Transcript Assessment

Appellate Proceedings
An Overview
Presenter:
Rachna Gurnani
[email protected]
Convener:
Yogesh Mittal
[email protected]
Insight
Common Concerns:
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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…..
Compliance Process
Return of Income (original
or revised)
Summary
Assessment
Intimation
u/s.143(1)
Notice u/s.142(1)
r.w.s.143(2)
Scrutiny
Assessment
u/s.143(3)
Rectification
Petition u/s 154
Appeal before
Courts
Settlement
Commission
(Circumstantial)
Settlement
Commission
(Circumstantial)
Order giving effect of
ITAT’s order by A.O.
Grievance :
Revision / Appeal
Hearing & Disposal
Payment of
assessed tax /
Stay Petition
ITAT Appeal
Order
giving effect
CIT(A)’s order by A.O.
of
CIT(A)’s Order
Hearing & disposal
of appeal
Hearing
u/s.250
New Window: Advance Ruling / Advance Price Agreements
CIT(A) Appeal
Assessment
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Self assessment of own tax by the tax payer & its onward verification by Tax Authorities
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Assessment : the process of verification & arrival of final income & tax figure by Revenue
Legal Machinery:
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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
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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
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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…
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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
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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
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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
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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
Aggrieved assessee to bring the contentious matters before Appropriate Authority
for hearing & remedy
A.O’s Order
Revision
Application
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Once invoked, has to
be in favor of appellant
Appellate
Proceedings
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Can also be filed by
Tax authorities
CIT(A) can suo moto
initiate
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Writ Petition
in Courts
Appeal before CIT(A)
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Appeal before Tribunal
- Assessee or Revenue
Appeal to High Court
Supreme Court
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Has to waive the right
of appellate remedy
Rectification Petition to A.O.: for apparent mistakes
Filed before High Court
exercising Article 14 of
Constitution
Redundant due to
other measures
Revision Application
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Preferred before Commissioner of Income Tax u/s 264 by the Assessee
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Subject to the acceptance of the concerned CIT
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Revision of Orders by any authority subordinate to concerned Commissioner
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CIT can suo moto revise any of the orders
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Has to be discharged in favor of Assessee
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Once filed, no other appellate rights can be exercised
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Usually preferred for less litigious matters
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Should not be argumentative
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Application has to be filed within 1 year of Original Order
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CIT can revise the Order within 1 year of filing such petition
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Merely an application, hence no compulsory representation by Counsel etc.
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CIT can call for additional information & discharge the matter appropriately
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Filing fees for such application is Rs. 500
The Other Route : Appeal before CIT(A)
Appeal before Commissioner
Appealable Orders
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Intimation / Order made by DCIT u/s 120
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Assessment Order u/s 143(3) or 144
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Reassessment Order u/s 147
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Rectification Order u/s 154
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Assessment / Reassessment Order u/s 153A
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Assessment Order in respect of fringe benefits u/s 115WE(3) or 115WF
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Order made u/s 201(1) & section 201(1A) levying interest for delay in remitting TDS or
failure to deduct TDS
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Block Assessment Order in case of search or requisition u/s 158BC
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Order imposing penalty u/s 221 for default in payment of tax
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Order imposing penalty under Chapter XXI (Section 270 to 275)
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Order of assessment made by AO under section 158BC
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Order imposing penalty u/s 158BFA(2) for concealment of income in case of block
assessment
Preparing for the Appeal
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Appeal has to be filed in 2 sets before CIT(A) of own range
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Assessed tax must be paid before filing appeal – Stay petition can be sought
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Grounds of appeal should be precise & non-argumentative
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Statement of facts can be concise keeping the bare minimum content. While hearing, a
detailed paper book can be filed
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Additional grounds of appeal can be filed if omission not willful or unreasonable
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Use of clear & easy language should be preferred while drafting
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Orderly arrangement of case laws & notifications relied upon
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Appeal has to be filed within 30 days of the date of service of Order / intimation – delay
condoned only for sufficient cause
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Appeal can be represented by assessee or his designated attorney
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Must be signed by the authorized signatory specified u/s 140
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Filing fees of Rs. 1,000 /- for assessed income exceeding Rs. 2 Lakhs
Documentation
Sr. No.
Document
Description
1.
Form No. 35
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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
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3.
Statement of Facts
- Actual
4.
Original Notice of
Demand
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5.
Certified true copy of
impugned order
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6.
Letter of authority for
representative
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7.
Original Counterfoil
of filing fees
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Contentions of assessee in respect of various points in
the Order appealed against
facts pertaining to every ground of appeal
It reveal the sum payable / refundable in consequence
with the A.O.’s Order
Order against which the appeal is preferred
- Court fee stamp of Rs. 2/- on last page of the order
Serve as authority to represent the case before CIT(A)
- Must be on Stamp Paper of Rs. 100/Proof of payment of the filing fees in Challan ITNS-280
Hearing & Disposal
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CIT(A) endeavor to hear & dispose off the appeal within 1 year from financial year
end of filing the appeal
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Can have any number of hearings before final order
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Can ask for additional documents, details as deems fit
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Additional evidence can be placed at the time of hearing if the assessee did not
have opportunity to present before lower authorities
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Adjournment for hearing can be plead in extreme situations
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CIT(A) has wide & plenary powers, wider than those of Tribunal
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CIT(A) may confirm, reduce, enhance or annul the A.O’s order
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Has to pass a speaking order
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Verification of CIT(A) Order & Order Giving Effect (‘OGL’) to CIT(A)’s order
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After the order is obtained, further course of action decided
For any grievance : Appeal before ITAT
Appeal before I-tax Tribunal
Preparing for Appeal
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Appealable Orders – Order of CIT(A), Order of Chief Commissioner u/s 272A
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Compliance with CIT(A)’s order before ITAT appeal is filed
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Appeal to be preferred in 60 days of the service of order appealed against – delay condoned
only for reasonable cause
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Appeal set has to be filed in 3 copies
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Must be signed by the authorized signatory mentioned u/s 140
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Representation by Assessee, Counsel or a Chartered Accountant
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Submission of detailed paper book at time of hearing
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Additional grounds can be admitted if omission is not willful or unreasonable
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Segregation of legal notifications & factual details pertaining to case
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Additional submissions can be placed at every hearing
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Material produced before earlier authorities also presented
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Memorandum of cross objections filed against Tax Department’s Appeal
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Filing fees : for income exceeding Rs. 2 lakhs, least of 1% or Rs. 10,000
ITAT Appeal Set
Sr. No.
Document
Description
1.
Form No. 36
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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
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3.
Certified true copy of
impugned order
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4.
Appeal set filed
before CIT(A)
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5.
Original Counterfoil
of filing fees
Contentions of assessee
The base of filing the appeal
Order against which the appeal is preferred
- First & last page of order to be certified
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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
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Proof of payment of the filing fees in Challan ITNS-280
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Court Room – the real test
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ITAT: highest fact finding body
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With a judicial & accountant member, special
bench constituted in situations
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Endeavor to hear & dispose off appeals in 4 years
of filing the appeal
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If stay is granted over proceedings, has to
conclude in 180 days
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Hearing can be adjourned in extreme situations
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Tax Department represented by “Departmental
Representative”
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No informal arguments can be placed
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Submissions in summary format should be
preferred
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Appellant to observe the code of formal dressing &
conduct
ITAT – Miscellaneous matters
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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
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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
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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
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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
Appeal Petition before Courts
Courts – Original Judiciary
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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
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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
Finances at Stake
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For every disallowance – additional tax burden 30% on domestic & 40% on foreign
assessees
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Penalty proceedings initiated under Chapter XXI poses additional burden
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Assessed tax becomes payable before the appeal is preferred – bear the burden
before remedy
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For any delay in payment of assessed tax – penal interest charged u/s 220 after 30
days of notice
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Till the time matter is heard & concluded, money remains blocked up – stay petition
can be preferred stating financial problems
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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
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On favorable conclusion of appeal – interest u/s 244A at 0.5% p.m. payable by the
Income tax department
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No tax shield available to payer – Tax is non-deductible item
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Opportunity loss of earnings for every payment made to the tax office
Worth the Risk??..
Way Forward
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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”
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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
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Advance Pricing Agreements:
- Still not operative
- To obtain revenue’s stand in respect of “Transfer Pricing Agreements”
- Obtained before the agreement is entered into
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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
THANK YOU.