Bank wins appeal after being denied proper hearing opportunity in faceless appeals process

The ITAT Mumbai held that a bank appellant was denied proper opportunity to present its case before the National Faceless Appeals Centre. Relying on SC precedent in CIT v. Vatika Townships, the tribunal applied the doctrine of fairness and held that procedural provisions conferring benefits should be given retrospective effect. The ITAT ruled that the right to video conferencing hearings under the Faceless Appeals Scheme 2020 must be available to all taxpayers on demand, even under old rules. The matter was remitted to the first appellate authority for fresh adjudication with proper hearing opportunity.

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Issues involved:
Appeal against denial of opportunity for video conferencing in a tax assessment case.

Analysis:
- The cross-appeals were filed against the order passed by the National Faceless Appeals Centre (NFAC) regarding the assessment year 2010-11 under the Income Tax Act, 1961.
- The primary issue raised by the assessee was the denial of the opportunity to present the case through video conferencing, as per the Faceless Appeals Scheme 2020.
- The assessee argued that the denial of video conferencing without reason necessitated setting aside the order and remitting the matter for a fresh adjudication.
- The Commissioner (DR) contended that video conferencing was not mandatory under the scheme and supported the NFAC's decision.
- The Tribunal noted that the Faceless Appeals Scheme 2020 allowed for personal hearings through video conferencing under specific circumstances, subject to approval by the Chief Commissioner or Director-General.
- The Tribunal emphasized that the authority concerned had a duty to decide on such requests and that inaction on this matter was not justifiable.
- Referring to legal precedents, the Tribunal highlighted the obligation of public authorities to exercise powers granted by law when circumstances warrant.
- The Tribunal acknowledged the subsequent Faceless Appeals Scheme 2021, which made personal hearings through video conferencing virtually on-demand, eliminating the discretion in granting such hearings.
- Citing legal principles, the Tribunal concluded that the amendment in the scheme to allow video conferencing hearings should be treated as retrospective to address unintended hardships faced by taxpayers.
- Consequently, the Tribunal decided to remit the matter to the first appellate authority for a fresh adjudication with an opportunity for a personal hearing through video conferencing as per the Faceless Appeals Rules 2021.
- With the matter being remitted for fresh adjudication, all other issues raised in the cross-appeals were deemed academic and did not require immediate adjudication.
- Both appeals were allowed for statistical purposes in line with the decision to remit the matter for a new adjudication.

The judgment highlights the importance of procedural fairness and the evolving nature of tax policies to address taxpayer grievances effectively, emphasizing the retrospective application of beneficial amendments to ensure equitable treatment in tax assessment proceedings.

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