1. Procedures of Tax Appeals By CA. RASESH SHAH

2. 2 Introduction  Requirement of effective presentation  Knowledge of facts of case.  Knowledge of law  Knowledge of procedure of appeal.  Provisions/Procedures of appeals and revision  Chapter XX of Income-tax Act, 1961 (section 246 to 262)  Part X of Income Tax Rules, 1962 (Rule 45 to 48)  Rule framed under Appellate Tribunal Rules, 1963.  Right of appeal of assessee  To dispute orders passed by income-tax authority.  Article 265 of the Constitution  No tax except by authority of law  However taxpayers are called upon to pay tax because of wrong assessment, which can be challenged by way of appeal and revision.

3. 3 Levels of Appellate Authority  At present there are four levels of appeals  Commissioner of Income-tax(Appeals)  Income-tax Appellate Tribunal  High Court  Supreme Court.  Tribunal - Ultimately fact finding authority  High Court and Supreme Court can decide only cases involving Substantial Question of Law

4. 4 Right of Appeal  Dispute any addition, interest or penalty  Agreement on factual matters  Binding only if Affidavit not filed with proper reason Western Automobiles v. CIT 112 ITR 1048 (Bom.)  Agreement on Legal Matter  Not binding Gauri Sahai Ghisa Ram v. CIT (120 ITR 338) (All) Rani Anand Kanwar v. CIT (8 ITR 126 )

5. 5 Appeal Against Interest  The assessee can take up the ground regarding charging of interest for default of late filing of return or advance-tax along with the other ground(s) disputing the quantum of addition(s).  The assessee can file an appeal raising sole ground of deletion of such interest provided that he disputes that he is not liable to pay interest at all. This is because an appeal can be filed where the assessee denies his liability to be assessed. Central Province Mang. Ore Co. Ltd. v. CIT (160 ITR 961) (SC)  No appeal can be filed against charging of interest u/s 220(2)

6. 6 Appeal before CIT(A)/Tribunal  Section 246A prescribes circumstances under which an appeal can be preferred to CIT(A).  The assessee can file the appeal only if he is aggrieved by the orders mentioned in section 246A.  Department or assessee can file appeal against order of CIT(A) before Tribunal  Direct appeal if Order passed by Commissioner –  U/s 263 or  U/s 154, amending order U/s 263.

7. 7 Form of Appeal before CIT(A)  Form No. 35, Statement of Facts and Grounds of Appeal.  Documents required to be attached -  Copy of relevant order  Original notice of demand

8. 8 Statement of Facts  It is vital for the assessee to present the statement of facts(SOF) in first appeal in such a manner so as to bring out clearly the steps in the assessment/penalty proceedings leading to the order under challenge.  In SOF, the assessee must refer various evidences and explanation given at the time assessment /penalty proceeding.  If the facts stated by assessee has not been considered, it should be stated so in SOF.  If the assessing officer states wrong facts contrary to record in order, the assessee must dispute that and bring on record correct facts in SOF.

9. 9 Importance of Statement of Facts The importance of drafting detailed SOF in first appeal is important for three reasons.  Firstly, the copy of SOF is also forwarded to assessing officer and if the assessing officer does not dispute the same, it will be taken as correct in second appeal.  Secondly, there is no requirement to file statement of facts in second appeal.  Thirdly, the tribunal rules requires that no facts contrary to records can be stated by either party unless supported by affidavit.

10. 10 Contents of Statement of Facts  General Introduction of case  Facts leading to each addition  Issues raised by AO on Item of Addition  Reference of submission made before AO  Reference of documents filed in support of submission  Summary of finding of Assessing Officer  Dispute of observations of assessing officer with reasons

11. 11 Form of Appeal before Tribunal  Form No. 36 setting forth grounds of appeal  Concise  Distinct Head  Without any argument or narration.  Numbered Consecutively.  Overlapping grounds should be avoided  Enclosures -  Relevant order which is subject matter of appeal  Copy of grounds of appeal filed in first appeal  Statement of facts filed in first appeal  Assessment order passed u/s144A after direction given by Add./Jt. CIT Copy of such direction to be attached  If appeal is against penalty Copy of relevant assessment order

12. 12 Grounds Before CIT(A) & Tribunal  Specimen - Grounds of Appeal  Items of addition [Grounds for telescoping and peak to be mentioned separately]  Prayer  Reservation to raise additional ground

13. 13 Limitation of Appeals First AppealWithin 30 Days Second AppealWithin 60 Days Cross Objection Before Tribunal Within 30 Days High CourtWithin 120 Days Supreme Court No time limit laid down

14. 14 Time Barred Appeals If the assessee or revenue is prevented by sufficient cause for not filing an appeal or cross objection in time, the CIT(A), tribunal and courts are empowered to admit such appeal on being so satisfied. In Collector of Land Acquisition v. Mst. Katiji (167 ITR 471), the Supreme Court held that courts should have a pragmatic and liberal approach in admitting the appeal beyond the period of limitation.

15. 15 Filing Fees  As per the amended section 249(1) by the Finance (No. 2) Act, 1998 for the first time, filing fee has been introduced in case of appeal filed before CIT(A) on or after 1/10/98. Formerly, there was no filing fee in case of appeal filed before CIT(A).  It has been held that in case of appeals filed before tribunal disputing all types of penalties including penalty for concealment u/s 271(1)(c), the filing fee is Rs. 500. Dr.Ashokkumar Pandey v. ITAT (310 ITR 195) (Pat)  On same analogy, the fees of Rs. 250 is payable in case of all appeals pertaining to penalty before CIT(A). Note - Income computed for the purpose of determination of filing fee is income originally computed by AO and not revised income computed by AO after giving effect to CIT(A)’s order.

16. 16 Signature in Appeal Memo  Prescribed form and verified in the prescribed manner.  Non signing of verification statement  Doesn't render the appeal as invalid  Opportunity to remove the defect.  Case Law : Malani Trading Co. v. CIT 172 CTR 633 (Bom)

17. 17 Situation of non payment of tax  First Appeal to be competent requires payment of -  Tax on returned income or  tax equal to advance-tax where the return of income is not filed.  No power to relax this provision  If tax on returned income paid after filing the appeal  Appeal shall be treated as filed on the date of payment of tax.  Delay required to be condoned by appellate authority.

18. 18 Procedures in First Appeal  Notice of hearing to assessee and assessing officer.  Go into any ground of appeal not specified in appeal memo  If omission not wilful or unreasonable.  Non allowance of opportunity of hearing to assessing officer  Tribunal may set aside the order to the file of CIT(A) directing him to decide appeal afresh

19. 19 Additional Evidence Before CIT(A)  Appellant not entitled to produce additional evidence unless,  Assessing officer refuses to admit such evidence in course of assessment proceeding or  Assessee was prevented by sufficient cause  Where additional evidence is allowed to be admitted-  AO is entitled to examine the evidence or document or cross examine the witness.  AO is also entitled to produce any evidence, document, or witness in rebuttal of additional evidence.

20. 20 Powers of CIT(A) in Hearing  Co-terminus with that of assessing officer.  He may make further inquiry as he thinks fit or Direct AO to make further inquiry and report the result of the same  Entertain new claim not raised in first appeal and which is not even based on materials available on record.

21. 21 Power of CIT(A) in Appellate Order  Confirm, reduce, enhance or annul assessment or penalty  Show Cause Notice required if CIT(A) proposes to enhance the assessment or penalty or reduce amount of refund.  Cannot bring to tax new source of income – power of enhancement restricted only in respect of items of addition made by the AO.

22. 22 Exparte Orders by Tribunal  If no appearance made by any of the parties at hearing of appeal  Order can be set aside and appeal can be restored on showing sufficient cause for non appearance  Power to dismiss appeal without going into merits if appellant is absent. CIT v. Multiplan India (P) Ltd. (38 ITD 320) (Del) Late Tukojorao Holkar v. CWD (233 ITR 480) (MP)  However, Tribunal can recall the order if appellant shows that he was really interested in prosecuting the appeal.

23. 23 Exparte Orders by CIT(A )  Cannot be rendered by CIT(A) Gujarat Themis Biosym Ltd. v. Jt. CIT (74 ITD 339) (Ahd.)  Section 250(7) requires CIT(A) to pass speaking order stating,  Points of determination,  decision thereon and,  reasons for the decision

24. 24 Additional Evidence before Tribunal  Rule 29 does not confer any right on parties to produce additional evidence  Tribunal may admit such evidence in following three circumstances :  To enable Tribunal to pass order  For any substantial cause  When income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence.

25. 25 Binding Nature Decisions  Decisions of High Court and Supreme Court binding on all lower authorities  In same set of circumstances and law, one bench of the tribunal generally follows the decision of earlier bench. If bench wants to differ with decision already given by Bench, the matter is generally referred to larger bench.  Decision of special bench binding on all benches of tribunals and even CIT(A).  Contrary views expressed by High Courts and no decision available of the jurisdictional High Court,  Tribunal to follow decision of High Court which is in favour of assessee.  In case of same assessee, CIT(A) is bound by decision of tribunal.

26. 26 Paper Book  Rule 18 - procedure  If party proposes to refer or rely upon any document or statements or other papers on the file or referred to in the assessment orders he is required to prepare paper book.  Requirement of Paper Book  Papers must be legible  Papers should be properly indexed  Certified as a true copy by the party or his authorised representative  Relevance of each paper and authority to whom it was filed must be indicated in description of index.  Certification that papers contained were filed before lower authorities  Additional evidence to be provided in separate paper book  It is necessary to refer vital papers of Paper Book during the course of arguments before Tribunal. This is because of the fact that it has been provided in Rule 18(6) that documents that are referred to and relied upon by the parties during the course of arguments shall alone be treated as part of record of the Tribunal. The assessee is well advised to file Paper Book on above lines before CIT(A) also.

27. 27 New ground before CIT(A) and Tribunal  Before AO, the new claim could only be made in revised return as held in case of Goetze (India) Ltd v. CIT (284 ITR 323) (SC)  However, before CIT(A) and Tribunal, the new grounds/claims could be raised. National Thermal Power Corporation Ltd. v. CIT (229 ITR 383) (SC) and Jute Corporation of India v. CIT (187 ITR 688)  Tribunal can deal any ground of appeal suo moto as per Rule 11. But Appellant can urge an additional ground only with leave of tribunal subject to opportunity to other party. Additional / New ground may be raised at any time even in course of hearing of appeal.  Before Tribunal, new grounds cannot be based on fresh investigation into facts.

28. 28 Powers of Tribunal  Tribunal may, after giving opportunity of being heard to both the parties of appeal, pass such orders as it think fit.  Appellant not to be placed in a situation worse than in what he was before filing of the appeal. State of Kerala v. Vijay Stores (116 ITR 15) (SC)  Power of enhancement is not available to tribunal.  If order emerges from appeal filed by department, it may result into enhancement. Abhinav Finanace & Leasing Co. Ltd. v. Dy. CIT 81 ITD 339 (Ahd)

29. 29 Powers of Rectification  Mistakes apparent from record  On own motion or  On application made by any party to appeal  Time limit for rectification is 4 years from the date of order  Review of order cannot be made in guise of rectification  It was formally held that time limit of four years laid down for rectification is applicable only in respect of suo moto rectification made by tribunal and not when application is made by party to appeal. [ Bhilai Engg. Corp. Ltd. v. Dy. CIT 81 ITD 282 (Nag)]. However, this decision was overruled by Ahmedabad Special Bench in case of Arvindbhai H. Shah v. Asst CIT (270 ITR 125) (AT).  Where arguments and judgement referred by assessee have not been considered by Tribunal while passing its order, it is appropriate for Tribunal to recall its order for fresh hearing. (91 ITD 398)(Asr.) (TM)  The CIT(A) can also rectify its order under provision of section 154.

30. 30 Jurisdictional Point  The assessee can raise the jurisdictional point at any time even in course of appeal relating to penalty. So if the assessment is invalid and assessee did not file the appeal but assessee disputes penalty emerging from invalid assessment order in appeal, he can raise the jurisdictional point stating that as the assessment order is bad in law the penalty order is also bad in law.

31. 31 Powers of Special Bench  Section 255(3) authorises President to constitute special bench consisting of three or more members  Special Bench can decide only on matter specifically referred to it  Case Law : Central Wines v. ITO (244 ITR 307) (AP)

32. 32 Board’s Instruction for filing Appeals  Board issued instructions laying down monetary limits for filing appeal from time to time and providing exceptions against such limits. The latest instruction in this regard is Instruction No. 5 of 2008 dated 15 th May, 2008  If appeal is filed against such instruction of CBDT, it is liable to be dismissed in limine. The case laws:  CIT v. Dineshchandra S. Shah (219 CTR 247) (Guj)  CIT v. Concord Pharmaceuticals (14 DTR 186) (Guj)  CIT v. Oscar Laboratories Pvt. Ltd. (P & H)

33. 33 Appeal after Unsuccessful Revision Application  Revision is not possible if appeal is filed by assessee in view of sec. 264(4)(c)  No similar provision in section 249 or section 253 so, where assessee had invoked the reversionary power unsuccessfully so that he has exhausted his remedy by way of revision, the assessee can still pursue the appellate authority. (CIT v. D. Lakshmi Narayan Tripathi) (250 ITR 187) (Mad)

34. 34 What is Question of Law?  To be substantial,question of law should  Be debatable  Not previously settled or Binding precedent  Must have material bearing on the decisions of case  Emerge from the substantial findings of fact  Word “substantial”  Having substance, essential, real, of sound worth  Important or  considerable.  (Santosh Hazari v. Pursottam Tiwari) (251 ITR 84) (SC)

35. 35 Filling of Cross Objection Before Tribunal  Assessing officer or assessee, as the case may be, on receipt of notice that an appeal against the order of CIT(A) has been preferred by the other party can file memorandum of cross objection within 30 days of receipt of notice  C/o to be filed -  only if assessee has not filed an appeal although he was aggrieved or has not taken particular ground and now wants to contest  not to be filed by assessee against revenue’s appeal to support his arguments  If appeal is filed by revenue, time limit for filing appeal can be overcome and the filing fee can be avoided

36. 36 Stay Application  In case of appeal before CIT(A) -Approach AO/CIT -CIT(A) -Held by various courts -Still applications are not entertained.  Stay application before Tribunal -Triplicate -Challan of filing fee of Rs. 500 -No form prescribed. -Rule 35A(2) -Tribunal has prescribed the form containing various particulars -Separate application for stay of recovery of demand under separate enactment -Separate petition for different A.Y. -Wipro Ltd. v. ITO 84 TTJ 685  Aggrieved by not granting stay by lower authority. -Letter from commissioner rejecting stay should be filed.  Stay application is pending -Lower authorities are expected not to take coercive measures.

37. 37 Language of the Tribunal  Language shall be English  Parties may file documents drawn up in Hindi if they so desire in Notified benches  Tribunal may permit use of Hindi in its proceedings or may pass orders in Hindi in notified States  Order in Hindi shall be accompanied by an authorised English Translation thereof

38. 38 Thanks To Organisers and Delegates CA. Rasesh Shah