Every law that provides for some form of adjudication also usually provides for appeal in one form or the other against orders passed by the lower authorities. ‘Appeal is a complaint to a superior court of an injustice, done by an inferior one.' This is based on the concept of equity and recognition that every authority is fallible. The mechanism of appeal provides safeguard against erroneous, unjust or invalid orders. The appeal proceedings ordinarily embrace all proceedings whereby an appellate authority is called upon to review, revise, affirm, reverse or modify the decisions of the lower or subordinate authority. The party complaining is known as “appellant” and the other party is known as “respondent”.
Under the scheme of the Income Tax Act, appeal can be preferred only against orders specified under the relevant act. It is pertinent to note that the right to appeal is conferred by the statute and that right to appeal cannot be assumed to be an inherent right. Accordingly, Indian courts have held that right to appeal must be expressly stated by an enactment and cannot be implied. Therefore, an appeal against non-appealable orders can be dismissed as not maintainable. Since it is a privilege rather than a right, every person seeking to fight an appeal must be sure to fulfil every condition and procedure, and be wary of every restriction provided for in the law for his appeal to be considered by the appropriate authority.
The right in appeal is a substantive right. Thus, once an appeal is admitted, a person has a right to have the appeal dealt with properly under the law. Therefore the appellate authorities while construing right of appeal opt for liberal interpretation. It is for this reason that the courts have held appeal against levy of interest valid under the board category of denial of liability to be assessed. Similarly appeal against non-granting of interest on refund is also held to be valid.
An appeal against the order of the Assessing Officer lies with the Commissioner (Appeals). Alternatively, the assesse can file revision petition to the Commissioner. An appeal against the order of the Commissioner (Appeals) can be preferred by the assesse or the income tax department and such appeal lies with the Appellate tribunal. The assesse or the Commissioner of the income tax may prefer an appeal against the order of the Appellate tribunal to the high court on any substantial question of law arising out of the order of the tribunal.
Order of the high court can be challenged either by the assesse or by the income tax department by preferring an appeal to the Supreme Court which is the final appellate authority.
The power of revision is an exceptional power kept to ensure that there is no miscarriage of justice on either side owing to certain technical requirements of appellate procedure. Since it is an exceptional power, revisions are not as frequently resorted to as appeals. The power of revision is meant to protect the department as well as the assesse; therefore, there are two provisions that deal with its nature and scope S.263 & S.264.
While the section 263 empowers the Commissioner to revise orders that he considers prejudicial to the interests of revenue it also throttles this authority under a time limitation along with the manner in which it can be exercised. Under section 264 assesses aggrieved by certain orders that they believe to be administrative in nature, or against which appeal is not possible, can seek revision of such orders by the Commissioner.
Eligibility To File Appeal
Only a person aggrieved by an order would have a right to file an appeal. Thus for instance, and assesse who has been allowed an additional deduction or allowance such as depreciation or has been permitted a set off of loss which was not claimed by him would have to establish that he is aggrieved by such an order granting him a benefit not claimed. An assesse can be said to be aggrieved when he is required to bear tax, legal burden or is denied some benefit to which he claims to be entitled.
An appeal can be filled in front of the first appellate authority under the Section 246A against the following orders:
An order against assesse who denies his liability to be assessed
Intimation u/s 143(1)/143(1b)
Order u/s 143(3)/ 144, 154 or 155 rectification of mistake
Order u/s 143(3) an order of assessment, reassessment or re-computation under Section 147 or 150.
Order u/s 170(2) or 170(3).
Order u/s 171.
An order of assessment or reassessment u/s 185(1b)/ 185(2)/ 185(5).
Order u/s 186(1)/ 186(2) - cancelling the registration
Order u/s 158BC/158BD/158BFA or u/s 237.
Order u/s 163 - treating an assesse as representative assesse
Order u/s 201, 271B/ 271BB.
271C, 271D or 271E.
Order u/s 272A
Order of penalty u/s 221, 271, 271A, 271AA, 271F, 271FB, 272, 272AA, 272B, 272BB 271C, 271D, 271E, 271 CA, 272A, 273, 275(1A)
Penalty order under chapter XXI
An order by the Assessing Officer other than Deputy Commissioner where so directed by the Board.
Procedure For Filing An Appeal (Rules 45 &46)
Appeal is required to be filed in form no. 35 within 30 days from the receipt of order to be appealed against contain grounds of appeal and statement of facts. It should be filed in duplicate. The statement of facts should clearly bring out the facts relating to disputed issue and the development in the course of assessment proceeding leading to its ultimate addition / disallowance in the impugned order. The certified copy of the impugned order should be filed with the memorandum of appeal. The appeal should be accompanied by a fee of:
Rs.250/- for total assessed income of Rs.1, 00,000/- or less.
Rs.500/- for total assessed income exceeding Rs.1,00,000/- but not more than Rs.2,00,000/-
Rs.1,000/- for total assessed income over Rs.2,00,000/-
Rs.250/- where the subject matter in appeal is not covered by clause a, b or c above.
The appeal should be accompanied by original notice of demand issued u/s 156 of the Act. The appeal should be signed by the appellant himself/herself. A letter of authority in favour of the Chartered Accountant representing the assesse should also be preferably filed with the appeal.
Time Limits For Filing Appeal
Sec 249 (2) prescribes the limit for filing an appeal which is generally a period of 30 days from the triggering event while section 249 (3) empowers the appellate authority to admit belated appeal. But a petition praying for condonation of delay should be filed along with appeal specifying circumstances which caused delay. The appellate authority ordinarily takes liberal view in the matter of condonation of delay unless the appellant is guilty of gross negligence in submitting the appeal.
S. 249(4) dictates payment of tax on admitted / returned income as a precondition for filling an appeal. The appellate authority can, on being satisfied of the good and sufficient cause for non-payment, exempt an assesse who has not filed return of income from the fulfilment of condition of tax having been paid equal to the amount of advance tax payable by him. The order refusing to grant such exemption can be appealed against before the Tribunal.
Hearing Of Appeal
The Commissioner of Income Tax (Appeal) is required to give opportunity of hearing to the assesse and to the assessing officer. S. 250 refers to the right to be heard as mentioned hereinabove and also provides that the day and place for hearing shall be fixed by way of notice served to the parties. However, based on the well-established rule of equity namely ‘Audi Alteram Partem', certain healthy practices have evolved and have also got judicial recognition over the years. Thus to give an effective and meaningful hearing it has been established that:
notice must give sufficient/ reasonable time for the assesse/his representative to attend to the same in a proper manner
in order to enable the above, the notice must preferably mention the subject matter which is to be considered at the hearing
the notice must be specific in regard to the year and the proceeding in regard to which response/attendance of the assesse is sought
Opportunity to be heard would ordinarily mean opportunity to represent in person or through representative. In rare case opportunity to make written representation without verbal arguments could also be considered to be part of “opportunity to be heard”
In case the assessing officers / Commissioner of Income Tax (Appeals) relies on some external evidence against the assesse, he should be given full opportunity of a rebuttal.
Powers Of The Commissioner Of Income Tax (Appeals)
The proceedings before the Commissioner of Income Tax (Appeals) are considered to be an extension of the initial assessment proceedings. The CIT (A) is empowered to make further inquiry as he thinks fit or may direct the AO to make further inquiry and submit report thereof. The power of the CIT (A) is co-extensive with the powers of the AO. The CIT (A) may confirm, reduce, enhance or annual the assessment. However CIT (A) does not have power to set aside the assessment or penalty orders. Where the enhancement is involved, once again certain rules of natural justice and equity come into play and therefore there are certain limitations and procedural requirements in effecting an enhancement. However, the power to make an enhancement where the situation warrants is clearly recognized in the Act.
The CIT(A) is also entitled to admit fresh evidence. The Act also provides that the CIT (A) can entertain additional grounds of appeal even though the same may not have been originally preferred. This is a discretionary power to be exercised based on the facts and circumstances of the case.
Culmination Of The First Appeal Process
CIT (A) is required to make an order in writing disposing of the appeal. The order is required to state the points for determination the decision thereon as well as the reasoning underlying the decision. Thus he is in effect required to pass a speaking order. Such order as to be communicated to the assesse and to the Commissioner/Chief Commissioner.
Appeal Before The Appellate Tribunal - Second Appeal
Either party aggrieved by an order of the Commissioner of Income Tax (Appeals) can prefer an appeal to the Income Tax Appellate Tribunal (referred to as ITAT or Tribunal). The appeal to the Tribunal can arise on points of law or of facts or a combination of both. The tribunal is the last fact-finding authority under the Income Tax Act and this fact needs to be kept in mind when presenting matters before it. No fresh facts would be considered by the higher appellate authorities, and this needs to be kept in mind in presenting appeals before the ITAT. The eligibility to file appeals is circumscribed by the Act only to the extent that Appeal by assessee is possible against any order of CIT (A) and against any order of CIT u/s 12AA, 263, 272A,115VZC. The department is entitled to file an appeal against any order of the Commissioner of Income Tax (Appeals).
Points noted earlier in regard to the right of appeal etc. which are common at the first and second appeal stage are not repeated in regard to procedure relating to ITAT. It may however, be noted that the time limit for filing appeal to the ITAT is as under ……..
Time limit: u/s 253(2) / 253(4)
60 days from the date of receipt of order under appeal
30 days for filing cross objection u/s 253 (4) from the date of receipt of intimation of department having filled appeal.
Fees payable for appeal before ITAT u/s 253 (6)
No fee payable for appeal by CIT
No fee for cross objection by assessee
Rs.500/- where assessed income is less than Rs.1,00,000/-
Rs.1,500/- where assessed income is over Rs.1,00,000/- but less than Rs.2,00,000/-
1% of assessed income of more than Rs.2,00,000/-
maximum fee - Rs.10,000/-
Rs.500/- any other matter
The appeal should be filed in Form 36 as prescribed by Rule 47(1).
No statement of facts is required to be given to the ITAT as the statement of facts filed before the CIT (Appeals) is annexed to the appeal memo. If the facts are voluminous, it is advisable to file a paper book. According to Rule 18 of the ITAT Rules, a paper book has to be filed at least 7 days before the date of hearing. A paper book has to be filed in triplicate - two copies for the Honorable members and one copy for the departmental representative. A paper book has to be accompanied by a certificate stating as to whether the papers / documents in the paper book were available to the lower authorities.
Grounds Of Appeal
It is important to remember that the purpose of filing an appeal is to get redressal in regard to the perceived injustice. If this objective is to be achieved it is necessary to ensure that the grievance is properly communicated to the appellate authority. Making dramatic claims and bringing in irrelevant factors such as the social or economic status of the assessee, or the benefits society derives from his actions may serve no purpose. This is on account of the fact that the appellate proceedings under the tax laws are well structured. Therefore, if the cause of grievance i.e. the grounds are not stated properly at the time of filing of appeal, the arguing counsel would face substantial difficulty. More importantly the issue to be decided by the appellate authority is specifically the grounds of appeal raised by the appellant. If the grounds are not clear and precise it is difficult for the appellate authority to formulate and thereafter to adjudicate upon a proposition of law. One must keep in mind that even though oral representation is made before the CIT (Appeals) and the tribunal, what remains as a matter of record is the written representation, and therefore, it is necessary that due care is taken in drafting.
It may be noted that the Tribunal is entitled to reject the memo of appeal, if the grounds are not clearly and specifically stated. One must take care to ensure that the grounds are not argumentative or repetitive. Some of the points to be noted in presentation of grounds are as under.
All the causes for grievance need to be included in the grounds. E.g. Even if an assessee is aggrieved by the addition and the chances of success are limited on account of factual weaknesses or legal interpretation, the assessee should take that ground. A common example is reopening of assessment. The power of assessing authority to reopen the assessment are now substantially wide. However, the law on the subject is continuously evolving and it may so happen that at the time that the appeal is fixed, an interpretation of law in favor of the assessee may be available. It is therefore advisable to include all the grounds on which the assessee is aggrieved.
Grounds should be brief and concise - In the grounds of appeal, the assessee must only state the cause of grievance. E.g. “The learned Assessing Officer has erred in treating expenditure on repairs of Rs. _____ as a capital expenditure.” The grounds are not arguments and they should not be argumentative. One has strike the right balance between grounds being adequately clear without any significant matter being omitted and yet concise.
Grounds must be serially numbered and if an assessee is aggrieved by the addition for 2 or 3 reasons, the ground should be divided into sub-clauses. E.g. a particular disallowance may be erroneous for 2 of 3 different reasons, and those 2 or 3 different reasons may be stated by way of sub-clauses.
Alternative grounds: - All issues to be raised should be mentioned in the grounds of appeal. Thus if there is a technical infirmity in the order this should be raised even if one is separately arguing on merits of the case. It is possible that the assessee may want to prefer an alternate plea. E.g. Assessing Officer may have treated revenue expenditure as a capital expenditure and not allowed depreciation on the same. The assessee's alternate plea would therefore be as follows
i) The learned Assessing Officer has erred in treating the expenditure of Rs. ____ as capital expenditure.
ii) In the alternate and without prejudice to the above, the learned Assessing Officer has erred in not allowing depreciation of Rs. _____ on the said expenditure of Rs. ________ treated by him as capital expenditure.
9.6. Often, the assessee and their Chartered Accountants tend to confuse between the grounds of appeals, and statement of facts. In the statement of facts, the assessee states the facts related to the grievance and gives factual narration of the actions of the Assessing Officer. It is on the basis of this statement of facts that grounds of appeals are prepared.
9.7. If a fact is incorrectly stated by the assessing authority that should be specifically challenged in the grounds of appeal. This is so, because if the factual inaccuracy is not controverted at the later stages of appeal, the appellate authorities are inclined to accept the proposition as stated in the assessment order.
9.8. At the conclusion of grounds of appeal, it is advisable to include a prayer for permission to present alternate and additional grounds.
10.1. Since proceedings before the appellate tribunal are in the nature of adversarial proceedings and held in open court, the procedure to be followed is much more rigid and formal. Therefore, it is very necessary that the rules and procedures in regard to the appellate tribunal are rigorously followed. If additional evidence is to be filed before the Income Tax Appellate Tribunal, Rule 29 has to be complied with and in that case, specific application has to be preferred before the ITAT seeking leave to the Tribunal for production of additional evidence. These documents have to be filed separately by way of a separate paper book.
10.2. It is often seen that a good case can be marred by lack of attention to these details. Therefore, for the sake of ready reference, some of the significant features of ITAT Rules are given hereunder.
Review & Miscellaneous Application
12.1. It is to be clearly understood that normally review of a decision is not permissible except where specifically provided under the statute. However, the absence of power to review cannot and should not lead to miscarriage of justice. Hence, when there is a patent or apparent mistake, there arises a power of rectification which is recognised by the law. Section 254(2) of the Income Tax Act provides a specific authority for rectification of mistake apparent from record. In doing so, Tribunal is careful not to extend this power so as to amount to a review. There are significant numbers of judicial precedents in this regard and any application for rectification must be carefully examined to see that it falls squarely within the powers prescribed U/s 254(2). There is a liberal time limit of 4 years from the date of the order within which the application for such rectification may be filed.
14.1. In extremely rare circumstances the assessee is given a right to petition the Commissioner for reduction/waiver of certain penalties imposed or impossible. This is provided in section 273A which also provides the parameters within which the Commissioner can exercise his discretion in favour of the assessee. One of the primary requirements for consideration of such petitioned for waiver/reduction of penalty is that
the assessee concerned should have co-operated in regard to the enquiry relating to the assessment of his income,
should have paid or made arrangements for the payment of tax on interest payable and
Should have made a full and true disclosure of his income and particulars relating thereto.
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