New ITAT Members Should Be Formally Tutored Of Their Duties & Rights Before Being Permitted To Judge Matters
The author, an eminent senior advocate, points out that the orders passed by the ITAT have severe ramifications on the taxpayers and the department and that it is essential that its Members undergo rigorous training before being permitted to exercise their powers. The author expresses concern that the newly appointed Members of the Tribunal do not appear to have undergone an "orientation" course and have been straightaway permitted to hear matters and pass judgements. He urges that the old practice of formally tutoring the new Members of their duties and responsibilities and of apprising them of the basic fundamental characteristics of a judge should be revived and implemented immediately. He emphasizes that the orientation course and judicial training will help the new Members to discharge their duties more efficiently and uphold the dignity and honour of the Tribunal
Income–tax Appellate Tribunal which was established on 25-1-1941 will be celebrating its platinum jubilee on 25-1-2016. Today, the Tribunal is considered as one of the finest institutions in our country. The credit must go to the Hon'ble Members who administer the justice and to the Tax Bar which represents matters before the Bench. Very recently, the Government has appointed 36 new members, many of who are very young and they have a long tenure to serve as members of the Tribunal. They have greater responsibility to preserve the purity and integrity of this Institution being one of the finest institutions in our country.
Earlier, whenever new members were appointed, there used to be an orientation course for the new members for at least 15 days which was addressed by Hon'ble judges of the Supreme Court, judges of High Courts and senior members of the Tribunal on subjects like natural justice, tax Jurisprudence, principles of interpretation especially of taxation statutes, etc. There also used be an 'All India Members' Annual Conference' to discuss and deliberate on various issues concerning the Tribunal, to enhance its working and performance to a remarkable level. I have had the opportunity and fortune of attending and addressing four such conferences.
One would appreciate that the Income-tax Act, 1961 refers to 98 other Central Acts and various State legislations. So, there is a marriage of these allied laws referred into IT legislation, which too are required to be necessarily studied in the course of delivery of judgments, if relied upon by the Bar in the course of hearing before the Tribunal. Therefore, in-depth knowledge of these general laws referred to in the IT Act, will surely help Members to deliver qualitative judgments.
Various articles published in 'Diamond Jubilee Souvenir of Income–tax Appellate Tribunal in the year 2001' will be a fountain of inspiration to all young Members of the Tribunal, who have joined the Bench very recently. They may therefore like to read the same for their grooming. For their ready reference, few of them, are cited below:
– "Principles of Natural Justice" by Hon'ble Justice Mrs. Sujata V. Manohar, Supreme Court of India (2008) AIFTPJ – March- P. 5
– "Rules of Precedence" by Hon'ble Justice Mr. B. N. Srikrishna, Supreme Court of India
– "Vision 2020-A Road ahead" by Hon'ble Justice Mr Ashok Bhan, Supreme Court of India (2008) AIFTPJ – June – P. 5
– "The Key to the Success of the Tribunal" by Hon'ble Justice Mr. Mohit S. Shah (2011) AIFTPJ – December – P. 6
– "Role of Tax Tribunal in the era of globalisation" by Hon'ble Mr. Justice (Dr.) D.Y. Chandrachud
– "Rules of Interpretation of Tax Laws" and "Conventions & Procedure of Income Tax Appellate Tribunal, and "Qualities of a Good Judge" by Hon'ble Justice Mr. T. N. C. Rangarajan
– "Qualities of a Judge and Principle of Natural Justice" by Hon'ble Justice Mr R.V.Easwar Judge Delhi High Court (2012) AIFTPJ – March – P. 7
– "Effective dispensation of Justice: Role of the Tribunal" by Hon'ble Mr. R.V. Easwar, President ITAT. (2010) AIFTPJ – June – P. 5
– "The Art of Writing Judgments" by Hon'ble Mr. M.A. Bakshi, Vice-President (2008) AIFTPJ – April – P. 4
– "Conduct of Members – On and off the Bench" by Hon'ble R.P.Garg, Vice President, (Regional Conference of ITAT, 15th July, 2006
– "Conduct on and off the Bench" by Hon'ble Mr. P.P. Parikh, Vice President (2008) AIFTPJ –April – P. 15
– "Art of writing Judgment" by Hon'ble D. Manmohan, Vice President, ITAT (2012) AIFTPJ – March – 19
– "Landmark cases" (Selected Cases) by S. Rajaratnam (2008) AIFTPJ – April – P.21
– Guidelines to Hon'ble members of ITAT for drafting orders, letter addressed to the Hon'ble Members by The President of ITAT posted on 25-6-2008 .www.itatonline.org
– Code of Ethics adopted by the members of the ITAT – Letter dated 20-6-2008 by the President of ITAT. www.itatonline.org
– "My Ideal Tribunal Member by Shri S.E. Dastur, Senior Advocate (2001) AIFTPJ – April-June – P.33
There are conventions which members may have to follow, both on and off the Bench, which can be shared by the senior Members of the Tribunal as well, with new members to have good rapport and brotherhood amongst themselves.
It may be desirable to make a compilation of all the above cited articles and whenever a new Member joins the Bench, the same may be presented to him along with convention book which may prove a treasure of learning at his desk to help him to deliver qualitative and landmark Judgments. If an opportunity is provided the Federation will compile all the above referred articles and will present the same to the new members along with message and vision from the Hon'ble President.
An assessee rings the bell of justice in the Tribunal and High Court only when the Assessing Officer levies taxes or make additions which are not in accordance with law. As appeals involves time and money, before doing so he makes a careful cost benefit analysis and elects to file an appeal where the stakes are high and there are chances of success. Many a times though he may be having very good case in appeal considering the litigation cost he prefers not to file an appeal. He is no academician and he does not derive any pleasure in obtaining a judgment for the sake of publicity or for laying down a legal precedent. The revenue on the other hand files an appeal in most of the cases mainly because there is no accountability and the fear of investigation. One will find more than 65% appeals before the High Court is of the revenue.
In one of the Conferences a well-known tax Judge who headed the Tax Bench for number of years stated that whenever an assessee filed an Reference Application under section 256(2) for referring question of law he normally used to admit the reference on sound reasoning that he always felt that when an assessee approaches High Court definitely some injustice must have been done to him otherwise why he will spend lakhs of rupees in tax litigation, therefore at least he deserves admission. Whether he will succeed or not the decision will be taken at final hearing.
The Tribunal being a final fact finding authority the assessee can file an appeal to High Court only on a substantial question of law. In Mumbai, for admission it takes nearly two years and if admitted, another 13 years for final hearing and disposal. Therefore, if any wrong order is passed against an assessee, it takes nearly 15 years to get it reversed.
Under the circumstances, there is greater responsibility on the Bar to assist the Bench to arrive at correct decision. Members of the Tribunal may please bear in mind that by hearing the appeals, they are not merely adjudicating on the issues before them but they are invariably deciding on the fortunes of the assessees, as per law. Therefore, one wrong decision against an assessee may possibly ruin his life and relegate him to the position of a pauper, and he may be held liable for penalty and prosecution, the same against the Government, may affect the coffers of the Government to an extent of a drop in a vast ocean. Considering this gravity and effect of the judgment, Tribunal has a greater responsibility to the citizen in our democratic set-up.
Learning is a continuous process for any professional for continuous updation, professionals attend various seminars, workshops to get updated on case laws and to understand the development of law. It may equally be desirable that there could be an annual conference of Members of the Tribunal to interact with each other and share knowledge and experience to improve the justice delivery system so that the name of the Tribunal will be a shining feature of the IT Act.
The Hon'ble President of the ITAT, Hon'ble Justice Dev Darshan Sud (Retd.) is making a sincere attempt by sharing his judicial experience and knowledge to enhance the status of the institution by following the convention and practice followed by High Courts. One will be able to see the changes in the process of justice delivery system in the years to come. Hon'ble President is open to any constructive suggestions for better administration of justice. Readers may therefore send their suggestions to the AIFTP which will enable the ITAT Bar Associations' Co-ordination Committee, to forward the same for the consideration of the Hon'ble President.
On behalf of Editorial Board and on behalf of the AIFTP, we offer our best wishes to all the new Members of the Tribunal, a sustained judicial career and a very bright tenure as Members of the Tribunal. We trust that the Tribunal should become paragon in the administration of justice.
Jai hind
Dr. K. Shivaram
Editor-in-Chief, AIFTP Journal
Reproduced with permission from the AIFTP Journal
The author, an eminent senior advocate, points out that the orders passed by the ITAT have severe ramifications on the taxpayers and the department and that it is essential that its Members undergo rigorous training before being permitted to exercise their powers. The author expresses concern that the newly appointed Members of the Tribunal do not appear to have undergone an "orientation" course and have been straightaway permitted to hear matters and pass judgements. He urges that the old practice of formally tutoring the new Members of their duties and responsibilities and of apprising them of the basic fundamental characteristics of a judge should be revived and implemented immediately. He emphasizes that the orientation course and judicial training will help the new Members to discharge their duties more efficiently and uphold the dignity and honour of the Tribunal
Revision—Order erroneous and prejudicial to the interest of r
DELHI TRIBUNAL
Revision—Order erroneous and prejudicial to the interest of revenue—Assessee Firm engaged in construction company had filed its return declaring net income at Rs. 2,55,46,190 which was processed u/s 143(1) on the returned income—Assessees case was selected to be completed under scrutiny through Selective scrutiny and accordingly, notice u/s 143(2) was issued—Thereafter, various notices u/s 143(2) and 142(1)—Assessment was completed on returned income vide order 15.11.2010 passed u/s. 143(3)—CIT examined the record and found that the assessment was completed without proper enquiry—CIT had viewed that the order passed by the AO was erroneous and prejudicial to the interest of revenue—He also held that in the case of M/s. Malabar Industries, the Hon'ble Apex court has held that incorrect assumption of facts or incorrect application of law, will satisfy the requirement of the order being erroneous; order passed by the AO is without applying the principles of natural justice or without application of mind—CIT had passed the impugned order u/s 263 directing the AO to make addition of Rs. 38,48.050/- and partly set aside the assessment order with the direction to frame a fresh assessment order after examining the issues discussed in the order u/s. 263—Held, revisional power was a quasi-judicial one hedged with limitation and has to be exercised subject to the same and within its scope and ambit—It cannot be based upon the whims and the fancies or the caprice of the revising authority—There must be material(s) available from the records called for by the Commissioner—Commissioner must give reasons for passing an order—Merely a mistake or omission in the assessment order would not justify the setting aside of the whole order—Every loss of revenue as a consequence of an order of the AO, cannot be treated as prejudicial to the interests of the Revenue—In the present case assessee had filed return of income for the year under consideration and had disclosed the entire requisite details alongwith return of income during the year under consideration—During the assessment proceedings, AO had examined all the relevant evidences produced before him, either alongwith the return or during the assessment proceedings, and has accepted the gift as genuine—AO called for the entire details on the issue in dispute—AO has made proper enquiries during the assessment proceedings and after examining the proofs so filed by the assessee before him, has made disallowance on being satisfied with the explanation of the assessee— the present case was not a fit case for revising the assessment order as the twin conditions, viz., the assessment order should be erroneous in so far as it was prejudicial to the interests of revenue do not co-exist in this case—Also, the impugned order u/s 263 was also illegal as the CIT had not conducted any independent enquiry/verificatio n before making addition—Assesses appeal allowed
Restrains clandestine attempt to infringe ITC's "Gold Flake" trademark; Prefix 'National' indistinguishable
HC grants injunction, to ITC Ltd against NTC Industries Ltd ('defendant') over use of ITC's trademark 'GOLD FLAKE'; Rejects defendant's claim of prior user, notes that ITC got its trademark registration in 1942, while defendant applied for registration of trademark 'SUPERIOR GOLD FLAKE' / 'NATIONAL GOLD FLAKE' in 1989 & 1994 which too were abandoned; Also rejects defendant's plea of acquiescence, observes that to constitute 'acquiescence', "rival's use must be open, continuous and extensive: in a word, notorious, such that it could not possibly escape a plaintiff's attention"; Observes that defendant's annual reports did not show 'NATIONAL GOLD FLAKE' trademark, states that defendant's use of alleged trademark was either insufficient or "was kept clandestine to fly below ITC's radar", holds that "There are nearly 20 cigarette manufacturers in the country.. submission that ITC must be deemed to have had either notice or knowledge or both, and that its consequent failure to act on that notice constitutes acquiescence is not one that commends itself"; Notes that defendant adopted same colour scheme, same words, same devices, holds such adoption as dishonest and rejects defendant's contention that the word 'NATIONAL' made the trademarks distinguishable; Refers to SC ruling in Power Control Appliances v Sumeet Machines Pvt Ltd, Delhi HC rulings in Hindustan Pencils Pvt Ltd v India Stationery Products Co & Anr and Dr Reddy's Laboratories Ltd v Reddy Pharmaceuticals Ltd :Bombay HC
The ruling was delivered by Justice G. S. Patel.
Senior Advocate Ravi Kadam, Advocates Sanjay Kher, Tanmayee Rajadhyaksha argued on behalf of Plaintiffs while Senior Advocate Janak Dwarkadas, Advocates Amit Jamsandekar, Aditya Thakkar argued for the Defendant.
[LSI-756-HC-2015-(BOM)]
Refuses to unsettle settled position, dismisses ex-MD's asset undervaluation allegations in winding-up
Division Bench of Madras HC upholds single judge order, dismisses appeal filed by ex-managing director of company ('appellant') in liquidation, seeking to set aside the auction sale; Notes that pursuant to winding-up order, the assets were auctioned and highest bid was accepted by court, observes that there was no objection to valuation obtained at any stage prior to auction by any secured creditors, as all requisite formalities were complied with; Further notes that auction purchaser was in possession and enjoyment of property for more than 4 years, holds "merely because appellant thinks that his property could fetch more and that in his opinion, the auction was held without obtaining proper valuation, cannot be an excuse to set the process at naught"; Observes that appellant has failed to support the claim that property value has increased, holds "appellant cannot be permitted to unsettle the settled position as and when he chooses":Madras HC
The order was passed by Chief Justice Sanjay Kishan Kaul and Justice T. S. Sivagnanam
Advocate S. T. Varadarajulu represented the appellant.
After hearing this, I will ask several questions, leading to the suggestion that the CPA should consider firing these types of clients. This suggestion is followed quickly by a "no, we can't afford to do that" type of reaction. So here we sit in a nice conference room going around in circles—you hate working for a client, your staff hates working for the client, the client has little upside for future growth or new opportunities, the client complains about your bills, yet you rely on the client to pay your fees to keep your doors open.
At this point your firm has two options: A. Since you feel like you can't fire the client (which is a whole other article), stop complaining and accept the client for who they are since you are not motivated to do anything about it. Or B. Figure out a way to change the behavior that makes the client a pain to work with.
Since you are still reading this article, I am going to assume you are interested in finding out what steps you and your firm can take to modify your client's behavior (and just maybe figure out how to provide them with the service they deserve.) So here we go. Below are the six steps you and your firm should take before you go ahead and fire the client:
1. Identify the behavior that makes the client difficult. Is the client always late to deliver their information? Do they change their mind every other day, causing additional work on your end? Are they calling you incessantly about where their final product is? Do they yell at you? If there is something inherently wrong about the way the current service is being provided that fails to meet the needs of your firm, find out what the difficult behaviors are and write them down.
2. Talk to your client about their expectations and concerns. Hopefully somebody in your office at least has a working relationship with the difficult client. If so, during the next conversation they should ask the following question: "What do you expect out of the firm"? If there is no relationship, designate a person to build the relationship and during the initial meeting ask, "What do you expect out of the firm?" I guarantee the client will provide several expectations from their perspective. These perceptions may very well be different from what you offer. Write down those expectations.
3. Create an incentive to change the behavior. Jumping back to your internal team, at this point you and your team want to evaluate any expectations that are not being met, as discovered from your client during step 2. These expectations should be compared to the invoked behaviors that your firm just can't deal with. For example, let's say your client HATES being emailed by more than one person in your firm, suggesting they "don't talk to one another" and he "is asked the same question" on multiple occasions. When this occurs, the client stops communicating with the firm and sends "nasty" emails to the partner-in-charge. If your firm designates one point of contact for this client, will the nastiness go away?
4. Talk to your client about the incentive to change. Check back in with your client and advise him of the change in protocol. In the future, all firm communications, along with any questions he has, should be run through "Joe." Joe will be his personal advisor and have full knowledge of the client's issues.
5. Follow the plan. As the days and weeks go by, "Joe" and the client will develop a working relationship, if one has not been established already. "Joe" should be supported in his endeavor to manage the difficult client. He should be provided with the resources, time and guidance to provide the difficult client with the answers necessary to resolve all outstanding issues. Furthermore, "Joe" should be applauded for going above and beyond to show the client that the firm is truly committed to working with the client.
6. Evaluate the change in behavior. Find out from "Joe" if he is having any problems or if the behavior from the client continues to be onerous. In most cases, when you have identified the problem, created a solution, communicated the solution, and followed the plan to solve the problem, the problem goes away. In those cases where it doesn't, I'll explain in an upcoming article how to help clients who don't want help.
Adam Blitz is a CPA and a relationship builder. Through his 10+ years in public accounting he has refined his ability to develop relationships with partners and clients alike in the pursuit of enhancing business profitability and individual satisfaction. Adam's passion for business development stems purely from the notion that CPAs help people. He works with professional service firms to enhance relationships with clients, vendors, staff and communities for the purpose of developing revenue streams. Adam has a Masters in Leadership Studies and has published a thesis on the value a CPA provides to clients and staff. In his spare time, you'll find him hiking the Sierra Nevada or training for his next triathlon. You can reach Adam at Adam@getblitzedsolutions.com or via Twitter @getblitzed.
The Securities and Exchange Commission has charged two former top executives at OCZ Technology Group Inc. for accounting failures at the now-bankrupt seller of computer memory storage and power supply devices.
In a complaint filed in the Northern District of California, the SEC alleges that OCZ's former CEO Ryan Petersen engaged in a scheme to materially inflate OCZ's revenues and gross margins from 2010 to 2012. It separately charged OCZ's former chief financial officer Arthur Knapp for certain accounting, disclosure, and internal accounting controls failures at OCZ. Knapp agreed to settle the SEC's charges without admitting or denying the allegations against him. The SEC's litigation continues against Petersen.
OCZ, based in San Jose, is now part of Toshiba, a company that has been shaken by a high-profile accounting scandal this year that has led to the departures of a series of top executives (see Toshiba Says 30 More Executives Named in Accounting Scandal). However, the SEC charges appear to be unrelated to Toshiba's accounting woes. Toshiba acquired OCZ's assets in late 2013 for $35 million after OCZ filed for bankruptcy.
According to the SEC's complaint, Petersen's scheme allegedly included mischaracterizing sales discounts as marketing expenses and having employees create false documentation to conceal the scheme, channel-stuffing OCZ's largest customer by shipping more goods than the customer could sell in the normal course of business, and concealing large product returns from OCZ's finance department and OCZ's auditor so that those returns would not be recorded in OCZ's books and records. Petersen allegedly signed and certified portrayed the company in a way that was a far cry from its true operational and financial condition in OCZ's financial filings. The SEC said Petersen personally profited from his misstatements by selling shares of OCZ stock and receiving a bonus during the period when OCZ's public filings contained inflated financial results.
Knapp allegedly instituted or maintained policies that caused OCZ to record transactions in a manner that was not in accordance with U.S. GAAP, according to the SEC. These policies included reclassifying costs of goods sold as research and development expenses without sufficient basis for doing so, failing to capitalize labor and overhead costs in OCZ's inventory costs, recognizing revenues upon product shipment rather than upon delivery of the product to OCZ's customers, and understating OCZ's accruals for product returns.
As CFO, Knapp had responsibility for OCZ's internal accounting controls and procedures. Nevertheless, he failed to implement sufficient internal accounting controls to prevent OCZ from misclassifying sales discounts as marketing expenses and significantly overstating its revenues and gross profits.
"CEOs and CFOs are responsible for reporting accurate financial information," said Antonia Chion, associate director of the SEC's Division of Enforcement, in a statement. "When those high-level executives participate in accounting fraud and failures, as we allege Petersen and Knapp have done, they will be held accountable."
The SEC charged Petersen with violating the antifraud, certification, books and records, internal controls, and clawback provisions of the federal securities laws. It also charged him with lying to accountants and aiding and abetting OCZ's violations of the reporting, books and records and internal controls provisions. The complaint seeks a permanent injunction, payment of his allegedly ill-gotten gains plus prejudgment interest, a civil penalty, an officer and director bar, and forfeiture of Petersen's stock sales profits and bonus.
The SEC charged Knapp with violating certain antifraud provisions, and the certification, and internal controls provisions, and with aiding and abetting OCZ's violations of the reporting, books and records, and internal controls provisions. Knapp agreed to be permanently enjoined from violating or aiding and abetting violations of these provisions, to be barred from acting as an officer or director of a public company, to pay a total of $130,000 in disgorgement, prejudgment interest, and civil penalties, and to forego any claims against OCZ for $170,000 in unpaid compensation. The settlement is subject to court approval.
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