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Some suggestions for better utilization of services of Members of Tribunals -Enlarging scope for hearing by Single member Bench (SMC Bench) for early disposal of cases and cost reduction. |
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Some suggestions for better utilization of services of Members of Tribunals -Enlarging scope for hearing by Single member Bench (SMC Bench) for early disposal of cases and cost reduction. |
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Tribunal members: Tribunal members are very senior officials and have high salaries and perquisites. Therefore, it is high time to think as to how their services can be best utilized for quick disposal of appeals and reduction of costs. In a division bench two members hear appeals. In many small cases which involves routine issues, covered issues and lower tax implication on the relief sought or relief opposed by revenue, there is no sense to place the appeal before division bench merely because the income determined by the Assessing Officer is more than Rs. Five lakh, though the relief sought by assessee or opposed by revenue is of nominal amount or is of routine and covered matter. In such cases lot of time and costs can be saved by disposal of such cases by SMC bench instead of Division Bench. Authorization for members to hear cases singly: The Central Government can authorize the President or other member to hear appeals sitting singly instead of two or more members ( division bench). Usually President, Senior Vice President or Vice President or other senior member hears cases in SMC bench. Cases in which the income computed by the A.O. does not exceed Rs. Five lakh are fixed before the SMC bench without consideration of relief allowed by CIT (A) and income remaining assessed after appeal order. In view of author for better administration in Tribunal covered matters and matters having less than prescribed tax effect (on disputed issues) can be considered by SMC benches. Members having experience of authoring certain number of orders can be considered fit as having necessary experience for hearing and deciding matters sitting singly in SMC bench. This will reduce burden of the ITAT and costs in administration of Tribunal considerably as more matters will be decided by SMC bench resulting into increase in total available hours of ITAT benches for hearing and deciding issues. Bench of Tribunal: As per Income-tax (Appellate Tribunal) Rules, 1963 a SMC bench is also a bench of Tribunal. In Rules 2 "Bench" is defined as follows: Definitions. 2. In these rules, unless there is anything repugnant in the subject or context, - XXXX (iii) "Bench" means a Bench of the Tribunal constituted under sub-section (1) of section 255 read with sub-section (2) thereof and includes the President, [Senior Vice-President, ] Vice-President or any other Member sitting singly under the provisions of sub-section (3) of the said section and a Special Bench constituted under the same provision;] Thus, we find that an order of SMC bench is an order of ITAT and in all practical implications a SMC bench is a bench and its order has the same implications as any other bench of ITAT. The order of any bench including SMC bench can be appealed before High Court if it involves a substantial question of law. Facts found by SMC bench are also final as is the case of any other bench. Tribunal is the final fact finding authority: ITAT is second appellate authority dealing direct taxes. ITAT is also final fact finding authority and the facts found by it are generally final and are not disturbed by the High Court or the Supreme Court unless the findings are perverted or patently wrong. In case of perverse finding or patently wrong finding also usually courts prefer to remit the matter to the Tribunal for correct ascertainment of facts. Different type of Benches We find following types of benches of ITAT. (1) Single Member Bench (SMC); (2) Division Bench (two members - Judicial member and Accountant Member); (3) Special Bench (to consider matters on which difference of opinion is prevailing or matters having significant importance) (4) Third Member Bench (to resolve difference of opinion among two members of division bench). Scope of this write up In this write up we are discussing mainly the provisions relating to SMC Bench. SMC Bench means a Bench constituted by a single member who hears the case and decides the matter. So far the finality of fact finding and the character of binding decision over lower authorities are concerned, it remains the same in case of SMC decision also. In case of SMC Bench, the constitution of Bench is usually by a senior member of Tribunal and in case there is Vice-President or a senior member, the Bench may be constituted and headed by either the Vice-President or senior member of Tribunal who have been authorized by the Central Government under sub-section (3) of section 255 which reads as follows: (3) The President or any other member of the Appellate Tribunal authorized in this behalf by the Central Government may, sitting singly, dispose of any case which has been allotted to the Bench of which he is a member and which pertains to an assessee whose total income as computed by the Assessing Officer in the case does not exceed five hundred thousand rupees**, and the President may, for the disposal of any particular case, constitute a Special Bench consisting of three or more members, one of whom shall necessarily be a judicial member and one an accountant member. (** Limit was Rs. One lakh from 01.04.1989 -30.09.1998 and before 01.04.1989 Rs.40000) An analysis and comments: Eligibility for single member: As per provisions of section 255 (3) the president of ITAT or any other member of ITAT as may be authorized by the Central Government can hear matters singly when assessed income is below prescribed limit. As per provisions the President of ITAT is authorized in this behalf and any separate order of the Central Government is not required. The Central Government usually authorizes Service President, Vice President and Sr. members in this behalf. However, as discussed later on, author feels that in case of SMC bench matters can be assigned to junior members so that they can decide the issue independently and gain more experience and job enrichment. Monetary limit of assessed income is not justified: We find that in case of SMC Bench, monetary limit is fixed about deciding the appeals by SMC Bench. At present the limit is income computed by the A.O. Therefore, registry office of the Tribunal fixes the appeal to be heard by SMC Bench if the income assessed by the A.O. is less than the prescribed limit of Rs. Five lakh. Suppose in a case returned income was Rs. One crore and assessed income was Rs. One crore and two lakh. After order of Commissioner (Appeals) assessed income is reduced to Rs. One crore one lakh only. The assessee prefers appeal only in respect of Rs. One lakh. In such a case hearing of the appeal by division bench can be avoided and the matter can be placed before a SMC bench because the matter involved in small having revenue effect of just about Rs.Thirty thousand only. Substantial relief is allowed by Commissioner (Appeals) It is a matter of fact that more than seventy percent of additions and disallowances made by the A.O. stands deleted by the Commissioner (Appeals). Therefore, income computed by the A.O. is not proper basis. Therefore, instead of income as computed by the A.O. the assessed income after first appeal order can be considered. In opinion of the author the assessed income as computed by the A.O. as deciding factor is not proper. In fact the decision should be based on the amount involved in dispute. Suppose assessed income is Rs.one crore and the amount of additions in dispute is just say Rs. Two lakh, in such a case placing the matter before a division bench ,merely because the assessed income is above Rs. Five lakh does not appear to be correct approach based on the purpose of keeping a difference in SMC bench and Division bench. Transfer of cases from SMC Bench to Division Bench Sometimes when the single member, while hearing the appeal finds that the matter involved is important and requires consideration by a Division Bench, he may take proper steps for transferring the case for consideration by a Division Bench. Many times we find that cases of SMC Bench are transferred to Division Bench because the SMC Bench is not constituted and some cases of SMC Bench can be heard by Division Benches. For example in the exhibits given after the article some cause list of Tribunal benches shows that the cases of SMC benches were transferred to division benches. Some suggestions for SMC Bench Hearing by members having prescribed experience: As per provisions and the practice, SMC bench cases are heard by any of senior Members who is authorized by the Central Government in this regard. However, considering the fact that SMC Bench hears matter which involves less than prescribed amount of assessed income and the revenue effect is less and usually the matters fixed before the SMC Bench relates to routine type of litigation and many of such matters might have already been decided by Division Benches of ITAT or High Court. Therefore, author feels that SMC Benches can be constituted by a junior member having some experience of hearing matters in a division bench and authoring orders in certain numbers of appeals - say fifty appeals. This will provide opportunity and scope to junior members also to decide matters independently. This will go a long way in human resource development (HRD) amongst ITAT members. This will also make available more time to the President and other senior members authorized in this behalf (SR.VP.VP and senior members) to study and decide other matters of serious concern and having more revenue implication. Criterion for SMC bench: As discussed earlier assessed income is not a proper criterion to consider matter to be placed before the SMC bench or division bench. The better criterion is tax implications or the amount of addition or relief involved. After hearing by SMC if it is considered that the issues involved in the appeal require consideration by a division bench, then the case can be transferred to division bench. Covered matters can be taken up by SMC bench In case the matter involved in an appeal is decided by the Commissioner (Appeals) based on judgment of Tribunal or Court and apparently involves a covered issue by the decisions of Tribunal or courts and the issue involved is thus settled type the matter can be decided through SMC Bench instead of Division Bench. Of course, the single member while hearing the appeal if considers it prudent, can take steps for transferring the appeal to a Division Bench. For this purpose the section 255 (3) needs to be suitably amended to prescribe criterion of tax effect instead of income computed by the A.O. and eligibility criteria for SMC.so that time and again orders authorizing members to hear cases in SMC benches are not required. Meanwhile the Central Government can take a policy decision to authorize members having authored certain number of orders as member of Tribunal to be eligible for acting as single member. Suggested section 255 (3) The subsection (3) of section 255 can be substituted as follows: (3) Any member of the Appellate Tribunal who is in service as a member for more than six months or who has heard at least one hundred case while sitting in division benches or who has authored at least fifty orders as a member of Tribunal may, sitting singly, dispose of any case which pertains to an appeal in which amount involved in disputed issue or issues does not exceed Rs. five hundred thousand rupees, and also cases which involves such issues which are already decided by Tribunal or high Courts. The President may, for the disposal of any particular case, constitute a Special Bench consisting of three or more members, one of whom shall necessarily be a judicial member and one an accountant member. Guidelines to practitioners: When a case is eligible for hearing by SMC bench, this can be mentioned on the appeal memo by way of note or in the covering letter. In case a case is fixed before SMC Bench it would be sufficient that two paper books are filed, one for the member of ITAT and one for the departmental representative. However, the problem arises when it is decided that the SMC cases be heard by other sitting division bench or when the matter is transferred to Division Bench. In that case two copies of paper books are required for members. Therefore, it is advisable to file three copies of paper books - two for members and one for the departmental representative so that in case the appeal is transferred and heard by a Division Bench, the case can be heard without any problem as both the members have a copy of paper book. While filing an appeal a summary of issues involved in dispute and amount involved and fact as to being covered issue or new issue can be provided. This will help registry office to ascertain eligibility for fixing the case before proper bench. Conclusions: For better administration in Tribunal covered matters and matters having less than prescribed tax effect can be considered by SMC benches. Members having experience of certain period or having heard certain number of cases in division bench or having authored certain number of orders can be considered fit for hearing and deciding matters sitting singly in SMC bench. Similar changes can also be made in law relating to other Tribunals.If these suggestions are implemented, there will be quick disposal of appeals and cost incurred in administration of tribunals will also reduce. Exhibit:
By: Uma Kothari - August 21, 2008
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