request the NFAC to obtain any further information or document or evidence from the appellant or any other person. The appeal unit is authorized to obtain a report from the NeAC or the assessing Officer on the grounds of appeal or information, documents or evidence filed by the appellant.

Any notice on the matter of appeal shall be served by the NFAC to the appellant or any other person or NeAC or Assessing Officer as may be specified by the appeal unit.

The appellant or any other person shall file his response to the NFAC only within the prescribed time limit or extended time limit. Similarly, any report shall be filed by the NeAC or assessing Officer to the NFAC.

Appellant is allowed to file additional grounds with reasons. National Faceless Appeal Centre shall send the additional ground of appeal to the National e-Assessment Centre or the Assessing Officer, as the case may be, for providing comments, if any, and to the appeal unit. National Faceless Appeal Centre shall intimate the admission or rejection of the additional ground, as the case may be, to the appellant.

The appellant may file additional evidence in such form, as may be specified by the National Faceless Appeal Centre.

Finally, the appeal unit shall prepare a draft order in accordance with the provisions of section 251 of the Act and send the order to the National Faceless Appeal Centre along with the details of the penalty proceedings, if any, to be initiated therein.

National Faceless Appeal Centre shall upon receipt of the draft order finalise the appeal as per the draft order or send the draft order to an appeal unit, other than the unit which prepared such order, in any one Regional Faceless Appeal Centre through an automated allocation system, for conducting a review of such order.

The appeal unit shall review the draft order, referred to it by the National Faceless Appeal Centre, whereupon it may decide to,–

(a) concur with the draft order and intimate the National Faceless Appeal Centre about such concurrence; or

(b) suggest such variation, as it may deem fit, to the draft order and send its suggestions to the National Faceless Appeal Centre.

The National Faceless Appeal Centre shall, upon receiving the concurrence of the appeal unit, finalize the appeal as per the draft order. In case of variance is suggested, the same will once again be given to another appeal unit to review the draft order.

National Faceless Appeal Centre shall, after finalizing the appeal, pass the appeal order and shall communicate such order to the appellant PCCIT/CCIT/PCIT/CIT, to the NeAC or AO.

A person shall not be required to appear either personally or through authorized representative in connection with any proceedings under the said Scheme before the income-tax authority at the National Faceless Appeal Centre or Regional Faceless Appeal Centre or appeal unit set up under the said Scheme. Though provisions for personal hearing is included in the directions, but such personal hearing will take place through video conferencing only.

An appeal against an order passed by the National Faceless Appeal Centre under the said Scheme shall lie before the Income Tax Appellate Tribunal having jurisdiction over the jurisdictional Assessing Officer.

Points for clarification

While the Faceless Scheme is an inexorable march towards transparency through digital means, it may face some teething troubles, unless necessary clarifications are issued in a timely manner.

At the outset the constitutional validity of introducing such a scheme vide notification in an official gazette is under question and we will have to wait till the same is considered by the Judicial authorities.

The insertion of enabling provisions in the Taxation Bill has removed ambiguity regarding the coverage of the scheme to a certain extent. It has been explained that matters pertaining to search, seizure and international tax charges shall be kept outside the purview of the scheme. However, the department shall still have to clarify matters such as circumstances under which the assessee shall be eligible for personal hearing through video conferencing, whether the hearing would be recorded and if yes, whether it would be made available to the assessee for future reference.

Further, while it has been made clear that proceedings under DRP shall be conducted in a faceless manner, it is still being deliberated upon as to how the DRP would exercise its power of making further enquiry. Further, it is doubtful as to how tax clearance certificates (under Section 281) will be issued and whether it would form a part of the section governing faceless approval and registration process.

Another grey area is while the law lays down the recommendation of initiation of penalty proceedings by any unit, it does not pronounce a procedure for the conduct of proceedings. The question arises that while almost all proceedings have gone the digital way, why have penalty proceedings been kept out.

While we await clarity on dubious issues, both the taxpayer as well as the department must brace themselves and make sincere efforts for successful implementation of the scheme. Taxpayers should now maintain robust documentation in relation to potential and legacy issues, prepare self-explanatory and concise written submissions, update their contact information on the e-filing portal and respond to the notices timely. Likewise, the department must adopt a non-adversarial approach, grant reasonable time for response, issue clarifications wherever necessary and give time to adjust to the new mechanism.

H. N. Motiwalla,
Editor