Almost all tax statutes provide for first appeal against any tax demand or assessment order, to an officer of the same department, assigned the role of an appellate authority who is supposed to be a quasi-judicial authority, in the sense that despite his being an official of the tax collecting department, he is required to be impartial. In reality, it is rarely the case. The appellate officials nowadays do not even pretend to be impartial. Cases are routinely decided against the assessees who necessarily proceed to the next level of appeal automatically. In few cases where appellate official has decided the matter in favour of the assessee, it is the department which feels compelled to move into the appeal. Thus, the layer of the appellate official is a complete waste, waste of time and energy for both, the assessee as well as the department, and represents an avoidable cost.
In fact, the system of departmental appeal is completely flawed and emanates from hypocrisy that our society has completely become. The system pretends to be fair, impartial and working in the public interest when everybody within the system as well as outside but dealing with the system knows far too well that reality is exactly opposite. This is because the system rewards the officials for higher tax demands, regardless of whether actually realized or not. Consequently, they are motivated to confirm a tax demand to jack up the revenue figures, completely losing sight of the demand reversals at next higher forum. Even apparent cases are decided against the assessees. Not only the officials are least concerned by demand reversals at higher forum, they are also least bothered about strictures passed against them at higher forums. They are happy and satisfied to have proved their authority on the tax payers, humbled them and claimed credit for higher tax demands. They are not embarrassed or ashamed that their decisions are rejected and reversed by higher authorities/courts, and quite frequently, mention it to the assessees that they are helpless in providing any relief which they know will be awarded in the second appeal.
The system of departmental appeals is flawed on several counts :-
(1) The appellate official is subordinate to the same authorities to whom the regular assessing and recovery officials report, and such authorities themselves are accountable only to a single authority whose sole interest lies in revenue realization. No wonder, the appellate officials are unlikely to be appreciated if they assume an impartial stance which is seen to be detrimental to their efforts in raising revenue, by their higher ups.
(2) The appellate officials are routinely transferred into administration, recovery or assessment duties and vice versa. This system of changing approach to issues is impractical, and does not allow an inpidual to think differently when he is transferred from one position to another.
(3) The assessees present their case to the appellate officials without being confronted by an opposite counsel from the department. This puts pressure on the appellate authority to safeguard the interest of the department and he assumes the role of counsel for the department as well as the munsif. This is a conflicting scenario which could hardly allow any impartiality.
This is the same situation with Sub pisional Magistrates (SDMs) assigned the quasi judicial or rather fully judicial responsibilities in land revenue matters, so much so that their offices are officially called “Nyayalaya” which are practically nothing but a mockery of the court. Even Tehsildar’s office is called “Nyayalaya” and I have seen their favourite clients especially from banks, sitting with them behind the Board as if there are two seats of judicial officers behind the board. The functioning of these officials is pathetic. The conduct of these officials never feels like that of a judicial officer, they don’t even pretend to be impartial or fair, and are 100% revenue collecting officials. No wonder, these revenue courts are a mockery of justice. The sooner we abolish them the better it is.
The new government could therefore, cut the hypocrisy and save time and energy for everybody by abolishing the concept of departmental appeals in all tax matters be it income tax, commercial taxes, excise/service tax or even customs, as well as the “Nyayalayas” of these revenue officials like Tehsildars, or SDMs. The judicial responsibility must be discharged by inpiduals are trained to be impartial and fair right from the start, and must not be rotated into administrative or assessing or recovery duties. First appeal should lie with Tribunal which will save costs because most of the appeals are in any case, landing at tribunal level. This way, departments could look forward to some savings in costs incurred on such needless departmental appellate functionaries, and assessee could save some costs in handling this needless forum.