In this blog post, Konika Mitra, an Associate at Vikas Pahwa & Associates and pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, describes the procedure of tax appeals in India.  

INTRODUCTION:

Appeal is a proceeding resorted to rectify an erroneous decision of a court by submitting the question to a higher court, or court of appeal. It means ‘making a request’ and in legal parlance, it means ‘apply to a higher court for a reversal of the decision of a lower court.

Income tax liability is primarily determined at the level of Assessing Officer. Where the Income Tax department (the government) disagrees with the tax computed by the taxpayer, they can levy an additional tax. In such a situation, as per Income Tax Act, 1961 the liability is determined at the level of Assessing Officer. Where a taxpayer is aggrieved certain action of Assessing Officer, he can move an appeal.

The assignment herein deals exhaustively with procedure for such appeal as provided by Income Tax Act, 1961. 

APPEALS BEFORE COMMISSIONER:

WHEN CAN IT BE FILED:

As provided by S. 246 of the IT Act, an assessee who is aggrieved by an order, passed by Assessing Officer may prefer an appeal to the Commissioner of Income- Tax. Such Commissioner may admit an appeal, even beyond period of limitation, if satisfied that there was a sufficient cause for not presenting the appeal. Within time.

An appeal before ITAT can be filed by a taxpayer against;

• an intimation issued u/s 143(1)/ (1B), where adjustments have been made in income offered to tax in the return of income,
• an assessment order passed u/s 143(3) except in case of an order passed in pursuance of directions of the Dispute Resolution Panel,
• an assessment order passed u/s 144 or an order assessment, reassessment or re- computation passed after reopening the assessment u/s 147 except an order in pursuance of directions of the Dispute Resolution Panel,
• an order referred to inspection u/s150,
• order passed against the taxpayer in a case where the taxpayer denies the liability to be assessed under Income Tax Act,
• intimation issued u/s 200A(1) where adjustments are made in the filed statement,
• an order of assessment or reassessment passed u/s 153A or 158BC in case of search/seizure,
• an assessment or reassessment order passed u/s 92CD(3),
• a rectification order passed u/s 154 or 155,
• an order passed u/s 163 treating the taxpayer as agent of non-resident,
• an order passed u/s 170(2)/(3) assessing the successor of the business in respect of income earned by the predecessor,
• an order passed u/s 171 recording the finding about partition of a Hindu Undivided Family,
• an order passed by Joint Commissioner u/s 115VP(3) refusing approval to opt for tonnage-tax scheme to qualifying shipping companies,
• an order passed u/s 201(1)/206C(6A) deeming person responsible for deduction of tax at resource as assessee-in-default due to failure to deduct tax at source or to collect tax at source or to pay the same to the credit of the Government,
• an order determining refund passed u/s 237,
• an order imposing penalty u/s 221/  271/ 271A/ 271AAA/ 271F/ 271FB/ 272A/ 272AA/ 272B/ 272BB/ 275(1A)/ 158B FA(2)/ 271B/ 271BB/ 271C/ 271CA/ 271D/ 271E/ 271AAB,
• an order imposing a penalty under Chapter XXI.

An appeal to the Commissioner of Income-tax must be filed within 30 days from the date of service of notice of demand relating to assessment or penalty order.

PROCEDURE FOR APPEAL:

An appeal to Commissioner of Income-tax must be in Form No. 35 along with details of “Relief claimed in appeal”, “Statement of Facts” and “Grounds of appeal”, signed and verified by the individual taxpayer himself or by a person duly authorized by him holding valid power of attorney. Further, e-filing of Form has been made mandatory by Income-tax (3rd Amendment) Rules, 2016, for persons for whom e-filing of return of income is mandatory.

The prescribed fees for any such appeal is as under:

• Rs. 250, where the assessed income is Rs 1lakh or less
• Rs. 500, where assessed income is more than Rs. 1 lakh but less than Rs. 2 lakhs
• Rs.1,000, where assessed income is more than Rs. 2 lakhs

On receipt of Form no. 35, Commissioner of Income-tax fixes date and place for hearing the appeal by issuing notice to the taxpayer and the Assessing Officer, against whose order appeal is preferred. Before passing the order, the Commissioner of Income-tax may make such further inquiries as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result to him.

As a rule, a taxpayer is not entitled to produce any evidence, whether oral or documentary other than what was already produced before the Assessing Officer. However, in certain exceptional circumstances as provided below, additional evidence are accepted by the Commissioner of Income-tax (Appeals);

• Where the Assessing Officer has refused to admit evidence which ought to have been admitted; or
• Where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to be produced by the Assessing Officer; or [As amended by Finance Act, 2016]
• Where the appellant was prevented by sufficient cause from producing any evidence before the Assessing Officer which is relevant to any ground of appeal; or
• Where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.

ORDER OF COMMISSIONER OF INCOME- TAX:

After hearing the case/arguments, the Commissioner of Income-tax passes his order, and the same is recorded in writing. Where the order passed is that for disposal of the appeal and the Commissioner must supply reasons for the same. While disposing of an appeal, the Commissioner of Income-tax may consider and decide any matter arising out of the proceedings in which order appealed against was passed, even if such matter was not raised by the taxpayer before the Commissioner of Income-tax. The order should be issued within 15 days of last hearing.

APPEALS BEFORE INCOME TAX APPELLATE TRIBUNAL:

Income Tax Appellate Tribunal (ITAT) is the second appellate authority in order after The Commissioner of Income Tax.  This body is constituted by the Central Government, and functions under the Ministry of Law. It consists of 2 classes of member, i.e., Judicial and Accountant. An appeal to ITAT can be filed either by the taxpayer or by the Assessing Officer.

WHEN CAN IT BE FILED:

An appeal before ITAT can be filed by a taxpayer against;

• an order passed by the Commissioner of Income-tax (Exemption), u/s 10 (23C)(vi), which provides for filing of application by the educational institute or hospital for the purpose of grant or exemption;
• an order passed by the Principal Commissioner of Income-tax or Commissioner of Income-tax with respect to registration application made by a charitable or religious trust as provided u/s 12AA
• an order passed by the Principal Commissioner of Income-tax or Commissioner of Income-tax with respect to the approval of a charitable trust for donations made to it which would be eligible for deductions in the hands of the donor, as provided u/s 20G(5)(vi)
• an order passed by the assessing officer u/s 143(3) or 147 or 153A or 153C, either in pursuance of direction given by Dispute Resolution Panel or with approval of the Principal Commissioner of Income- Tax or Commissioner of Income- Tax as provided u/s 144BA(12);
• a ratification order passed by the Commissioner of Income- tax u/s 154;
• an order passed by a Principal Commissioner of Income- Tax or Commissioner of Income- Tax u/s 263, which relates to revision of the order of Assessing Officer which is considered as prejudicial to the interest of revenue;
• An order by the Assessing Officer u/s 115VZC(1), which provides for order of excluding the taxpayer from tonnage tax scheme;
• an order passed by the Commissioner of Income-tax u/s 250, 270A, 271, 271A or 272A;
• an order of penalty by a Principal Commissioner of Income- Tax or Commissioner of Income- Tax u/s 270A, 271 or 272A;
• an order or penalty by a Principal Chief Commissioner or Chief Commissioner or a Principal Director General a Director General or a Principal Director or Director under section 272A.

A Principal Commissioner of Income-Tax or Commissioner of Income-Tax, may direct the Assessing Officer to make an appeal to ITAT, if he objects the order passed by the Commissioner of Income-Tax (in appeals) under section 154 or section 250. Such an appeal is also called a Departmental Appeal, i.e., the Income-Tax department moving to ITAT against the order of the Commissioner of Income-Tax. However, Departmental Appeals are allowed only in cases where the tax effect involved in the appeal exceeds Rs. 10,00,000.

Notwithstanding the limit above mentioned, adverse judgements relating to following issues should be contested on merits, even when the tax effect is less than the mandatory limits specified above;

• Where the Constitutional validity of the provisions of an Act or Rule is under challenge, or
• Where Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra-vires, or
• Where Revenue Audit’s objection in the case has been accepted by the Department.
• Writ matters
• Matters pertaining to other direct taxes, i.e., other than Income-Tax
• Where the tax effect is not quantifiable or not involved, such as case of registration of trust or institution under section 12A.
• Where the addition relates to undisclosed foreign assets/bank accounts.

Any appeal to ITAT must be filed in 60 days of the date on which order appealed against is communicated to the taxpayer or the Commissioner.

PROCEDURE FOR APPEAL:

An appeal to ITAT must be in Form No. 36- in triplicate. The prescribed fees for any such appeal is as under:

• Rs. 500, where the assessed income is Rs 1lakh or less
• Rs. 1,500, where assessed income is more than Rs. 1 lakh but less than Rs. 2 lakhs
• 1% of assessed income, subject to maximum of Rs.10, 000, where assessed income is more than Rs. 2 lakhs

Where the subject matter of appeal relates to any other matter, fee of Rs 500/- is to be paid. An application for stay of demand is to be accompanied by fee of Rs. 500

The appellant may submit a paper book in duplicate containing documents or statements or other papers referred to in the assessment or appellate order, which it may wish to rely upon, at least a day before the hearing of the appeal along-with proof of service of copy of the same on the other side at least a week before. Parties to the appeal are neither entitled to produce additional evidence of any kind, nor oral or documentary before the Tribunal.

The Appellate Tribunal then fixes the date for hearing the appeal and notifies the parties specifying date and place of hearing of the appeal. A copy of memorandum of appeal is sent to the respondent either before or along with such notice. The appeal is heard on the date fixed and on other dates to which it may be adjourned.

ORDER OF ITAT:

The Appellate Bench comprises of one judicial member and one accountant member. Appeals where total income computed by the Assessing Officer does not exceed Rs. 5lakh may be disposed of by single member Bench.

If members are equally divided in their opinion, the points of difference are stated by each member and the case is referred by the President of the ITAT for hearing such points by one or more of other members of the ITAT. Such point or points is decided according to opinion of majority of the members of ITAT who have heard the case, including those who first heard it.

APPEALS BEFORE HIGH COURT:

Where the High Court is satisfied that the case involves substantial question of law, an appeal shall lie against the order/ judgment of ITAT. Such appeal may be filed either by the taxpayer or the Chief Commissioner/Commissioner. An appeal against order of ITAT shall lie only within 120 days of receipt of such order and in the form of memorandum of appeal, precisely stating the substantial question of law. The High Court then goes on to formulate the question. An appeal filed before the High Court is heard by a bench of not less than two judges.

APPEALS BEFORE SUPREME COURT:

Appeal against an order of High Court in respect of Appellate Tribunal’s order lies with the Supreme Court. Appeal lies only against cases, which are certified to be fit one for appeal to the Supreme Court. Special leave can also be granted by the Supreme Court under Article 136 of the constitution of India against the order of the High Court.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:  

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

REFERENCES:

• Act, The and +CA Accountant. “The Appeal Procedure Under Income Tax Act”. Guide to Taxation and Legal Concern |Simplified Laws. N.p., 2015. Web. 30 Sept. 2016.
• “Appeal to Commissioner of Income-Tax (Appeals)”Income Tax Department, Govt. of India, 2016.
• Appeal to the Income Tax Appellate Tribunal” Income Tax Department, Govt. of India, 2016.
• “Income Tax Appeal Filing Procedure in Brief”. Taxguru.in. N.p., 2014. Web. 30 Sept. 2016.
• “Appeal Under Income Tax Act -I”. CAclubindia. N.p., 2016. Web. 30 Sept. 2016.