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Dynamic jurisdiction of ITAT, simpler compliance window being considered

A dynamic jurisdiction of the direct tax tribunal allotting circumstances for Income Tax appeals to varied benches with out human intervention, and a brand new compliance window to regularise technical lapses regarding filings and disclosures by tax payers are understood to have figured among the many proposed revenue-neutral modifications in tax regulations which were examined by the federal government.

A random, automated course of to distribute circumstances – the place an enchantment of a Mumbai-headquartered firm is heard by the Chennai or Hyderabad or some other bench of the Income tax Appellate Tribunal (ITAT) as a substitute of the Mumbai Tribunal members as is the observe now – might scale back the scope of corruption, reduce the affect that some of the senior attorneys could train on ITAT members, together with the choice and attachment to postings in some of the big cities.

ITAT is a quasi-judicial physique, coping with appeals below the direct tax legal guidelines. The tribunal rulings may be challenged earlier than the excessive court docket, notably if there’s a substantial query earlier than the legislation.

“This was discussed at the Central Board of Direct Taxes. Such a move would have no impact on revenue and would be in tune with the faceless assessment scheme. While ITAT proceedings would naturally have virtual or physical interactions, the assessee would have no clue which bench in which city hears the case,” mentioned a senior official within the tax administration. However, the individual mentioned he was not conscious whether or not the proposal can be introduced within the FY23 Budget.

Some tax professionals suppose a plan on random allocation of ITAT circumstances have to be considered with an open thoughts.

According to Hitesh Gajaria, Senior Partner, KPMG, “The questions that crop are: Will Transfer Pricing and International Tax Cases also be randomly allotted by such a system or will there be a carve-out of such cases? What happens to matters requested to be referred to a Special ITAT Bench if there are apparently contradictory ITAT rulings currently? Which jurisdictional High Courts will apply to the ITAT Benches? Will these be the Courts where the Taxpayer is located, or will these be those where the ITAT Bench is located?”

In the tax appellate hierarchy, ITAT is the second appellate authority and a last fact-finding authority. Assessments have already turn out to be faceless and Commissioner (Appeals), the primary stage of appeals, in a single metropolis is deciding issues regarding taxpayers primarily based in numerous cities – a departure from the territorial jurisdiction for enchantment proceedings.

“The next progression would be a dynamic jurisdiction for Tribunal matters. While there would be pros and cons for each such change, since the Tribunal is the final fact-finding authority, it is imperative that this change be well thought out and implemented in a phased and guarded manner. The Tribunal benches while dealing with the appeals will need to be mindful of the decisions of the jurisdictional High Courts governing the tax-payers whose matters are being heard and this aspect needs to be properly incorporated in the scheme prescribing for dynamic jurisdiction. Given the importance of this forum, the scheme should provide for sufficient opportunities of a virtual hearings,” mentioned Ashish Mehta, companion on the legislation agency Khaitan & Co.


On the difficulty of simpler compliance, Gajaria mentioned a scheme to regularize previous non-filings of tax returns with out harsh penalties would assist taxpayers.

On many events taxpayers come throughout errors and omissions, faulty claims in tax returns whereas submitting returns. These may very well be within the nature of arithmetical errors, changes having affect on incomes of a number of years, missed changes associated to ICDS (earnings computation and adjustment requirements), incorrect mark to market claims, or one thing so simple as ticking a sure field, submitting a further kind in help of a declare.

“Even if they suo moto intend to rectify these mistakes, they may not be able to do so as the time limit to file revised returns may have lapsed by the time such mistakes are spotted. In such situations a lot of times it is seen that due taxes are voluntarily paid and tax authorities are intimated of such payment through requisite explanatory letters, though there is no formalized mode of dealing with such situations. It would be great if there is a scheme to regularize such bonafide mistakes so that chances of litigation when such returns are picked for scrutiny are reduced,” mentioned Mehta.

In current instances many taxpayers have been pulled up by the tax workplace below the cruel Black Money Act for failing to reveal overseas financial institution accounts although funds had been transferred overseas below official, RBI-approved routes.



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