CIT(A) and ITAT - PuneICAI - Pune Branch Of WIRCpuneicai.org/wp-content/uploads/Appeals-CITA_ITAT-4-June...Rameshchandra & Co v CIT (1987) 168 ITR 375(Bom) – It says appeal not maintainable

APPELLATE PROCEEDINGS - CIT(A) AND TRIBUNAL

CA Rajendra Agiwal

Pune Branch of WIRC of ICAI

Page 2

► Background

► Appeals to CIT(A)

► Appeals to Tribunal

CIT(A) and Tribunal

Page 3

Background

CIT(A) and Tribunal

Page 4

Dispute Resolution Process

Assessing

Officer

Commissioner

(Appeals)/DRP

Appellate

Tribunal High Court

Supreme

Court

►No specific time limit

for Appeal hearings

►Generally, order

passed within1-2

years from filing of

appeal

►Disputed tax would

need to be

immediately paid

unless stay is

obtained or

objections filed

before DRP

► Final fact-finding

Authority

►No specific time limit

►Generally order

passed within 1-3

years from filing of

appeal

►Revenue can also go

in appeal if

Commissioner

decides in favor of

Tax payer

► Only substantial question of law

can be referred to the High Court

► Special leave Petition can be filed

against the order of the High Court

on substantial question of law.

CIT(A) and Tribunal

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Who can file an appeal?

An Appeal can be filed by any assessee (or any Deductor w.e.f. 1.7.2012)

aggrieved by an order or a representative assessee as defined under Section

160.

►In case of Firm, it can filed by any partner of a firm

►In case of Association of Persons (“AOP”), by any member of AOP.

►In case of a deceased person, by any legal Heir (Section 159(1))

►Managing Director or any Director in case of Company

►In case of a HUF, by a Karta.

Right of appeal is not a procedural right it is substantive right. It is vested right in Litigant.

CIT(A) and Tribunal

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General Overview of Appealable Orders before CIT (A) and ITAT…

Appeals before CIT (Appeals)

(Refer: Section 246A of the Act)

Quantum assessment order u/s 143(3)

Re-assessment order passed u/s 147

Order imposing penalty u/s 221, 271C, 271(1)(c), 271B, 271D, 271E, etc

Rectification Order u/s 154/155

Search assessment order u/s 153A

Appeals before ITAT

(Refer: Section 253 of the Act)

Order by Commissioner u/s 263 revising Assessing Officer’s order

All Orders passed by CIT (Appeals) whether related to assessment or penalty

Order passed by Commissioners u/s 12AA or u/s 80G

Penalty order passed by Commissioners u/s 271 or section 272A

Order passed by Commissioner u/s 154.

Order passed by DRP

CIT(A) and Tribunal

Page 7 CIT(A) and Tribunal

…General Overview of Appealable Orders before CIT (A) and ITAT

► Ranking of the officers who passed the order is worth noticing. If any officer who is of rank of Commissioner, the appeal needs to be filed with the Tribunal.

►Decision of Lucknow Bench in the case of Raibareilly District Co-operative Bank Ltd v. DCIT (ITA No. 699/LKW/2013) may be referred.


Appeal to CIT(Appeals)

► Time limit for filing appeals

► Payment of appeal fees

► Documents to be attached

► Non-Appealable orders

► Powers, limitations and duties of

CIT(A)

► Additional points

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Appeals to CIT(Appeals) Time limit for filing appeals

► Appeal to CIT(A) within 30 days* of –

►Date of payment of tax, where appeal is in respect of Tax Deduction at Source under section 195(1)

►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

► Time-limit can be extended by CIT(A) –

►If sufficient cause proven – section 249(3) of the Act

►Condonation of delay application to be filed alongwith appeal

► How to count 30 days time limit?

►Whether these days are to be included or excluded:

►Day of receipt of notice of demand alongwith 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)

CIT(A) and Tribunal

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

Appeals to CIT(Appeals) Payment of Appeal fees

Sr. No Income determined by AO Appeal Fee

1. Less than Rs 1,00,000/- Rs 250

2. More than Rs 1,00,000/- but less than Rs 2,00,000/- Rs 500

3. More than Rs 2,00,000/- Rs 1000

CIT(A) and Tribunal

► Many order which are appealable do not pertain to “income determined by AO”.

►Like orders passed u/s 201, intimation processed u/s 200A are independent of income assessed.

►If appeals are to be filed against these orders filing fees of Rs. 250 would suffice.

►In case of doubt, it is advisable not to take risk and pay higher fees.


► Documents to be filed during Appeal before CIT(A) (in duplicate) (should consist of the documents listed out under section 249 of the Act read with Rule 45 and 46 of the Income Tax Rules, 1962)

►Form – 35 alongwith Statement of Facts and Ground of Appeal

►Copy of order against which appeal is preferred

►Original notice of demand

►Copy of challan for payment of appeal fees and court fee stamp

► Note - All the procedural part of Tribunal will equally apply to CIT(A) procedures as well

Appeals to CIT(Appeals) Documents to be attached

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Appeals to CIT(Appeals) Non-Appealable orders…

Orders which are not specified under section 246-A are non appealable order.

For example:

►Order of refusal to grant stay of demand. ►Order to levy interest under sections 234 A, 234 B, 234C. ►Certificate granted under section 197(1).

►Interest charged under section 220(2).

►Orders passed under section 264 rejecting Revision Petition.

►Orders with agreed additions(with certain exceptions).

►Chatt Mull Aggarwal vs CIT (1979) 116 ITR 694 (P&H) – It says withot filing affidavit & rectification appeal is maintainable.

►Rameshchandra & Co v CIT (1987) 168 ITR 375(Bom) – It says appeal not maintainable unless addition is agreed under mistaken belief of law or facts. It is also to be seen whether assesse filed a rectification for clarification.

CIT(A) and Tribunal


Appeals to CIT(Appeals) …Non-Appealable orders ►Order passed under section 263 of the Act. However, whether order passed by the AO in pursuance of order u/s 263 passed by CIT can be appealed to CIT(A)? In this regard, following decisions are worthwhile to note:

►Azhimala Beach Resorts Private Limited. vs. CIT (2010) 325 ITR 419 (Ker)

►Herdillia Chemicals Ltd. vs. CIT (1996) 221 ITR 194 (Bom)

►Sakar Patal Vibhag Jungle Kamdarr Sahakari Mandli Ltd. vs. ITO (1991) 39 TTJ 54 (Ahd.)


Appeals to CIT(Appeals) Powers, limitations and duties of CIT(A) …

► Limitations on powers

►Does not have power to review. There is only power to rectify the order under section 154

►Commissioner (Appeals) has no power to set aside an order and refer the case back to AO for fresh adjudication. (w.e.f. 01.06.2001)

►Commissioner (Appeals) cannot award cost to the parties

► Duties :

►Jurisdiction of CIT(A) is quasi-judicial – required to pass well reasoned and speaking order. From his order nexus between material considered in the facts of the case and conclusion reached by him should be visible

►To dispose within 1 year from the end of the Financial year in which appeal was filed (Directive)

►Must follow decision of jurisdictional Tribunal/ High Court and Supreme Court

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Appeals to CIT(Appeals) …Powers, limitations and duties of CIT(A)

CIT(A) and Tribunal

► Additional powers:

►Power to call for information as provided under section 133.

►To enhance assessment/ penalty.

►CIT v Shapoorji Pallonji Mistry (1962) 44 ITR 862 (SC) – New source of income not mentioned in the return cannot be added by CIT (A).

►Loknath Tolaram V CIT (1986) 161 ITR 82 (Bom) – If CIT(A) wants to enhance on the basis of new source of income it is necessary for him to exercise powers of remand

►To consider whether the principles of natural justice have been violated by AO [Dr. K. Nedunchezhian v. DCIT, (2005) 274 ITR 37 (Mad)]

►Powers of CIT(A) extremely wide than Tribunal:

►Ugar Sugar Works Limited vs CIT (1983) 141 ITR 326 (Bom)

►CIT v Kanpur Coal Syndicate (1964) 53 ITR 225 (SC)


Appeals to CIT(Appeals) Additional points…

► Whether CIT(A) can allow additional grounds of appeal?

►No express provisions in the Act.

►Can be entertained if it not wilful or unreasonable

►Both revenue and assessee can take additional grounds

►Notice to other party is necessary before admitting such grounds

►No time limit prescribed for raising additional grounds

► Can defects in the Appeal memo be cured? : Yes, in following cases:

►Unsigned or unverified appeal – Harilelas – 16 ITD 356

►Appeal signed or verified by wrong person

►Absence of notice of demand – Rajendrakumar – 213 ITR 715

►Mere defect in appeal cannot be ground of dismissal of appeal without giving opportunity to cure said defect - Malani Trading Co. – 252 ITR 670 (Bom)

► Withdrawal of appeal ►No provision in the Income tax Act - CIT v Rai Bahadur Hardutroy Motilal

Chamarial ( 1967) 66 ITR 443 (SC) ►However, objective of withdrawal may be achieved by not pressing the appeal


Appeals to CIT(Appeals) …Additional points

► Orders can be challenged:

►On Merits of the case.

►On Facts as well as on Law.

►And also can be challenged with reference to jurisdiction of officer who passed the order.

►Technical ground, but proves to be valid remedy at times when the officers assumes wrong jurisdiction.

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CIT(A) and Tribunal

Appeals to Tribunal ► Background

► Pre-conditions of filing a valid appeal

► Appeal by Department

► Procedures in Tribunal proceedings

► Powers of Tribunal and its limitations

► Select Issues

► Important terms very frequently used

in ITAT proceedings


Background ...

►Constituted under the Ministry of Law, Justice and Company Affairs

►Tribunal - highest fact finding body (under aegis of Ministry of Law and Justice)

►Total no. of Benches in India – 55 in 27 Cities divided into 10 Zones

►Jurisdiction of Tribunal ordinarily determined neither by place of business nor by place of residence but by the location of the office of the AO

►Benches of the Tribunal

►Single Member Constitution (SMC) (If assessed income less than 5 lakhs)

►Division Bench (Comprises of Accountant Member and Judicial Member)

►Third Member Bench (TM)

►Special Bench (SB) – consisting of 3 or 5 Members


…Background

►Appeal to be filed within 60 days from receipt of order – Section 253(3)

►Memorandum of cross objections may be filed, where the other party has preferred an appeal to be filed within 30 days from receipt of intimation of filing of appeal (No appeal fees)

►Application under Rule 27 of ITAT Rules, 1963 can also be filed for which there is no time limit. But in any case it has to be filed before adjudication of appeal filed by other party.

►Appeals normally fixed within 2-3 years from date of filing the appeal

►Appeal against orders under section 263, Stay Petitions/ stay granted matters fixed on priority basis


Pre-conditions for filing of valid appeal before ITAT

►The person filing the appeal must be ‘aggrieved’ [section 253(1)]

►The impugned order must be appealable u/s 253 (1)

►The appeal is prepared in Form no. 36, along with grounds of appeal.

►Form no. 36 is duly signed and verified.

►Requisite fee is paid :

Total Income As per AO Filing Fees in Rs.

Less than Rs. 1 lakh 500

Between Rs. 1 - 2 lakhs 1,500

Above Rs. 2 lakhs 1% of assessed income or 10,000

whichever in lower

Any other matter (Eg. Section 263 or TDS Appeal) / Stay application

500

Rectification application 50

►Attention is drawn to the decision of Dr. Ajit Kumar Pandey vs. ITAT 310 ITR 195 (Pat)


Appeal by Department ►Section 253(2) provides that the Commissioner may, if he objects to any order

passed by the Commissioner (Appeals) under section 154 or section 250, direct the Assessing Officer to appeal to the Appellate Tribunal against such order.

►Department is also vested with right to file an appeal against the directions given by Dispute Resolution Panel (‘DRP’) [section 253(2A)]

►Departmental appeals may be filed on merits before Appellate Tribunal, High Courts and Supreme Court keeping in view the following monetary limits of tax effect (Instruction No. 5/2014 dated 10 July 2014):

Diverse view expressed by Courts;

►Smt Vijaya V Kavekar [350 ITR 237](Bom HC) – Instruction is applicable on pending appeals as well

►Smt B Sumangaladevi [352 ITR 143](Karn HC) – Instruction has no retrospective effect and it will be applicable to cases filed on or after 10 July 2014

Forum Revised Limit Old Limit

ITAT 400,000 300,000

HC 10,00,000 10,00,000

SC 25,00,000 25,00,000


Procedure in Tribunal Filing of an Appeal

► Governed by Income-tax (Appellate Tribunal) Rules, 1963

► Date of filing an Appeal [Rule 6]

►Date of presentation of appeal at office of Tribunal

►When through registered post – date on which appeal received by office of Tribunal

►When last day of limitation period –

►Appeal may be presented at residence of Assistant Register

►Appeal may be filed at Mumbai (Head Quarters) – Registration of other jurisdiction as well

► Condonation of delay

►In case of delay in filing of appeal, petition to be filed mentioning the reason for delay and plea to condone the delay

►Affidavit stating the said facts to be executed on stamp paper, according to the State Stamp Act and to be duly notorised.


Procedure in Tribunal Filing of an Appeal

► Documents to be filed during Appeal before ITAT(A) (in triplicate)

►Form No. 36 and Grounds of Appeal

►Receipt for payment of fees

►Certified copy of the impugned order and appeal set filed before CIT(A)

► Revised Form 36 (along with grounds of appeal) to be filed in the following cases [Rule 9A]

►Change of address of the Assessee

►Death of the Assessee in order to bring legal heir on the record.

►In case of department appeal,

►when there is change of address, letter to be filed mentioning new address or

►where in case of death, a letter for being legal heir on record


Procedure in Tribunal Filing of an Appeal ► Additional ground of appeal

►It should be taken by way of separate petition along with request for its admission and should not be taken along with original appeal

► Stay petition

►Direct Stay Application to Tribunal is maintainable, not necessary that lower authorities must be approached first (if appeal pending before Tribunal)

►Honeywell Automation India Ltd vs DCIT (2011) 138 TTJ 373

►File it before Wednesday, for it will be listed for hearing on immediate Friday.

►AO should be appropriately intimated regarding stay application filed with ITAT

►Not possible in respect of appeal pending before CIT(A)

►Single stay petition can be filed for different assessment years in view of favorable judgments (Chirangilal S. Goenka (Mumbai ITAT)). However, practically separate stay petition should be filed for each year.


Procedure in Tribunal Filing of an Appeal ► Miscellaneous Application

►Time limit is 4 years

►Petition stating the mistake occurred in the order of the Tribunal

►Separate MA should be filed for different assessment years.

► Additional evidence - [Rule 29 & 30]

►During the assessment proceedings before the AO, where the opportunity was not given to assessee to furnish or where the evidence was not available at any time during the course of hearing ( i.e. later in point of time)

►It should be filed in covering letter alongwith the plea to admit additional evidence.

► Filing of Cross objections [ Rule 22]

►Cross objections may be filed where the other party has preferred an appeal

►To be filed within 30 days from receipt of the appeal notice to either party.

►No appeal fees

►All the attributes of appeal filing will apply for cross objection


Procedure in Tribunal Hearing stage ► Hearing before Tribunal

►Person authorized under Sec. 288 can represent before ITAT

►Vakalatnama/POA in favour of AR to be filed before hearing [Rule 17]

►Mandated dress code to be followed [Rule 17A]

►Even for adjournment

► Technically, Tribunal is not a court but it has all the trappings of a court.

► Preparation of Paper book [Rule 18]

►Documents to be serially numbered

►Certification of documents

►To be filed at least a week (7 working days) before the hearing by the parties in dispute.


Procedure in Tribunal Hearing stage ► Legal submissions

►Only relevant decisions, which are directly on point to be enclosed

►Index of documents to be submitted. Continuous numbering from earlier paper book.

► Consolidation of appeals

►Where there is similar issue involving in different assessment year(s) under appeal for the same assessee or group company, a letter requesting for consolidation of appeals can be filed, so as to save on the time and cost involved.

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Powers and Limitation on powers of ITAT

CIT(A) and Tribunal

►Powers of ITAT

►Powers of ITAT are similar to powers of an appellate authority under Code of Civil Procedure

►ITAT has powers to admit additional evidence in certain circumstances after recording reasons for admission of such additional evidence, affidavit or examination of witness, etc. (Rule 28-31 of ITAT Rules)

►The Tribunal has powers to allow appellant to raise additional grounds at the hearing of the appeal even without a formal amendment of the memorandum of appeal (Rule11)

►The Tribunal has jurisdiction to allow a new question to be raised for the first time in appeal if such question can be decided on facts already on record

►Power to rectify its order

►Limitation on powers of ITAT

►ITAT cannot enhance the income from what was determined at the time of original assessment proceedings.

►ITAT does not have a power to determine validity of Act

►Cannot review its order.


Select Issues…

► Order giving effect to the Tribunal’s order is directly appealable to Tribunal and not to CIT(A)

►View 1 – Directly appealable to Tribunal

►Paras Rice Mills [18 DTR 149 (P&H HC)]

►Tally Solutions Pvt Ltd [IT(TP)A No.101 /Bang/2013, Bangalore Tribunal, dated 2 Aug 2013]

►View 2 – Appealable to CIT(A), as section 253 does not mention such order as appealable before Tribunal

► Third party can – if as a result of order of CIT(A), liability to tax arises

►Maersk BV 264 CTR 26 (Bom)

►Kikabhai Abdulali Vs. ITAT 32 ITR 762

► Ex parte order can be recalled (Rule 24)

►Make detailed application explaining cause of absence

►Support it by documentary evidence

►Affidavit


…Select Issues Review vs Rectification

► No, the Tribunal do not have power to review its own order. Though the Tribunal has no inherent power of reviewing its order on merits, the Tribunal has incidental or ancillary powers which can be exercised by it. But such power cannot be invoked to rehear a case on merits. - M/S Lachman Dass Bhatia Hingwala (P.) Ltd. vs ACIT , WP(C) 6460/2010 (Delhi High Court) (FB)

Tribunal decided Appeal filed by ‘X’ on merits, however, in terms on certain issues it was

noticed that on the same set of facts, the correct approach would have been to decide

the issue in favour of ‘X’. Is tribunal empowered to review its order ?

► Yes, the Tribunal has the power to rectify its own order. The expression "rectification of mistake from the record" finds place in section 254(2). The purpose behind the enactment of section 254(2) is based on the fundamental principle that no party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal. - Honda Siel Power Products Ltd. v. Commissioner of Income-Tax, [2007] 295 ITR 466 (SC)

In yet another case the Tribunal inadvertently does not decide on legal issue which was

raised and argued during the course of hearing. Is Tribunal empowered to rectify its own

order?


Important Terms very frequently used in ITAT proceedings

► SG – Stay Granted

► EH – Early Hearing

► RM – Recalled Matter

► Consolidation of Appeals/ Cross Appeal

► Infructuous

► Sine-die

► Blocked Matters


Questions?

Thank You