An Overview

Appellate Proceedings

Presenter:

Rachna Gurnani

Rachnagurnani@gmail.comConvener:

Yogesh Mittal

Yogesh_Mittal2@yahoo.co.in

Insight

Common Concerns:

How does the Tax Return gets processed post submission

What powers do Tax Authorities have for their conduct

What are the remedies available for me – the “Aggrieved Assessee”

How to initiate the remedial action in the sphere of legal machinery

How to prepare for hearing & disposal of appeals before Judiciary

The Barrister Explains…..

Return of Income (original or revised)

Intimation u/s.143(1)

CIT(A)’s Order

Notice u/s.142(1) r.w.s.143(2)

Scrutiny Assessment u/s.143(3)

CIT(A) AppealHearing u/s.250

Order giving effect of CIT(A)’s order by A.O.

ITAT Appeal

Hearing & Disposal

Order giving effect of ITAT’s order by A.O.

Compliance Process

Summary Assessment

Rectification Petition u/s 154

Grievance : Revision / Appeal

Hearing & disposal of appeal

Settlement Commission (Circumstantial)

Appeal before Courts

Payment of assessed tax / Stay Petition

New Window: Advance Ruling / Advance Price Agreements

Settlement Commission (Circumstantial)

Assessment

Self assessment of own tax by the tax payer & its onward verification by Tax Authorities

Assessment : the process of verification & arrival of final income & tax figure by Revenue

Legal Machinery:

Summary Assessment u/s 143(1):

- On the basis of Return of Income filed

- Completion of assessment proceedings without calling the assessee

- Intimation is served upon completion of assessment

- Time Limit : 1 year from the Financial Year end in which Return is submitted, deemed approval if not completed

Scrutiny Assessment u/s 143(3):

- After verification of additional information & evidence called from assessee in enquiry before assessment

- Notice calling for additional information served u/s 143(2) within 12 months of furnishing Return

- Right of tax officials to call information of past 3 years invoking section 142

- Completion of Assessment within 21 months from the end of relevant Assessment Year

Best Judgment Assessment u/s 144:

- Wherein assessee fails to furnish suffice information to Tax Officials

- Assessment completion based on agreed parameters

- Should be completed within 21 months from the end of relevant A.Y.

- Cannot be based on fictitious or prejudiced parameters

- Opportunity of being heard must be provided to assessee

Assessment…

Assessment while Search or Requisition u/s 153A:

- In a situation wherein search is initiated u/s 132 or books, documents, assets etc. called u/s 132A

- Information up to past 6 years can be called for

- Return of Income in respect of all such A.Ys to be resubmitted

- Should be completed in 21 months of the year end of search & requisition

- For assessment carried under this section, tax shall be chargeable at the rates applicable to such year

Assessment of Income of any other person in case of Search or Requisition u/s 153C:

- Based on A.O’s belief of interconnections between 2 or more persons

- Completed within 21 Months from end of relevant A.Y.

- Upon the seized accounts or documents are handed over, assessment to be completed in its 9 months

- Computation mechanism as provided u/s 153A to be followed for the purpose

Reassessment u/s 147:

- Once again assessment of income that allegedly has escaped assessment

- Tax officials can initiate proceedings only in respect of past 4 years

- 6 years if the income escaping assessment exceeds Rs. 1 Lakh

- To be completed in 9 months from the financial year end of serving notice

Assessment Order:

- Passed as the final outcome of proceedings initiated under respective section

- Favorable Order : Acceptance of Assessee’s contentions

- Unfavorable Order: can disallow expenses/ claim for losses, make addition to the declared income

- Additional Interest, penal proceedings can be initiated

- Notice of Demand served u/s 156 in case of additional tax liability

Remedial Action

Rectification Petition to A.O.: for apparent mistakes

Appellate Proceedings

Revision Application

Appeal before CIT(A)

Appeal before Tribunal - Assessee or Revenue

Appeal to High Court / Supreme Court

Writ Petition in Courts

Once invoked, has to be in favor of appellant

Can also be filed by Tax authorities

CIT(A) can suo moto initiate

Has to waive the right of appellate remedy

Filed before High Court exercising Article 14 of Constitution

Redundant due to other measures

Aggrieved assessee to bring the contentious matters before Appropriate Authority for hearing & remedy

A.O’s Order

Revision Application

Preferred before Commissioner of Income Tax u/s 264 by the Assessee

Subject to the acceptance of the concerned CIT

Revision of Orders by any authority subordinate to concerned Commissioner

CIT can suo moto revise any of the orders

Has to be discharged in favor of Assessee

Once filed, no other appellate rights can be exercised

Usually preferred for less litigious matters

Should not be argumentative

Application has to be filed within 1 year of Original Order

CIT can revise the Order within 1 year of filing such petition

Merely an application, hence no compulsory representation by Counsel etc.

CIT can call for additional information & discharge the matter appropriately

Filing fees for such application is Rs. 500

The Other Route : Appeal before CIT(A)

Appeal before Commissioner

Appealable Orders

Intimation / Order made by DCIT u/s 120

Assessment Order u/s 143(3) or 144

Reassessment Order u/s 147

Rectification Order u/s 154

Assessment / Reassessment Order u/s 153A

Assessment Order in respect of fringe benefits u/s 115WE(3) or 115WF

Order made u/s 201(1) & section 201(1A) levying interest for delay in remitting TDS

or failure to deduct TDS

Block Assessment Order in case of search or requisition u/s 158BC

Order imposing penalty u/s 221 for default in payment of tax

Order imposing penalty under Chapter XXI (Section 270 to 275)

Order of assessment made by AO under section 158BC

Order imposing penalty u/s 158BFA(2) for concealment of income in case of block

assessment

Appeal has to be filed in 2 sets before CIT(A) of own range

Assessed tax must be paid before filing appeal – Stay petition can be sought

Grounds of appeal should be precise & non-argumentative

Statement of facts can be concise keeping the bare minimum content. While hearing, a

detailed paper book can be filed

Additional grounds of appeal can be filed if omission not willful or unreasonable

Use of clear & easy language should be preferred while drafting

Orderly arrangement of case laws & notifications relied upon

Appeal has to be filed within 30 days of the date of service of Order / intimation – delay

condoned only for sufficient cause

Appeal can be represented by assessee or his designated attorney

Must be signed by the authorized signatory specified u/s 140

Filing fees of Rs. 1,000 /- for assessed income exceeding Rs. 2 Lakhs

Preparing for the Appeal

Documentation

Sr. No. Document Description

1. Form No. 35 - Form prescribed for making the appeal- Basic information about the appeal matters is served- Court fee stamp of Rs. 2/- should be affixed

2. Grounds of Appeal - Contentions of assessee in respect of various points in the Order appealed against

3. Statement of Facts - Actual facts pertaining to every ground of appeal

4. Original Notice of Demand

- It reveal the sum payable / refundable in consequence with the A.O.’s Order

5. Certified true copy of impugned order

- Order against which the appeal is preferred - Court fee stamp of Rs. 2/- on last page of the order

6. Letter of authority for representative

- Serve as authority to represent the case before CIT(A)- Must be on Stamp Paper of Rs. 100/-

7. Original Counterfoil of filing fees

- Proof of payment of the filing fees in Challan ITNS-280

CIT(A) endeavor to hear & dispose off the appeal within 1 year from financial year

end of filing the appeal

Can have any number of hearings before final order

Can ask for additional documents, details as deems fit

Additional evidence can be placed at the time of hearing if the assessee did not

have opportunity to present before lower authorities

Adjournment for hearing can be plead in extreme situations

CIT(A) has wide & plenary powers, wider than those of Tribunal

CIT(A) may confirm, reduce, enhance or annul the A.O’s order

Has to pass a speaking order

Verification of CIT(A) Order & Order Giving Effect (‘OGL’) to CIT(A)’s order

After the order is obtained, further course of action decided

Hearing & Disposal

For any grievance : Appeal before ITAT

Appeal before I-tax Tribunal

Appealable Orders – Order of CIT(A), Order of Chief Commissioner u/s 272A

Compliance with CIT(A)’s order before ITAT appeal is filed

Appeal to be preferred in 60 days of the service of order appealed against – delay condoned

only for reasonable cause

Appeal set has to be filed in 3 copies

Must be signed by the authorized signatory mentioned u/s 140

Representation by Assessee, Counsel or a Chartered Accountant

Submission of detailed paper book at time of hearing

Additional grounds can be admitted if omission is not willful or unreasonable

Segregation of legal notifications & factual details pertaining to case

Additional submissions can be placed at every hearing

Material produced before earlier authorities also presented

Memorandum of cross objections filed against Tax Department’s Appeal

Filing fees : for income exceeding Rs. 2 lakhs, least of 1% or Rs. 10,000

Preparing for Appeal

ITAT Appeal Set

Sr. No. Document Description

1. Form No. 36 - Form prescribed to prefer the appeal- Should be verified in the prescribed manner - A list of pending appellate matters also given

2. Grounds of Appeal - Contentions of assessee - The base of filing the appeal

3. Certified true copy of impugned order

- Order against which the appeal is preferred - First & last page of order to be certified

4. Appeal set filed before CIT(A)

- Entire set of appeal filed with CIT(A) to be produced- Original Notice of Demand & payment challan of CIT(A)

fees not to be given - Each page to be certified

5. Original Counterfoil of filing fees

- Proof of payment of the filing fees in Challan ITNS-280

ITAT: highest fact finding body

With a judicial & accountant member, special

bench constituted in situations

Endeavor to hear & dispose off appeals in 4 years

of filing the appeal

If stay is granted over proceedings, has to

conclude in 180 days

Hearing can be adjourned in extreme situations

Tax Department represented by “Departmental

Representative”

No informal arguments can be placed

Submissions in summary format should be

preferred

Appellant to observe the code of formal dressing &

conduct

Court Room – the real test

Stay petition:- Plea before authorities seeking relief against undue hardship

- application to be filed in duplicate before AO & TRO

- basic details: short facts, reasons for seeking stay, amount of demand, application etc. to be furnished

Rectification petition u/s 254(2):- for rectification of any mistake apparent from records of CIT(A)’s order or ITAT’s order

- application can be made by the assessee or A.O.

- should be within 4 years from the date of order

Consolidation of Appeals:- hearing of 2 or more different appeals of the same assessee at the same time

- for common issues involved in any of the appeals

- can be of different Assessment Years also

Practical Difficulties with proceedings:- long duration involved in hearing & disposal of appeals

- no adjournment possible for covered matters

- excess formalities to be complied with

- voluminous paper books

- open for general public : secrets can be leaked

- unreasonable behavior of members

ITAT – Miscellaneous matters

Appeal Petition before Courts

Appeal before High Court:

- right exercisable u/s 260A

- preferred against ITAT’s order

- only for a case involving a ‘Substantial Question of Law

- should be filed within 120 days of receipt of ITAT’s order

- can also be filed by the Tax Department if revenue effect exceeds 4 lakhs

- rules framed for court proceedings & conduct has to be observed

Appeal before Supreme Court:

- right exercisable u/s 261

- against a matter decided upon by High Court

- High Court to certify the case as fit for appeal before Supreme Court

- should be filed within 90 days of service of High Court Judgment

- decision : Law of Land

- decisions are binding on non-appellants as well

- separate code of conduct for appeal & representation matters

Courts – Original Judiciary

For every disallowance – additional tax burden 30% on domestic & 40% on foreign

assessees

Penalty proceedings initiated under Chapter XXI poses additional burden

Assessed tax becomes payable before the appeal is preferred – bear the burden

before remedy

For any delay in payment of assessed tax – penal interest charged u/s 220 after 30

days of notice

Till the time matter is heard & concluded, money remains blocked up – stay petition

can be preferred stating financial problems

A.O. can keep the demand in abeyance till the disposal of appeal before CIT(A) u/s

220(6) – Circular no. 530 dated 06.03.1989

On favorable conclusion of appeal – interest u/s 244A at 0.5% p.m. payable by the

Income tax department

No tax shield available to payer – Tax is non-deductible item

Opportunity loss of earnings for every payment made to the tax office

Finances at Stake

Worth the Risk??..

National Tax Tribunal:- A new judicial body in the making to replace High Courts – still in abeyance

- All governing provisions framed under “National Tax Tribunal Act, 2005”

Advance rulings: - A judicial body already in operation

- Tax authority’s views on particular matters can be sought before the transaction is entered into

- Only in respect of transactions with foreign parties

- An effective way to examine the revenue’s stand before initiating the transaction

Advance Pricing Agreements: - Still not operative

- To obtain revenue’s stand in respect of “Transfer Pricing Agreements”

- Obtained before the agreement is entered into

Settlement Commission: - A judicial body to hear & decide the matters pending before other authorities

- For cases involving a mutual settlement by assessee & the tax department

- An appreciated practical solution for litigious matters

Way Forward

THANK YOU.