APPEALS BEFORE CIT(A)

6-04-2024

Northern India Regional Council Of ICAI

Presented by –

CA. Pankaj Saraogi

And

CA. Paras Dawar

Appeals

• Dictionary Meaning - an application to a higher court for a decision to be reversed.

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• Black’s law dictionary - “A proceeding undertaken to have decision reconsidered by a higher authority.”

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• Appeal is a creature of statute

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• The right of appeal is not inherent or a fundamental right but it is a creature of the Statute governing it. The right to appeal must be given by express enactment & cannot be implied – Hariher Gir v. CIT (1941) 9 ITR 246 (Pat).

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• A provision granting the right of appeal should be construed liberally and should be read in a reasonable or practical manner and, where there is any ambiguity, it will be construed in favour of the existence of such right. CIT vs. Brahm Swarup Tandon & Co. [(2006) 283 ITR 320 (All)].

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APPELLATE STRUCTURE FOR APEALS UNDER INCOME TAX

Supreme Court

High Court

ITAT

CIT(A) / DRP

AO

Appeal Before CIT (A)

Appeal before Commissioner of Income-tax (Appeals)

• Section 246A – Appealable orders

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• Section 248 – Appeal by person denying liability to tax

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• Section 249 – Form of appeal and limitation

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• Section 250 - Procedure in appeal

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• Section 251 – Powers of CIT(A)

Section 246A – Appealable Orders

• Intimation u/s. 143(1), 143(1B) – Intimation u/s 143(1)

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• Order u/s. 200A(1) – Statements of TDS viz., Form 26Q, Form 24Q etc.

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• Order u/s. 206CB(1) – Statements of TCS

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• Order u/s 143(3) not including an order passed in pursuance of directions of the DRP

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• Order u/s. 144BA(12) – Order passed without prior approval of PCIT/CIT, if any tax consequences have been determined (GAAR)

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• Order u/s 143(3) r. w. s. 147 - Assessment order/Re-assessment order.

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• Order u/s 144 – best judgement

Section 246A – Appealable Orders

• Order u/s. 153A –Assessment in case of search or requisition.

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• Order u/s 154/155-Rectification of mistakes apparent from records.

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• Order u/s 163- Assessee being treated as agent of Non-resident.

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• Order u/s 170(2)/ 170(3)- Collection of demand from successor in case of succession to business/profession.

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• Order u/s 171- Assessment after partition of HUF.

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• Order u/s. 185- Assessment when a firm fails to comply with sec 184.

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• Order u/s 201 – Order for failure to deduct/pay taxes.

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• Order u/s. 206C(6A) – Order for failure to collect taxes.

Section 246A – Appealable Orders

• Order u/s 237 – Order for refunds.

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• An order against the assessee who denies his liability to be assessed

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• Order of Joint Commissioner u/s 115VP(3)(ii) – Refusal order for tonnage taxation scheme.

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• Order imposing Penalty under Chapter XXI

Section 248 – Appeal by person denying liability to tax

• Where under an agreement or other arrangement, the tax deductible on any income, other than interest, under section 195 is to be borne by the person by whom the income is payable, and

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• such person having paid such tax to the credit of the Central Government,

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• claims that no tax was required to be deducted on such income, he may appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income.

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Order u/s 139(9) - Defective return - Appealable ?

• CIT vs Tata Cummins Ltd.[2002]82 ITD798 (Kol Trib)

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• AO while declaring return defective u/s 139(9), also stated that "The assessee is not entitled for carry forward loss for the period under consideration."

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• ITAT held that “The above part of his order, made it an order of determination of the loss and refusal to carry forward the same. Therefore, it was to be held that the communication to the effect that the assessee was not entitled to carry forward the loss for the period under consideration amounted to an order of an assessment appealable under section 246 and the Commissioner (Appeals) was justified in so adopting and deciding the same on merits.”

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Non-Appealable Orders

• Order to levy interest under sections 234 A, 234 B, 234C. (except where levy is itself challenged)

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• Certificate granted under section 197(1).

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• Interest charged under section 220(2) –

ANZ Grindlays Bank PLC v. CIT (241 ITR 269)(Cal.) - The order charging interest under section 220(2) is neither a part of the assessment order nor there is any appeal provided under section 246. Therefore, the order charging interest under section 220(2) is not an appealable order.

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• Orders passed under section 264 rejecting Revision Petition.

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• Orders with agreed additions

Practical Aspects of Appeal

Form of appeal:

• Form No. 35
• e-filing of Form has been made mandatory for persons for whom e-filing of return of income is mandatory w.e.f 1/3/2016.

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Signature to the appeal:

• Person authorized to sign the return of income under section 140 of the Act.

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Documents to be submitted for appeal : (OLD WHEN MANUAL APPEALS WERE FILED)

• Form No. 35 (including statement of facts and grounds of Appeal) – in duplicate.
• One certified copy of order, appealed against.
• Notice of demand in original.
• Copy of challans of fees the details of the challan are required to be furnished in case of e-filing of form of appeal.

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Practical Aspects of Appeal

Fees:

• Fees to be paid for filing of appeal to CIT(A) depends on the total income determined by the Assessing Officer:

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• In cases of Penalty, or TDS appeals, no income is determined – Fee – Rs. 250

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• Total income determined at negative figure – “Minimum Fees” [Gilbs Computer Ltd. Vs ITAT – 317 ITR 159(Bom)]

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• Challan to be paid under the columns : Self Assessment Tax – > Others

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Practical Aspects of Appeal

Time Limit for filing Appeal:

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• Appeal to CIT(A) within 30 days of –
• Date of service of notice of demand relating to assessment or penalty
• Date on which intimation of order sought to be appealed against is served
• Date of payment of tax, where appeal is in respect of TDS u/s 195(1)

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• The limitation period commences from the date of receipt of notice of demand by the assessee and not from the date of receipt of Assessment Order. – Charki Mica Mining Co. Ltd. vs CIT [1978] 111 ITR 193 (Calcutta)

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How to count 30 days time limit? -Whether to include or excluded these days -

• Day of receipt of notice of demand along with order.
• Day of filing of appeal.
• If last day of filing appeal is public holiday, can Appeal be filed on subsequent working day? What will be the effect on limitation period? (Refer - section 4 of Limitation Act, 1963) ? Now e-filing?

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Practical Aspects of Appeal

Condonation of Delay in Filing of Appeal:

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• Section 249(3) gives power to the CIT (A) to admit a belated appeal, if there is sufficient cause for the delay.

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• In case of delay in filing the appeal, the appeal should be filed along with an application for condonation of delay explaining delay day-by-day [refer: Soorajmull Nagarmal v. Golden Fibre and Products AIR 1969 Cal 381] along with supporting evidence, if any, such as affidavit, doctor’s certificate, etc.

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• The CIT should have a pragmatic and liberal approach.- Mst. Katiji vs Collector Land Acquisition [167 ITR 471(SC)]

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• Sufficient Cause Meaning
• Means a cause which is beyond the control of the party
• any cause that prevents a person approaching the Court within time is sufficient

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Practical Aspects of Appeal

Sufficient Cause – Some Cases

• Wrong advice given to the appellant – R.Ranganayaki Ammal 38 ITR 20 (Mad.)

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• Appeal filed at wrong forum – eg: Delay due to the mistake of the income tax officer stating in the demand notice that the appeal lies with the Appellant Assistant Commissioner (AAC) instead of the Tribunal- Avtar Kishan Dass 133 ITR 338 (Del.)

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• Conflicting legal advices - Smt. Laxmi Devi AIR (1988) (All.) 133

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• Where the managing partner of the assessee’s firm was hospitalised and so couldn’t contact the concerned auditors in time for filing appeals.

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DRAFTING OF GROUNDS OF APPEAL AND BRIEF FACTS

• To be specific and brief.

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• Can give alternative ground without prejudice.

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• Facts need not be very elaborate. They must not be argumentative.

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• Should narrate that detailed submissions at the time of hearing and not at the time of SOF / GOA

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Section 249(4) - Payment of Admitted Tax

• No appeal can be filed, if at the time of filing of Appeal, unless assessee has paid:

a) If ROI filed = Tax on Returned Income

b) If ROI not filed = Advance tax Payable

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• CIT(A) for good and sufficient cause and upon recording reasons in writing exempt appellant from operation of cl.(b)

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• Whether the word ‘tax’ includes interest?

No, Expression "tax" does not include interest for the purpose of section 249(4). Refer [CIT vs. Manojkumar Beriwal [(2008) 217 CTR (Bom) 407] ; Jagdish Rai Chandran, Sohagwant Gurbachan Singh (AOP) vs. ITO[(2006) 100 ITD 525 (Asr)].

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• Only liable to pay UNDIPUTED tax (T. Govindappa Setty [231 ITR 892 (Kar. HC)]

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• Payment condition is also applicable in case of penalty appeal CIT vs. Samanthakamani (2003) 259 ITR 215 (Mad HC)

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Section 251 – Powers of CIT(A)

In cases of assessment

• He may confirm, reduce, enhance or annul the assessment.

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In cases of penalty

• He may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty.

�Any other Case

• In any other case, he may pass such orders in the appeal as he thinks fit.

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Powers coterminous with that of AO

• The scope of his powers is co-terminous with that of AO. He can do what AO can do and can also direct him to do what he has failed to do. [CIT Vs. Kanpur Coal Syndicate 53 ITR 225(SC)]

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Section 251 – Powers of CIT(A)

Enhancement Powers

• No enhancement – unless reasonable opportunity of being heard

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• The CIT(A) can enhance assessment in respect of matters which could be considered by ITO, but which he failed to consider. However, the CIT(A) has to restrict himself to the material before the ITO.

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• CIT A has no power to enhance by discovering new source of income, not mentioned in return, or considered in asstt, or considered by AO. [CIT v Shapoorji Pallonji Mistry (1962) 44 ITR 862 (SC)]

Section 251 – Powers of CIT(A)

Enhancement Powers

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• CIT vs Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC)

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• Power of enhancement is restricted to the sources of income which have been the subject-matter of consideration by the ITO from the point of view of taxability.

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• In this context 'consideration' does not mean 'incidental' or 'collateral' examination of any matter by the ITO in the process of assessment.

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• There must be something in the assessment order to show that the ITO applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection.

Withdrawal of Appeal

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• No provision in the Income tax Act for withdrawal

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• The assessee, having filed an appeal and brought the machinery of the Act into operation, can’t prevent the first appellate authority from asserting and settling the real sum to be assessed, by intimation for his withdrawal of appeal. - CIT v Rai Bahadur Hardutoy Motilal Chamaria(1967) 66 ITR 443(SC).

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• However, the Bombay High Court in case of Jagmondas Gokaldas v CWT (1963) 50 ITR 578 has held that “true, an appellant can’t as a matter of right claim to withdraw an appeal but there is nothing illegal in doing so with the permission of Appellate Authority”.

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Deficiency in Appeal Memo

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• The assessee should be given reasonable opportunity of being heard to rectify the errors and the appeal shall be heard on merits. – Harilelas vs ITO 16 ITD 356 (MUM)

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• The CIT(A) shall intimate the defects to the assessee and give reasonable time to cure such defects. – Malani Trading Co. vs CIT 252 ITR 670 (BOM)

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• Appeal cannot be dismissed for defect in form without giving opportunity to the assessee. – Haryana State Roads and Development Corporation Ltd vs DCIT (ITAT Chandiagrh) [ITA No. 582/Chd/2016]

Additional Evidence

• Sec. 250(4) confers jurisdiction to the First Appellate Authority to make such inquiry as he deems fit.

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• The Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry or may direct the Assessing Officer to make further inquiries, and report the result to him.

Additional Evidence

Rule 46A

• The CIT(A) has a discretionary power to admit fresh or additional evidence subject to Rule 46A . The rule 46A requires the appellant to fit his case within the conditions specified therein for additional evidence which are as under:

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• Where the AO has refused to admit evidence which ought to have been admitted;

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• Where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to be produced by the AO; or

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• Where the appellant was prevented by sufficient cause from producing any evidence before the AO which is relevant to any ground of appeal; or

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• Where the AO has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.

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Additional Evidence

Rule 46A

• Under sub rule (3) to rule 46A, a condition was imposed that such evidence shall not be taken into account by the CIT(A) unless the AO was confronted with the same.

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Interplay between Section 250(4) and rule 46A [Manish Build Well (P) Ltd - High Court Of Delhi [(2012) 204 Taxman 106]

• Under section 250(4), the CIT(A) has the power to direct enquiry and call for evidence from the assessee.

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• Under Rule 46A, the assessee asks for the admission of additional evidence.

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• If the CIT (A) exercises his powers u/s 250(4) to call for evidence, the AO need not be given an opportunity to show-cause.

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• However, if the CIT (A) acts on an application under Rule 46A, then the requirement of giving the AO an opportunity as per Rule 46A(3) is mandatory.

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Additional Ground Before CIT(A)

• Sub-section 5 of Section 250 gives power to the CIT(A) to allow the appellant to raise additional ground if he is satisfied that the omission of that ground was not willful or unreasonable.

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• Additional grounds means grounds which are not specified in Form no. 35.

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• Letter in writing giving reasons why grounds not taken in Memo to Appeal

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• Opportunity to the AO to give his comments on the additional ground.

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Additional Ground Before CIT(A)

• Jute Corporation of India [187 ITR 688 (SC) ] - CIT(A) has ample power to admit additional ground not raised before the ITO if he is satisfied that ground raised was bona fide and the same could not be raised earlier for good reasons.

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• Also, National Thermal Power Co. Ltd. v CIT 229 ITR 383(SC)

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• A claim for a deduction can only be made by an assessee before an Assessing Officer and by way of filing a revised return Goetze (India) Ltd. vs. CIT (2006) 284 ITR 323 (SC).

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• The SC however only limited the power of an Assessing Authority to entertain a claim for a deduction otherwise than by filing a revised return. It did not impinge on the power of an Appellate Tribunal.

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• The Tribunal therefore would be correct in confirming the action of a CIT(A) who entertained a claim not made before the AO
• Jai Parabolic Springs [306 ITR 42 (Delhi HC)]
• Pruthvi Brokers and Shareholders (P) Ltd [349 ITR 336 (Bombay HC)]

Whether a fresh/ new claim can be made before the Appellate Authorities, without filing a revised return?

• Yes, Chicago Pneumatic vs. DCIT [(2007) 15 SOT 252 (Mum Trib)] -Even the Apex Court has not barred an assessee from raising a legal claim before Appellate Authorities. An AO is bound to assess correct income and for this purpose may grant relief even when a revised return is not filed. Since powers of the CIT(A) are coterminous with those of an AO and the fact that appellate proceedings are the continuation of original proceedings, the CIT(A) can also entertain a claim made by the assessee.

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G.V.K. Industries Ltd. v. ACIT [(2013) 56 SOT 73 (Hyd.)(Trib.)]

• The Tribunal held that while making a new claim if any before Assessing Officer it is required to file revised return of income and not by way of letters or by way of filing revised computation, etc.
• But when comes to the Tribunal or for that matter CIT(A), who is the appellate authority, assessee does not have to initiate a new claim before them by way of filing the revised return of income. As such the returns or revised returns are filed under the provisions of section 139 and it is to be done before the Assessing Officer and not before the first and second appellate authority i.e., CIT(A), Tribunal or higher judiciary.
• Therefore CIT(A) was justified in entertaining and adjudicating the grounds raised by the dept.

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Whether an appeal lies against the order charging interest under section 234A, 234B etc.?

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• No

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• However, in Anjum M.H. Ghaswala & Ors.[252 ITR 001 (SC)], SC said they are appealable only if disputes liability to pay Advance tax i.e. to the very levy of the same.

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• Also refer
• Central Provinces Manganese Ore Co. Ltd. vs. CIT [(1986) 160 ITR 961 (SC)]
• CIT vs. Veppalodai Salt Corporation [(1988) 171 ITR 366 (Mad)]
• Express Newspapers Ltd [(2006) 103 TTJ (Chennai) 122]

Time limit for passing of Order

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• Subsection 6A of Section 250

In every appeal, the Commissioner (Appeals), where it is possible, may hear and decide such appeal within a period of one year from the end of the financial year in which such appeal is filed before him under sub-section (1) of section 246A.

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• Not mandatory, only directory

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• As per CBDT’s Instruction no.20/2003 dated December, 2003 reiterated in F No. 279/ Misc 53/2003 dated 19/06/2015 , the Appellate Authorities should pass an Appellate Order in all cases within 15 days after the final hearing.

Stay of Recovery during pendency of appeal

• Where the outstanding demand is disputed before CIT (A), AO shall grant stay of demand till disposal of first appeal on payment of 20% of the disputed demand

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Exception

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• AO of the view that payment higher than 20% is warranted or,

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• AO of the view that payment lower than 20% is warranted or, he shall refer the matter to the administrative Pr. CIT/ CIT

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• Where stay of demand at 20% granted by AO, assessee may approach the jurisdictional administrative Pr. CIT/ CIT for a review of the decision of the assessing officer.

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• AO to dispose stay petition within 2 weeks of filing of the petition. Pr. CIT/ CIT shall also dispose 2 weeks of reference or review

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Stay of Recovery by CIT(A)

• Mere filing/ pendency of an appeal does not constitute an automatic stay. Paulsons Litho Works vs. ITO (1994) 208 ITR 676 (Mad.)

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• Tin Mfg. Co. of India vs. CIT (1995) 212 ITR 451 (All.)
• Power to grant stay of the recovery of the demand disputed in appeal is incidental or ancillary to the appellate jurisdiction.

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• Power of CIT(A) to stay the recovery of the demand, subject-matter of which is in appeal pending before him, is independent of the provisions of sec. 220(6)

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• Not necessary that before invoking the power of CIT(A), an assessee should approach AO u/s 220(6) or that AO must reject the assessee's prayer for stay of the demand.
• No coercive action/recovery during pending of Stay Application
• Pradeep Ratanshi vs. Asst. CIT (1996) 221 ITR 502 (Ker.)
• Mahindra & Mahindra (59 ELT 505) (Bom)
• Maruti Udyog Ltd. vs Addl. CIT (264 ITR 487) (Del HC)

Appeal Form – Form 35

Appeal Form – Form 35

Appeal Form – Form 35

Appeal Form – Form 35

Appeal Form – Form 35

Appeal Form – Form 35

Appeal Form – Form 35

Appeal Form – Form 35

Appeal Form – Form 35

Appeal Form – Form 35

Appeal Form – Form 35

Appeal Form – Form 35

Appeal Form – Form 35

Appeal Form – Form 35

Section 264 – Revision of Order

• The Principal Commissioner or Commissioner, on his own or on application made by the aseesee, can revise any order (other than order passed U/s 263) passed by his subordinate.

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• The order of revision can not be prejudicial to the assessee

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• No suo moto revision after the 12 months of the original order

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• Assessee should make application under this section with in one year from the date of the receipt of original order

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• No revisionary order under section 264 appeal filed before CIT(A)

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• Order of CIT final. Can not appeal before ITAT.

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Questions ???

THANK YOU

CA Pankaj Saraogi

Mob : +91 98103 08129

CA Paras Dawar

Mob : +91-97111 07317