Commissioner of Income-tax (Appeals) [CIT(A)], as the first appellate
authority.
Administratively, the CIT(A)s function under the Chief Commissioner of
Income-tax and the Legislature has empowered the Central Board of Direct
Taxes to assign jurisdiction to the CIT(A)
In fact, the Commissioner of Income Tax is also prevented from
exercising reversionary powers in respect of,
(i) an order that has been made a subject matter of appeal before the
CIT(A) - clause (c) of S. 264(4)
or
(ii) where an appeal against the order lies to the CIT(A) and the time
within which such appeal is to be made has not expired and the assessee
has not revoked his right of appeal - clause (a) to S. 264(4).
On the flip side and rightly so, once the Commissioner of Income-tax
exercises his reversionary powers u/s.264, the assessee cannot file an
appeal considering that he has revoked his right of filing the appeal.
Appealability of orders
The powers of the CIT(A), have to be exercised in respect of the matters
specifically made appealable. S. 246A gives a right of appeal to any
aggrieved assessee on any of the orders expressly specified in that
Section. In respect of other orders, it is not open to the appellate
authority to entertain a plea about the correctness, propriety or
validity of such an order, unless it falls within the ambit of the
phrase 'denial of liability to be assessed to tax'. Such denial may be
whole or partial; however, a plea that denial of liability would include
a contention that the Act does not apply to him, would not be valid.
Apart from the orders specified in S. 246A, a person liable to deduct
tax u/s.195, having paid such tax u/s.200, can file an appeal, if he
"denies his liability to make such deduction".
Hence, whereas in respect of a payment where tax is deductible u/s.195,
the assessee fails to deduct it or having deducted tax, fails to pay it,
and is treated as 'an assessee in default' u/s.201, he can file an
appeal u/s.246A (1), if he "denies his liability to make such
deduction". On the other hand, if tax has been deducted and paid, but
such person denies the liability, he can file an appeal u/s.248.
Filing of appeal with CIT
The appeal has to be filed in the prescribed Form 35 in duplicate being
Memorandum of Appeal and should be accompanied by
i) Grounds of appeal
ii) Statement of facts
iii) The copy of order appealed against
iv) The notice of demand in original
However, as the filing of the documents other than the grounds of appeal
are neither provided in the Act nor in the rules, any omission in filing
them is only an irregularity, which is not fatal.
The Form is to be verified and signed by a person who is otherwise
authorised to sign the return of income (refer S. 140).
Grounds of appeal
(i) The contents thereof should be specific, indicating the issue on
which relief is sought.
(ii) Common or basic ground, such as on violation of principle of
natural justice etc. that is material to the validity of the order
itself, should be taken up first.
(iii) In respect of each issue, there can be one or more grounds;
however, in case they are more than one, they should be taken up
sequentially one after the other.
(iv) Separate and independent ground should be taken for different
issues to facilitate its disposal by the appellate authority in the
manner provided in S. 250(6).
(v) It is desirable and convenient if the issues are incorporated in the
Grounds of appeal in the same chronological order, as these are dealt
with in the order appealed against.
Statement of facts
The statement of facts should also be in the same order as the issues
taken in the grounds. The statement of facts should be in details, but
should not be used to introduce additional evidence.
Time limit
A memorandum of appeal is to be filed within a period of 30 days from :
(i) the date of service of notice of demand, where the order appealed
against relates to an assessment or penalty;
(ii) the date of intimation of the order sought to be appealed against;
(iii) in case of appeal relating to tax deducted at source u/s.195(1) of
the Act, from the date of payment of such tax.
Filing fees
The appellant has to pay an appeal fee and enclose evidence of payment
along with the Memorandum of Appeal. Fee at the following rate is
payable for filing the appeal before Commissioner (Appeals) :
Assessed total income
Rs.1 lakh or less Rs.250/-
Assessed total income more than
Rs.1 lakh but not more than 2 lakh Rs.500/-
Appeals involving total assessed income
More than Rs.2 lakhs Rs.1000/-
Appeals involving any other matter Rs.250/-
Verification
After verifying that the appeal filed is in order in all respects, the
duplicate copy of Form no. 35 is forwarded to the Assessing Officer
along with the prescribed form ITNS 51 to verify from his record,
(i) whether the conditions prescribed in S. 249(4) are complied;
(ii) whether the appeal is filed in time, which is to be verified from
the date of service of demand notice as recorded in Demand and
Collection Register.
The Assessing Officer is also directed to inform whether he would like
to be present at the time of hearing of the appeal.
Condonation
The CIT(A) has the powers to condone the delay in filing the appeal and
admit the appeal if he is satisfied that there exists sufficient cause
for the delay. The discretionary powers vested with the appellate
authority should be exercised judiciously and not arbitrarily. The
Courts have held that the powers should be also exercised liberally,
considering that,
(i) ordinarily, a litigant does not stand to benefit by lodging an
appeal late;
(ii) refusing to condone the delay may result in a matter being thrown
out at the very threshold leading to cause of justice being defeated.
However, the existence of sufficient cause is sine qua non to such a
condonation.
Further, since the admission of a belated appeal is a condition
precedent, the CIT(A) has to adjudicate on the issue of condonation
before dealing with the issues in appeal. Where the request for
condonation is refused, a speaking order that is an order giving reasons
for not cordoning the delay, is to be passed.
Payment of taxes
Before filing the appeal, the appellant must pay the taxes,
(a) where a return has been filed, the tax due on income returned
(including interest thereon [refer S. 140A(1) with Explanation, which
mandates adjustment of interest first]; such payment should ordinarily
be made within the period of limitation
(b) where no return has been filed, an amount equal to advance tax
payable. As S. 249(4) starts with 'No appeal under this chapter shall be
admitted', this condition will need to be fulfilled for appeals against
both, the assessment and the penalty.
While, in the first circumstance, the CIT(A) has no power to dispense
with the condition prescribed, he may do so in the second one on an
application made by the appellant. However, the CIT will have to record
that there exists good and sufficient reasons for granting waiver. Thus,
the requirement u/s.249(4) does not merely regulate the assessee's
pre-existing right of appeal, but in effect whittles it down.
Notice of hearing
Unless the appeal is to be dismissed or rejected for any vital defect,
the CIT (Appeals) shall fix a date and place of hearing. A notice for
hearing, as prescribed u/s.282, is issued to the parties i.e., the
appellant at the address of communication mentioned in Form No. 35 and
also the Assessing Officer. Any subsequent change in the address should
be intimated to the CIT(A) office. In case of non-attendance, the CIT(A)
may after satisfying himself that the notice has been served on the
appellant, decide the appeal ex parte.
Hence, if the address of communication given is that of an authorised
representative, who is no longer representing the assessee, he should
forward the same to the appellant at his known address and should also
intimate the appellate authority accordingly.
The appellant can make a request for early hearing, which may be granted
by the CIT(A), only if he is satisfied that the appellant is not
delaying the hearing of appeal.
Hearing with CIT
The appellant can represent either in person or by a duly authorised
representative, who should carry proper authorisation with him. The
Assessing Officer can also be represented by an authorised
representative.
The provisions of the Act empower the CIT(A) to adjourn the hearing of
appeal from time to time, either suo moto or on an application made by
either of the parties, for just or sufficient reasons. The CIT(A) can
make inquiry himself or if he deems it necessary, direct the Assessing
Officer to do the needful and report. In other words, the powers of the
CIT(A) are plenary. The scope of the powers is co-terminus with that of
the Assessing Officer. Hence, while representing a case, the appellant's
representative cannot take a plea of restricting the review of decision
of the Assessing Officer, solely on the basis of material and reasons
that were placed before the Assessing Officer.
The following situations may arise in the course of appeal proceedings:
Filing of additional grounds
If the appellant wishes to file additional ground(s) of appeal, he has
to follow the procedure regarding filing the same in duplicate,
submitting statement of facts, verification, etc.
S. 250(5) empowers the CIT(A) to admit such additional ground(s), at his
discretion which has to be exercised judiciously, provided he is
satisfied that omission to include the issue in the original appeal was
not willful or unreasonable or that such ground could not have been
raised earlier for good reasons [Jute Corporation of India Ltd. v. CIT,
187 CIT 688 (SC)]. Further, the primary facts relating to the issue
should be available on record; if the relevant facts are not available
on record, the issue cannot be taken in the form of additional ground
[refer National Thermal Power Co. Ltd. v. CIT, 229 ITR 353(SC)].
On receipt of the additional ground(s), before admitting them,
principles of natural justice would require that the CIT(A) forward a
copy thereof to the Assessing officer for his comments and deal with the
objections, if any raised by the AO. In the normal circumstances, there
is no difficulty in getting the grounds admitted; however, it cannot be
taken by the appellant as an inherent right.
Filing of paper book
At the time of hearing of the appeal, oral arguments and submissions
should be supplemented by written submission covering all grounds,
unless the assessee desires to rely solely on the submissions on
statement of facts filed. Oral submissions in the form of oral argument
without making a written submission should be avoided in view of the
fact that the jurisdiction of CIT(A) is not that of a Court of appeal.
Along with oral submissions, if the appellant considers necessary, the
appellant can file a paper book, comprising of correspondence and
documents placed before the Assessing Officer and the gist of judicial
decisions (preferably head notes from the journals where these are
reported) in support of his contention and also distinguishing those
relied on by the AO. Of course, the appellant can make alternative
submissions before the CIT(A) in respect of the issues before him.
In view of the plenary powers granted to CIT(A), he may call upon the
appellant to submit more documents. Similarly, he may ask for
clarifications and submission on the material gathered during the
enquiry. While the appellant can intimate the CIT(A) that he has nothing
further to submit in that direction, if it is so, he cannot refuse to
part with the information/document in his possession in this respect
merely on the ground that such information/documents were not called for
by the Assessing Officer and not considered by him.
Filing of additional evidence
As far as possible, the issues before the CIT(A) are to be decided on
the basis of material placed before the Assessing Officer. However, to
ensure fairness and considering that the purpose of the assessment
proceedings is to correctly assess the tax liability of an assessee in
accordance with the law, the CIT(A) has been given powers to admit
'additional evidence' in certain circumstances. The receipt of
additional evidence by the first appellate authority cannot be equated
with the receipt of additional evidence as contemplated in Order No.
XLI, Rule 27 of the Code of Civil Procedure. Thus, the powers of the
CIT(A) in respect of admitting additional evidence are much wider than
the powers of a Court of appeal.
The additional evidence envisaged in Rule 46A(1) can be admitted,
subject to fulfillment of the conditions laid down therein and the onus
is on the appellant to prove that such circumstances existed. The mere
fact that the evidence sought to be produced is vital/important cannot
be sufficient cause to allow its admission at the appellate stage. The
additional evidence can be admitted by the CIT(A) after recording the
reasons in writing and giving an opportunity to the AO to examine the
document or examine the witness produced or produce similar evidence in
rebuttal of the additional evidence. Where such an opportunity is not
granted to the AO, it amounts to violation of the provisions of the
rule.
Also, the provisions of Rule 46A can be invoked only when the appellant
wants to produce fresh material before the CIT(A); it would not apply in
a case where further material is called for by the CIT(A).
Powers of remand
With effect from 1-6-2001, the CIT(A) no longer has the powers to set
aside an assessment order. However, in view of the powers of getting
enquiry made by the Assessing Officer, he has the powers of remanding
any issue arising in appeal to the Assessing Officer, directing him to
examine the issue again with reference to the material submitted in the
course of appeal.
The power to call for a remand report in tax cases is not circumscribed.
In terms of the Code of Civil Procedure, power of remand is ancillary to
the main power given to the appellate authority and has to be exercised
in the aid of and not in excess of it. The general principles of remand
discussed in CPC are that the powers of remand should be used sparingly
and ordinarily only in those cases where the appellate authority, after
the examination of the material placed on record by way of evidence,
takes the view that it is not possible for him to make a just order
without the assistance of further evidence or without the assistance of
a clearer finding from the authority who has passed the order under
appeal.
However, if the CIT(A) is of the view that circumstances to call for a
remand do not exist, such decision being an interlocutory order, the
appellant has no avenue for seeking remedy against it. On the principles
of natural justice, the appellant has a right of getting an opportunity
to rebut any findings by the Assessing Officer in the remand report,
which are prejudicial to its case.
Apart from the need for a remand where additional evidence is brought on
record, other instances where the order can be remanded are :
where the interest of justice so requires
where the submission made before the Assessing Officer are defective
and the appellant pleads that it be given an opportunity to correct it
when the Assessing Officer has omitted to record a specific finding on a
material issue;
When the findings of the Assessing Officer are not sufficiently specific
or lack precision.
Power of stay of demand
Although the Act is silent on CIT(A)'s power to grant stay from the
recovery of demand, the Courts in a number of decisions have held that
such power does exist in view of the inherent powers available and in
the absence of any exclusionary provision in that direction. However,
such powers can be exercised only if it is considered not only necessary
but expedient for effective adjudication of appeal.
It has also been held that mere filing or pendency of an appeal does not
constitute an automatic stay of recovery of tax under dispute. The power
of stay of demand ought not to be exercised by the appellate authority
in a routine manner or as a matter of course, having regard to the
object of the taxation laws. The Courts have also suggested that a
specific provision regarding stay of demand should be incorporated in
the Act by the Legislature, rather than leaving it to be decided by way
of implication.
Passing of appellate order
At the conclusion of the hearing, the CIT(A) has to pass an order in
writing giving reasons for his decision on the issues in appeal [S.
250(7)]. This is to ensure that the party in appeal knows the reasons
for deciding in his, favour or against him enabling the appellant to
decide on the further course of action in case the decision is against
him. A copy of the order has to be communicated to the AO and also to
the CIT [refer S. 250(7)].
In respect of passing of the appellate order, the Act prescribes an
advisory time limit, for appeals instituted on or after 1-10-1998,
[refer S. 250(6A) w.e.f. 1-6-1999] to decide the appeal, as far as
possible, within one year from the end of the financial year in which
the appeal is filed.
Powers of CIT (Appeals)
While disposing of an appeal, the CIT(A) is vested with the powers of :
(i) in the case of assessment order :
(a) to confirm
(b) to reduce
(c) to enhance
(d) to annul the order that is passed without jurisdiction and the
defect is not curable;
(ii) in the case of order of penalty :
(a) to confirm
(b) to cancel
(c) to vary so as to either enhance or reduce it
(iii) in respect of any other order, as he may consider or deem fit.
Powers of enhancement
The powers conferred upon the first appellate authority by the
Income-tax Act are much wider than the powers of an ordinary Court of
appeal. The first appellate authority is not an ordinary Court of
appeal, considering that only one party to the original decision taken
is entitled to appeal. It is on account of this peculiar position that
the statute has conferred wide powers to the first appellate authority.
Once the assessment comes before the CIT(A), his jurisdiction is not
restricted to examining only those issues that have been taken up by the
appellant in appeal, but ranges over the whole assessment and it is open
to him to correct the assessment order not only in regard to the matters
taken in appeal, but also with regard to maters which were considered by
the Assessing Officer in the assessment proceedings. He can examine
every process which results in ultimate computation and assessment of
income, even if his decision leads to enhancement of income.
Where the CIT(A) proposes to enhance the income or penalty, he has to
issue a show-cause notice giving the appellant a reason-able opportunity
to explain his case. In view of the wide powers of the CIT(A),
proceeding before the CIT(A) should be conducted after adequate
preparation and care.
Further, as far as possible, all legal issues should be taken before the
CIT (Appeals), as at times, the Tribunal takes the view that the issue
had not been agitated before the CIT(A) and does not arise out of his
order.
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