Transcript Assessment
Appellate Proceedings
An Overview
Presenter:
Rachna Gurnani
[email protected]
Convener:
Yogesh Mittal
[email protected]
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…..
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
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
Aggrieved assessee to bring the contentious matters before Appropriate Authority
for hearing & remedy
A.O’s Order
Revision
Application
Once invoked, has to
be in favor of appellant
Appellate
Proceedings
Can also be filed by
Tax authorities
CIT(A) can suo moto
initiate
Writ Petition
in Courts
Appeal before CIT(A)
Appeal before Tribunal
- Assessee or Revenue
Appeal to High Court
Supreme Court
/
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
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
Preparing for the Appeal
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
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
-
3.
Statement of Facts
- Actual
4.
Original Notice of
Demand
-
5.
Certified true copy of
impugned order
-
6.
Letter of authority for
representative
-
7.
Original Counterfoil
of filing fees
-
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
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
For any grievance : Appeal before ITAT
Appeal before I-tax Tribunal
Preparing for Appeal
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
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
-
3.
Certified true copy of
impugned order
-
4.
Appeal set filed
before CIT(A)
-
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
-
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
-
Proof of payment of the filing fees in Challan ITNS-280
-
Court Room – the real test
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
ITAT – Miscellaneous matters
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
Appeal Petition before Courts
Courts – Original Judiciary
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
Finances at Stake
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
Worth the Risk??..
Way Forward
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
THANK YOU.