INCOME TAX SLAB RATES-UNDER NEW SCHEME ONLY-

Income Tax Slabs Under New Tax Regime for FY 2024-25-ASST YEAR 2025-26-

Latest income tax slab (FY 2024-25 in Rs.)

Income tax rate (%)

Up to Rs. 3,00,000

NIL

Rs. 3,00,001 to Rs. 7,00,000

5%(Tax Rebate u/s 87A up to Rs 7 lakh)

Rs. 7,00,001 to Rs. 10,00,00

10%

Rs. 10,00,001 to Rs. 12,00,000

15%

12 LAKHS TO 15 LAKHS-20 PERCENT

15 LAKHS PLUS= 30 PERCENT

FOR SALARIED EMPLOYEES-STD DEDUCTION LIMIT=RS 75000/-.

LONG TERM CAPITAL GAIN ON SALE OF EQUITY SHARES- CHARGABLE TO TAX @ 11.20 PERCENT

SHORT TERM CAPITAL GAIN ON SALES OF EQUITY SHARES= CHARGABLE TO TAX @ 20 PERCENT

Taxation for Non resident Indians.

The Residential status definition has been amended.

If an Indian Citizen or a person of Indian origin stays in India for a period of 120 days or more, or stays abroad for 240 days or more (previously it was 182 days), shall be deemed to be a non resident. This non resident will be taxable in respect of the world income in India -which was previously exempt.

This exemption can be sought provided the foreign country does not levy tax the foreign income of the non resident. Thus the non resident shall have to pay tax on his foreign income in India.

The non resident shall be deemed to be Indian resident for the purpose of the income tax and taxed accordingly as per the Indian income tax rates on his foreign income.

Explanation-

The Union Budget 2020 has proposed changes in the definition of residency of an individual (with reference to tax residency in India) which determines how the person’s income tax liability will be calculated in a financial year. According to the proposal, if an individual has been a resident in atleast four out of last 10 financial years, then the individual will qualify as an ordinarily resident. This is bad news for the taxpayers as they will be required to pay tax on their foreign income and  . report foreign assets in their income tax return (ITR) in India

Currently for a resident individual to be classified as ordinarily resident for income tax purposes in India, the individual has to satisfy two conditions. Budget 2020 has proposed changes in these conditions which determine whether a resident individual is a ‘Not ordinarily resident’ or ‘ordinarily resident’.

"Under the current tax residency rules, after having determined an individual as a resident, there is a secondary test to determine whether the individual qualifies as a not ordinary resident (NOR) or ordinary resident (OR). Individuals who qualify as OR are required to offer their overseas income to tax and disclose their overseas assets in their India tax return. This test of determining whether an individual is an NOR or OR has been modified significantly.

The Budget 2020 has proposed to remove the condition that the individual should be physically present for more than 729 days in last 7 years to become ordinarily resident. Further, second condition has been tweaked. Currently, second condition says that a person becomes resident individual if he/she has been resident individual in atleast 2 out of last 10 years. It has been proposed to hike this two years to four years.

Further Budget 2020 also proposes that if an individual who is a citizen of India or person of Indian origin visits India for 120 days or more in a financial year and had spent more than 365 days in last four years, then such an individual will also become ‘resident’ in India.

EXAMPLE-

The non resident may plan his duration of stay in india in such a manner that he can escape the tax liability from both the countires- the place of residence(current residency) , or the place of his origin country.

For example some NRIS who are PIO(PERSON OF INDIAN ORIGIN) may derive income in Dubai  WHERE THE TAX RATE IS ALMOST “NIL”, or some other tax heavens like “MAURITIUS”, ETC-.

When it is determined that his stay in INDIA has crossed 120 days, -ie he resides in Dubai for a period of more than 240 days, then he is a non resident.

At present the DUBAI income is exempt as it is the world income of the non resident.

But now , as per the new provisions, the entire income in Dubai shall be taxable as per the INDIAN APPLICABLE INCOME TAX RATES.

In short, the non resident will be taxable in respect of his “WORLD INCOME”,  provided it is exempt in that other country.

Regards

C.A.NIKUNJ SHAH

CHARTERED ACCOUNTANT.

Tax rates )-

TDS Rate Chart for Financial Year 2024-25-(ASST 25-26)

192

Salary Income As per the slab rates

192A Premature withdrawal of EPF

10% (30% in case PAN is not provided)

193  Interest on securities 10% 

194  Dividend 10%

194A  Interest that is earned apart from securities by others 10%

194A  Interest that is earned apart from post office/ bank securities 10%

194B Income earned through the winnings from card games, lotteries, and/or other games 30%

194BB  Earnings from horse races  30% 

194D  Insurance commission payments  Companies: 10%Individuals: 5%

194DA Life insurance policy payments  5% 

194E  If payments are made to sportsmen who are non-residents  20% 

194EE  In case NSS deposits are sold 10% 

194F Payment towards repurchase of units by Unit Trust of India or Mutual Funds 20%

194G  Any commission that is received in case lottery tickets are sold  5% 

194H  Brokerage or Commission  5% 

194I  Plant & Machinery rentRent of Furniture, Building, or Land 2%10%

194IA If Immovable Property is transferred (apart from agricultural land) 1%

194IB  Rent  5%

194IC  In case monetary compensation is paid (Joint Development Agreements) 10%

194J  Fee that is paid for technical or professional services 10% or 2% 

194LA  Compensation that is paid in case an immovable property is purchased  10% 

194LB  Interest that is earned from an Infrastructure Bond (NRI) 5% 

194LBB Investment fund which pays income to the unit holder [except for incomes that are exempt under Section 10 (23FBB)

10%

194LBC

Income generated from investments in securitisation trust (as per Section 115TCA) 25%

194LD  Interest in some government securities and bonds  5% 

194N 

Any cash withdrawal that is done more one account or more in the previous year by a corporate society that is in the banking business, a post office, or an individual who has a banking company   2%

194Q  Goods that are purchased  0.10% 

194P  For senior citizens who are above 75 years As per the slab rates 194S

VIRrtual Digital Assets payment 1%

E-commerce cos to collect 1% TDS from sellers under new levy-

SECTION 194O-

NEW DELHI: The government on Saturday proposed a new levy of 1 per cent TDS (tax deducted at source) on e-commerce transactions, a move that could increase burden on sellers on such platforms.

"In order to widen and deepen the tax net by bringing participants of e-commerce (sellers) within tax net, it is proposed to insert a new section 194-O in the Act so as to provide for a new levy of TDS at the rate of one per cent," according to Budget 2020-21 documents.

Also, consequential amendments are being proposed in Section 197 (for lower TDS), in Section 204 (to define person responsible for paying any sum) and in Section 206AA (to provide for tax deduction at 5 per cent in non-PAN/Aadhaar cases).

The documents said the e-commerce operator -- an entity owning, operating or managing the digital platform -- will have to deduct 1 per cent TDS on the gross amount of sales or service or both.

This provision will not apply in cases where the seller's gross amount of sales during the previous year through the e-commerce operator is less than Rs 5 lakh and the seller has furnished his PAN or Aadhaar number.

TCS ON LRS u/s  206(1G) Vs. INTERPLAY WITH LRS.-LIBERALISED REMITTANCE SCHEME-

In Para 3.3  of budget speech of FM, for widening the scope of TCS, it is proposed to provide for tax collection at source (TCS) on remittance under Liberalised Remittance Scheme of Reserve Bank of India exceeding seven lakh rupees.

As per proposed section 206(1G)- Every person,––

(a) being an authorised dealer, who receives an amount, or an aggregate of amounts, of seven lakh rupees or more in a financial year for remittance out of India from a buyer, being a person remitting such amount out of India under the  Liberalised Remittance Scheme of the Reserve Bank of India;

shall, at the time of debiting the amount payable by the buyer or at the time of receipt  of such amount from the said buyer, by any mode, whichever is earlier, collect from the  buyer, a sum equal to five per cent. of such amount as income-tax:

Scope of 206C(1G)

Section 206(1G) is binding on AD who receives an amount from a buyer for remittance out of India under the  Liberalised Remittance Scheme of the Reserve Bank of India.  The LRS scheme is applicable to resident individuals.  Hence, Non-residents can not make use of LRS scheme and hence the provisions of section 206C is not applicable.  Also the Scheme is not available to corporates, partnership firms, HUF, Trusts, etc. and hence the TCS is not applicable to them.

In terms of Section 5 of the FEMA, persons resident in India,-(as per the definition of non resident under FEMA) resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both. 

Section 80c

The maximum tax exemption limit under Section 80C has been retained as Rs 1.5 Lakh only. The various investment avenues or expenses that can be claimed as tax deductions under section 80c are as below;

• • PPF (Public Provident Fund)

  • EPF (Employees’ Provident Fund)

  • Five year Bank or Post office Tax saving Deposits

  • NSC (National Savings Certificates)

• ELSS Mutual Funds (Equity Linked Saving Schemes)

  • Kid’s Tuition Fees

  • SCSS (Post office Senior Citizen Savings Scheme)

  • Principal repayment of Home Loan

  • NPS (National Pension System)

  • Life Insurance Premium

• Sukanya Samriddhi Account Deposit Scheme

Section 80CCC

Contribution to annuity plan of LIC (Life Insurance Corporation of India) or any other Life Insurance Company for receiving pension from the fund is considered for tax benefit. The maximum allowable Tax deduction under this section is Rs 1.5 Lakh.

Section 80CCD

Employee can contribute to Government notified Pension Schemes (like National Pension Scheme – NPS). The contributions can be upto 10% of the salary (or) Gross Income and Rs 50,000 additional tax benefit u/s 80CCD (1b) was proposed in Budget 2015.

To claim this deduction, the employee has to contribute to Govt recognized Pension schemes like NPS. The 10% of salary limit is applicable for salaried individuals and Gross income is applicable for non-salaried. The definition of Salary is only ‘Dearness Allowance.’ If your employer also contributes to Pension Scheme, the whole contribution amount (10% of salary) can be claimed as tax deduction under Section 80CCD (2).

Kindly note that the Total Deduction under section 80C, 80CCC and 80CCD(1) together cannot exceed Rs 1,50,000 for the financial year 2016-17. The additional tax deduction of Rs 50,000 u/s 80CCD (1b) is over and above this Rs 1.5 Lakh limit.

Section 80D

Deduction u/s 80D on health insurance premium is Rs 25,000. For Senior Citizens it is Rs 30,000. For very senior citizen above the age of 80 years who are not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure.

Preventive health checkup (Medical checkups) expenses to the extent of Rs 5,000/- per family can be claimed as tax deductions. Remember, this is not over and above the individual limits as explained above. (Family includes: Self, spouse, dependent children and parents).

Section 80DD

You can claim up to Rs 75,000 for spending on medical treatments of your dependents (spouse, parents, kids or siblings) who have 40% disability. The tax deduction limit of upto Rs 1.25 lakh in case of severe disability can be availed.

To claim this deduction, you have to submit Form no 10-IA.

Section 80DDB

An individual (less than 60 years of age) can claim upto Rs 40,000 for the treatment of specified critical ailments. This can also be claimed on behalf of the dependents. The tax deduction limit under this section for Senior Citizens is Rs 60,000 and for very Senior Citizens (above 80 years) the limit is Rs 80,000.

To claim Tax deductions under Section 80DDB, it is mandatory for an individual to obtain ‘Doctor Certificate’ or ‘Prescription’ from a specialist working in a Govt or Private hospital.

For the purposes of section 80DDB, the following shall be the eligible diseases or ailments:

• • Neurological Diseases where the disability level has been certified to be of 40% and above;

(a) Dementia

(b) Dystonia Musculorum Deformans

(c) Motor Neuron Disease

(d) Ataxia

(e) Chorea

(f) Hemiballismus

(g) Aphasia

(h) Parkinson’s Disease

• • Malignant Cancers

  • Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;

  • Chronic Renal failure

  • Hematological disorders

    • 1. Hemophilia

      2. Thalassaemia

 Section 24 (B)

The interest component of home loans is allowed as deduction under Section 24B for up to Rs 2 lakh in case of a self-occupied house. If your property is a let-out one then the entire interest amount can be claimed as tax deduction. (Read: Understanding Tax Implications of Income from house property)

Section 80EE

This is a new proposal which has been made in Budget 2016-17. First time Home Buyers can claim an additional Tax deduction of up to Rs 50,000 on home loan interest payments u/s 80EE. The below criteria has to be met for claiming tax deduction under section 80EE.

• • The home loan should have been sanctioned in FY 2016-17.

  • Loan amount should be less than Rs 35 Lakh.

  • The value of the house should not be more than Rs 50 Lakh &

  • The home buyer should not have any other existing residential house in his name.

Section 80U

This is similar to Section 80DD. Tax deduction is allowed for the tax assessee who is physically and mentally challenged.

Section 80GG

As per the budget 2016 proposal, the Tax Deduction amount under 80GG has been increased from Rs 24,000 per annum to Rs 60,000 per annum. Section 80GG is applicable for all those individuals who do not own a residential house & do not receive HRA (House Rent Allowance).

The extent of tax deduction will be limited to the least amount of the following;

• • Rent paid minus 10 percent the adjusted total income.

  • Rs 5,000 per month.

  • 25 % of the total income.

Section 80G

Contributions made to certain relief funds and charitable institutions can be claimed as a deduction under Section 80G of the Income Tax Act. This deduction can only be claimed when the contribution has been made via cheque or draft or in cash. But deduction is not allowed for donations made in cash exceeding Rs 10,000. In-kind contributions such as food material, clothes, medicines etc do not qualify for deduction under section 80G.

Section 80E

If you take any loan for higher studies (after completing Senior Secondary Exam), tax deduction can be claimed under Section 80E for interest that you pay towards your Education Loan. This loan should have been taken for higher education for you, your spouse or your children or for a student for whom you are a legal guardian. Principal Repayment on educational loan cannot be claimed as tax deduction.

There is no limit on the amount of interest you can claim as deduction under section 80E. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier.

Section 87A Rebate

If you are earning below Rs 5 lakh, you can save an additional Rs 3,000 in taxes. Tax rebate under Section 87A has been raised from Rs 2,000 to Rs 5,000 for FY 2016-17 (AY 2017-18).

In case if your tax liability is less than Rs 5,000 for FY 2016-17, the rebate u/s 87A will be restricted up to income tax liability only.

Section 80 TTA

Deduction from gross total income of an individual or HUF, up to a maximum of Rs. 10,000/-, in respect of interest on deposits in savings account with a bank, co-operative society or post office can be claimed under this section. Section 80TTA deduction is not available on interest income from fixed deposits.

.

            Due Dates

            According to Sec. 139 (1)

            i)    Every person being a company or firm; or

            ii)      Being  a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessment 

                  to  tax during the previous year  exceeded the maximum amount which is not chargeable to income tax, shall furnish Return of income within the

                  due dates stipulated here under:                                                       

            Illustrations

            14.1 Mr. A furnishes the following particulars for the year ending 31.03.2010:

            a) income from business – Rs.9,80,000/-; b) income from other sources – Rs. 20,000/-

            c) gross sales turn over – Rs. 2 crores; d) deduction eligible u/s 10A – Rs. 9,80,000/-

            Examine whether Mr. A should file the return of income for the A.Y. 2010-11.

            Ans : The gross total income of Mr. A is Rs. 10,00,000/- comprising of income from Business and other sources. After availing deduction u/s. 10A, the taxable income for the

            A.Y. 2010-11 is Rs. 20,000/-, which is below the maximum amount not chargeable to tax In the hand o fan individual. However, when total income before deduction u/s 10A,

            10B or under Chapter VIA exceeds the maximum amount not chargeable to tax i.e.Rs. 1,60,000/- the return of income shall be filed u/s, 139(1). Therefore, in the given case,

            Mr. A shall file his return of income on or before 30th September 2010.

            14.2  Mr. Y furnishes such the following particulars for the year ending 31.03.2010

            a)      Income from business – Rs.2,50,000/-;  b) income from other sources – Rs. 25,000/-;

            b)      gross sales turn over – Rs.25,00,000/-; d) brought forward business loss eligible for set off u/s. 72 Rs. 2,00,000/-.

            Examine whether  Mr. Y should file the return of income for the A.Y. 2010-11.

            Ans: Sec.80B defines gross total income to mean aggregate of taxable income under the Heads of income less brought forward losses eligible for set off. 

            Accordingly , in the given case, the gross total income of Mr. Y is Rs. 75,000/- after set-off of losses. As the total income before claiming deductions 

            has not exceeded the maximum amount not chargeable to tax, filling return of income Is not warranted as per the provisions of sec.139(1) for the 

            A.Y. 2010-11.

            Filing of bulk return of income by salaried employees – sec.139(1A)

            In case of salaried class assesses the return of income for any previous year may at the Option of the employee be furnished to the employer concerned. 

            Such employer shall Furnish all returns of income received by him on or before the due date. In such form and manner as notified by the CBDT for this purpose. 

            Any employee who has filed a return of income to his employer shall be deemed to have filed a return of income u/s139(1).

             Filling of returns in electronic form – sec.139(1B)

             Any person may at his option file returns in electronic form. The return shall be in such form and manner as specified by the CBDT such as floppy diskette, 

            magnetic cartridge tape. CD-ROM or any other computer readable media. Returns filed in such computer readable form shal be deemed to be a return filed  

             u/s.139.

            Loss return – Sec. 139(3)

            Any person may at his option file returns in electronic form. The return shall be in such Carried forward under sec. 72, 73, 74 and 74A of the Act shall furnish a 

            return of loss Within the time allowed u/s.139(1) in the prescribed form. Any return so filed shall be Treated as a return filed u/s.139(1) and all the provisions 

            of the Act shall apply accordingly. You may also refer to Sec. 80 which states that unless loss return is filed in accordance with the due date stipulated u/s                     

            139(3) and loss is determined in pursuance of that return, the loss cannot be carried forward. The above mentioned condition does not apply to unabsorbed 

            depreciation carried Forward u/s.32(2) and loss under the head “Income from house property” u/s.71B.

            Belated return – Sec.139(4)

            Any person who has not furnished a return within the time allowed u/s 139(1) the time allowed by the notice issued u/s.142(1) can file a belated return for             

            any previous year at any time before one year from the end of the relevant assessment year or before the assessment is completed, whichever is earlier.

            Returns by Trusts – Sec.139(4A)

            Every person in receipt of income derived from properly held under trust or other legal Obligation wholly or partly for charitable or religious  purposes or                         

            income by way of Voluntary contributions shall furnish a return of the total income if it exceeds the Maximum amount which is not chargeable to tax i.e. Rs.             

            1,60,000. Before giving effect to The provisions of Sec.11 and 12. When the income of the trust before giving effect to sec. 11 and 12 exceeds the maximum 

            amount not chargeable to tax, audit of accounts of the Trust is compulsory u/s 12A(b). Therefore, the due date for filing return of income of the Trust would be             

            30th September of the relevant assessment year.

            Returns by political parties – Sec.139(4B)

            The Chief Executive Officer of every political party shall furnish a return of income in Respect of which the political party is assessable if it exceeds the 

            maximum amount Which is not chargeable to tax before giving effect to the provisions of Sec.13A. In order To avail exemption u/s.13A, the accounts of 

            a political party must be audited. Therefore, The due date for filing the return of income is 30th September of the relevant assessment Year.

            Returns by certain association /institutions – Sec.139(4C)

            The following entities shall furnish their return of income if the total income, before Giving effect to the exemption u/s.10.exceeds the basic exemption limit:

            a)      Scientific Research Association covered under section10(21)

            b)      News agency covered under section 10(22B);

            c)       Association or institution referred to in section 10(23A)/(23B);

           d)      Fund or institution, University or other educational institution or hospital or other Medical institution referred to under section 10(23C) (iiiad);(iiiae);

                 (iv);/(v); /(vi)/(via);and

           e)      Trade union or association covered under section 10(24).

            You may note that the following institutions, associations etc, need not file their

            return of income:

          Returns by associations/institutions approved under section 35-Sec.139(4D)

          Every University, College or other institutions approved u/s.35(1)(ii) or 35(1)(iii), which Is not required to file return of income under any other provisions

          of section 139, shall Furnish the return of income or loss for every previous year. The return so funnished Shall be considered a return filed u/s 139(1).

           Revised return – Sec.139(5)

           Any person who has furnished a return u/s.139(1) or in pursuance of a notice issued u/s.142(1) can file a revised return if the assessee discovers any 

           omission or any wrong statement in the return filed earlier. Such revised return can be furnished at any time before the expiry of one year from the end 

           of the relevant assessment year or before completion of assessment whichever is earlier. The effective return for the purposes of assessment is the return 

           ultimately filed by the assessee. A revised return replaces the original return. Therefore, a return may be revised any number of times within the time

           limit u/s139(5).

           Case Law

           a)      Where belated return is filed u/s 139 (4), assesses can not file a revised return u/s. 139 (5). The provisions of u/s. 139 (5) provide that a revised return

                 can be filed only where a return has been furnished u/s 139(1) or in response to a notice issued u/s. 142 (1) – Kumar Jagdish Chandra Sinha Vs. CIT 220         

                  ITR 67(SC). 

           b)      Assessee files a loss return u/s 139 (3). Later he revises the return u/s. 139(5) and Claims enhanced amount of loss. According to section 139(3). 

                 once a return is filed, all The provisions of the Income-tax Act shall apply as if such return has been filed u/s.139(1). Consequently, the filing of revised loss

                 return is valid and section 80 does not come in the way of disallowing the carry forward of such increased amount of loss – CIT Vs. Periyar District Co-        

                 operative Milk Producers Union Ltd. (2004) 266itr 705 (Mad).

           c)       In a case where a return of income has been filed in accordance with the time limit, the only option available to the assessee to make amendment to such

                 return is by way of filing a return u/s 139(5). Where an assessee, files a letter seeking the assessing officer to allow certain deduction by way of a letter, 

                 the assessing officer shall not allow the same. The Supreme Court in Goetze (India) Ltd vs. CIT (2006) 284 ITR 323 has held that there Was no provision in             

                 the Income Tax Act to amend in the return unless a revised return is Filed.

            Defective return – Sec.139(9)

            Circumstances when a return can be treated as defective

            A return of income can be regarded as defective by the Assessing Officer under the

            Following circumstances:

            a)      Annexures, statements and columns in the return of income have not been duly filed;

            b)      Return of income has not been accompanied by –

                    i)     Statement showing computation of tax on returned income

                   ii)     Proof of tax claimed to have been deducted or collected at source (TDS or TCS) Advance tax paid and self-assessment tax paid 

                           However, the return of income shall not be regarded as defective if a certificate for TDS/TCS was not received by the person furnishing the return of         

                           income and such Certificate is produced within the period of 2 years from the end of the assessment year In which  the income covered by     

                           TDS/TCS is assessable.  Once the certificate is so Furnished , the Assessing Officer shall amend the intimation or deemed intimation or the order of 

                           assessment for the relevant assessment year by virtue of sec.155(14) to grant Credit for the TDS/TCS.

                    iii)       Tax Audit report u/s. 44AB or if report was furnished earlier copy of such report Together with proof of furnishing the report.

            c)     Where regular books of account are maintained, the copies of Manufacturing account or Trading account or Profit and Loss account or Income and 

                    Expenditure account or any other similar account and Balance Sheet has not been furnished. Similarly, where no couples of personal account and     

                    personal account in the business of the proprietor, partner or member of AOP/BOT have been filed; 

            d)          If accounts are audited and copies of audited statement of accounts and auditor’s Report have not been filed (including Cost audit report, if any);

            e)     Where regular books are not maintained, a statement indicating the amount of Turnover or gross receipts, gross profit, expenses an d net profit and the 

                    basis of Computation thereof together with the amount of total sundry debtors, sundry creditors, Stock-in-trade and cash balance at the end of the 

                    previous year have not been filed.

              Procedure for rectifying the defect

              The A.O. may  intimate the defect in the return of income to the assessee. The assessee May be called upon to rectify the defect within 15 days from the 

              date of service or Within such extended time allowed on application by the assessee. If the defect is not so Rectified then the  A.O. shall treat the return of 

              income as an invalid return. However, if The assessee rectifies the defect after the time allowed but before the assessment is made, The  A.O. is empowered 

              to condone the delay and treat the return as valid. 

              Permanent Account Number – Rule 114/Form no.49A – Sec. 139 A

              The following person are required to apply for and obtain Permanent Account Number.

              a)      Any person whose total income assessable to tax either in respect of his income or the income of any other person is required to apply on or before the 

                    31st May of the relevant assessment year.

              b)      Any person carrying on business / profession whose turnover or gross receipts are Likely  to exceed Rs. 5,00,000 in any previous year is required to apply 

                    before the end of the relevant previous year.

              c)      Any person who is required to furnish a return of income u/s139(4A) is required to apply before the end of the previous year.

               Note : It may be noted that, from a practical point of view Sales tax, Customs, Excise Department insist on PAN  for registration. Any peron registered under                 

               the Central Sales Tax Act,  1956 or the   General Sales Tax Act, applying for Import-Export code, service tax assesses or customs, excise  assesses of the 

               appropriate state or union territory.

             a)      The Central Government may notify the following classes of person who are Required to apply for a PAN within the prescribed time.

                    i)     (Importers and Exporters) – persons by whom cess or tax is payable,

                   ii)          Any other person, for collecting useful information.

            b)      The AO on his own motion ailot PAN to any person, having regard to the nature of Transaction, whether or not tax is payable. Any person may apply to AO 

                   for PAN.

                    i)           PAN should be quoted in all tax challans, returns and correspondence with the Income tax authorities.

                   ii)           Under Rule 114B of the Income-tax Rules, PAN should be quoted in all documents pertaining  to the following  transactions ;

Note : A return of income u/s 139(1) which is not signed and verified is not merely an Inaccurate or incomplete return but it is not a return at all.

Self Assessment Tax – Sec. 140A

On the basis of the return of income that is being filed u/s. 139 or in response to notice issued u/s 142(1) for making inquiry before assessment or in response to notice u/s 148

where income has escaped assessment; or in response to notice under section 153A for making assessment in case of search or requisition or under any other provisions of this

Act, the assessee is required to computer the tax payable by him after considering the following:

i.     Tax paid under the provisions of the Act;

ii.   Amount of Tax Deducted at Source and Collected at Source;

iii. Relief of Tax u/s 90,90A or 91;

iv.  Credit on Minimum Alternate Tax available in case of companies, u/s 115JAA.

Besides, interest payable for delay in filing return of income [u/s.234A], interest for Default in payment of advance tax [u/s.234B] or interest for deferment in payment of advance tax [u/s 234C] shall be computed and paid together with the tax payable before filing the return of income and the proof of payment shall be attached thereto. 

If the payment made by the assessee falls short of the aggregate of the tax and interest, the payment made shall first be adjusted towards the interest payable and the balance amount shall be adjusted towards the tax payable.

After a regular assessment is made under section 143 or assessment is made u/s 144 or u/s 153A or any other relevant provisions of the Act, any amount paid under this section shall be deemed to have been paid towards such assessment.

2. Inquiry before assessment – Sec. 142

      Notice

        1)      The Assessing Officer may serve a notice on any person who has filed a return u/s. 139 or in the case of any other person where the due date for filing return of income

              has expired requiring the following; 

              i)      If the assessee has not filed a return within the time allowed u/s. 139(1) or before the end of the assessment year, then the notice can require him to furnish the return of

               income.

              ii)  The notice can require the production of accounts and documents.          

              iii) The notice can require furnishing of information on such points or such matters including the furnishing of the list of assets and liabilities as the Assessing Officer may require.

        2)    But, prior approval of Joint Commissioner is necessary before requiring the assessee to furnish the details of all assets and liabilities not included in the accounts.

               the assessing officer shall not require the production of accounts relating to a period more than 3 years prior to the previous year [Sec. 142 (1)].

       Enquiry

       The Assessing Officer may make such inquiry as he considers necessary for the purpose of obtaining full information about the income or loss of any person [Sec. 142(2)].

        Special Audit

        1)  The Assessing Officer at any stage of the proceeding may, having regard to the nature and complexity of the accounts of the assessee and the interest of the revenue, direct 

             the assessee to get the accounts audited and furnish the audit report, Such a direction can  be issued only with prior approval of the Chief Commissioner or Commissioner and

              the audit shall be done by a Chartered Accountant nominated by the Chief commissioner or Commissioner. [Sec. 142(2)].

        2) The AO shall not direct the assessee to get the books of accounts audited unless the assessee has been given a reasonable opportunity  of being heard.

        3)  The audit may be directed even if the accounts are already audited. The audit report shall be furnished within a period specified by the Assessing Officer which can be

             extended up to 180 days from the date of receipt of direction by the assessee. The date of furnishing of audit report may be extended either by the assessee officer himself or 

             on an application made by the assessee.

        4) The expenses for the audit shall be determined by the Chief Commissioner or commissioner in accordance with the prescribed guidelines and such fee shall be paid

              by the Central Government.

        Opportunity

        The assessee shall be given an opportunity of being heard in respect of materials gathered on inquiry u/s. 142(2) or audit u/s 142(2A) and proposed to be used in the

        assessment. [Sec. 142(3)].

        Case law

        (i) The power conferred u/s.  142(2A) to direct an assessee to get the accounts audited is discretionary in nature. Before the assessing and the Commissioner can pass an

            order for special audit, they are required to apply their minds and form an opinion that  the accounts of the assessee are of such nature and complexity that without special

            audit, assessment or re-assessment is not possible. If the assessing officer sends the proposal for special audit without examination of the books of account, the Commissioner         

            should not give approval.

        (ii) Again in a case where two sets of accounts are maintained by the assessee, it does not mean that it is in the nature of accounts difficult to understand as was held in

             rajesh Kumar and Other Vs Dy. CIT (2006) 287 ITR 91. The onus is on the assessing officer to substantiate that the accounts are complex in nature.

         Estimation by Valuation Officer in certain cases – Sec 142A

         For the purposes of making an assessment or re-assessment, where an estimate of the  value of any investment referred to in sec. 69 or sec.69B or the value of 

         any bullion jewellery or other valuable article referred to in sec. 69A or sec. 69B is required to be made, the assessing officer may require the valuation officer 

         to make an estimate of such value and report the same to him. The valuation officer to whom such reference is made  shall have all the powers that he has u/s. 

         38A of the Wealth-tax Act, 1957, viz power to enter any place occupied by the assessee, inspect assets, enforce compliance etc.

          The assessing officer may, after giving the assessee an opportunity of being heard, the into account the report of the Valuation Officer in making such                                      

          assessment or re- assessment.

          3. Assessment – Sec 143                     

          The return of income or loss shall be computed after making the following adjustments, in the following manner:-

          a) the total income or loss shall be computed after making  the following adjustments, namely

               a.    any arithmetical  errors in the return; or

               b.   any incorrect claim if such incorrect claim is apparent from any information in the return

            An incorrect claim apparent from any information in the return shall mean the following claims, on the basis of an entry in the return,

            i)     of an item which is inconsistent with another entry of the same or some mean the item in the return of income

            ii)  in respect of deduction, where such deduction  exceeds specified statutory limit

            iii) in respect of deduction , where such deduction exceeds specified statutory limit expressed as monetary amount or percentage or ration or fraction

            iv)     in respect of deduction, where such deduction exceeds specified statutory limit expressed as monetary amount or percentage or ratio or fraction

           b)    The tax and interest, if any, shall be computed o the basis of the total income after considering the adjustments mentioned above.

           c)       The tax payable by or refund due to the assessee shall be determined after giving credit to TDS, TCS, Advance tax paid,  relief allowable under DTAA or u/s             

                  91. self assessment tax paid or any other amount paid otherwise than by way of tax or interest paid.

           d)      Based on the above, intimation shall be sent to the assessee specifying the sum payable or refund due to the assessee. If refund is due, it shall be granted             

                 to the assessee

            e)      Intimation shall be sent to the assessee when the loss declared by the assessee is adjusted but no tax or interest is payable by or no refund  is due to the             

                  assessee

             f)       Intimation shall be sent within one year from the end of the financial year in which  the return is made.  Intimation is required to be sent only in a case 

                   where there is demand payable by the  assessee or where refund is due to the assessee. In all other cases, acknowledgement issued on filling of the 

                   return of income shall be deemed to be intimation.

                Centralised  Processing of Returns

                According to Sec. 143[1A], the board is empowered to make a scheme for centralized processing of return with a view to expeditiously determine the tax                 

                payable or refund due to the assessee in the pursuance of Sec. 143[1A].

                Scrutiny Assessment

                1)         The Assessing Officer shall, if he considers it necessary or expedient to ensure that the assessee-

                        a)      has not understand the income; or

                        b)      has not computed excessive loss; or

                        c)       has not underpaid the tax in any manner,  take up the case for regular assessment by issuing notice u/s. 143[2][ii]

                2)      Such notice shall be served on the assessee within six months from the end of the  financial year in which the return is furnished.         

                3)      The Assessing Officer, after hearing evidence produced by the assessee and taking into account all relevant material which he has gathered, 

                         shall make an assessment u/s. 143 [3][ii] of the total income or loss of the assessee by an order in writing and  determine the sum payable by

                         him or   the amount refundable to him on the basis of such assessment .

                4)      Where a regular assessment is made under section143(3) or section 144, any tax or interest paid u/s. 143(1) shall be deemed to have been

                          paid towards such regular assessment.  If no refund is due on regular assessment or if the amount refunded u/s. 143(1) exceeds the 

                          amount refundable on regular assessment, the whole or the  excess amount so refunded shall be deemed to be tax payable by the assessee

                          Sec. 143(4).

                5)      During the course of assessment  u/s 143 (3) of any University, College or other institutions approved u/s 35, the assessing officer, should 

                         satisfy himself that the activities of these institutions are being carried out in accordance with the guidelines  and conditions subject to which 

                         the approval was granted. Incase it is found that, there is a violation, the assessing officer may recommend to the Central Government to

                         withdraw the approval after giving the assessee a reasonable opportunity of showing  cause against the proposed withdrawal. The Government 

                         may withdraw approval and forward a copy of the order to the assessee and AO – second proviso to Sec. 143(3).

                6)      While carrying out regular assessment u/s.143(3) in the case of scientific research association, news agency, institution, fund or trust, etc., 

                          the assessing officer shall not pass any assessment order without giving effect to the concerned sub-clause of section 10 under which such 

                          scientific research association, news agency, institution, fund or trust etc., have been granted exemption. However, the assessing officer may                             

                          proceed to pass assessment order u/s. 143(3) in the following cases;

                  (i) Where the assessing office has found during the course of assessment that such scientific research association, news agency, 

                       institution or association, fund or trust, etc., is carrying on its activity in contravention of the relevant sub clauses of section 10, under which 

                      they are approved for exemption and the same has been intimated to the central Government or the Prescribed authority; and

                  (ii) the approval granted to the scientific research association, institution or association or fund or trust has been withdrawn or exemption notification             

                       issued in respect of such news agency or institution fund or trust has been rescinded.

                    Best Judgment Assessment –Sec. 144

                    The Assessing Officer, after taking into account all relevant material which he has gathered and giving the assessee an opportunity of being

                     heard to make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the 

                     basis of such assessment under the following circumstances:

    PROFIT & LOSS ACCOUNT – EXCLUSIVE METHOD

             The introduction of section 145A is aimed at required assessee to follow the inclusive method whereby more profit in shown. However it needs to be 

             appreciated that if closing stock is shown at a higher figure in one year, it will be carried forward and shown as the opening stock in the next year and 

             to the profit increased in one year will be off set by the profit reduced in the next year. Thus, the effect of making the adjustment required under section 

             145A will be the advancing of a portion of the profits of one year  to the proceeding one year. In case where the closing stock is progressively on the 

             increase, the effect of such advancing will gradually increase resulting revenue collection to the government at an earlier of time. In the above working, 

             in the inclusive method, the closing stock is shown at Rs. 10,000/- and the excise duty claim of Rs. 15,000/- is reduced by the entire Rs. 10,000/- 

             being CENVAT credit available. However if an assessee avail CENVAT credit only to the extent of consumption of raw material the net result will be 

             the same under both methods. Since the excise duty of Rs. 1,000/- attributable to raw material a deduction of Rs. 6,000/- towards the excise duty for 

             this and the profit will be Rs. 24,000/- which is same as arrived at by the exclusive method. This is the approach suggested in the Guidance Note on 

             Tax Audit under section 44AB by the Institute of Charted Accountants of India and if this approached is adopted. Sec. 145A become tax neutral as 

             per the computation shown below:

        PROFIT & LOSS ACCOUNT – INCLUSIVE METHOD

  5. Income Escaping Assessment

                If 4 year of expired, notice u/s.148 can be issued in a case only if the income chargeable to tax which has escaped assessment amounts to or is 

                likely to amount to Rs. 1 lakh or more for that year.

                According to sec.151, approval from CCIT, CIT or JCIT as the case may be the required in the circumstances mentioned above. Explanation to 

                Sec.151(2) provides on being satisfied on the recorded by the assessing officer about the fitness of the case, CCIT, CIT, JCIT as the case may

                be, need not to issue notice u/s.148 himself. After the approval is granted, it is sufficient that AO issues notice u/s.148 to initiate the reassessment 

                proceedings.

                Exceptions to the time limit

                1. Proviso to section 147: If an assessment for any year has been completed u/s.143(3) or u/s.147, then no action shall be taken u/s.147 after the 

                    expiry of 4 years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment by reason of the failure 

                    on the part of the assessee –

                    a) to file a return u/s.139 ; or

                    b) to furnish a return in response to notice u/s.142(1) or u/s.148 ; or

                    c) to disclose fully and truly all material facts necessary for that assessment year.

                  Production of books of account or other evidence from which material evidence could have been discovered with due diligence by the Assessing     

                  Officer will not necessarily amount to disclosure on the part of the assessee – Explanation 1 to Sec. 147, Students may note that there cannot be 

                  assessment u/s.143 (3) if a return has these criteria mentioned in (a) and (b) above shall apply only where assessment is made under section 147. 

                  The criteria mentioned in (c) above to apply to a case where order u/s.143(3) or u/s.147 has been passed.

                  Case Law

                  1. In a case where the original assessment was made either under 143(3) or u/s.147, such assessment can be reopened beyond a period of 4 

                   years only if there is failure on the part of assessee to disclosed fully and truly all material facts necessary for the purpose of such assessment. If 

                  assessee has disclosed all material facts but claimed higher depreciation erroneously, it will not be case of failure to disclosed fully and truly all

                  material facts. Rate of depreciation is not be claimed is a matter of legal inference drawn from the materials facts. If the legal inference so drawn is 

                  erroneous it cannot be said that there is failure on the  part of the assessee to disclose material facts. Therefore, notice u/s. 148 invalid and Liable 

                  to be quashed – ICICI Bank Ltd. Vs K.J. Rao (2004) 268 ITR 203 (Bom)

                  2. The assessee company claimed in its return, a deduction supported by a certificate in the prescribed form from the Chartered Accountant. 

                  Assessing Officer Passed order of assessment u/s.143(3) and allowed the deduction. Thereafter, notice u/s.148 was issued. The assessee 

                  company, after filing return challenged the validity of such notice by filling a writ petition. Under sec. 147, a proceeding for reopening an 

                  assessment made u/s. 143(3) can be initiated where income escaped assessment by reason of the failure on the part of the assessee to disclose 

                  fully and truly all material facts necessary for the assessment. In the reasons for reopening recorded, it has not been alleged that there had been 

                  any omission or failure on the part of the assessee to disclose  fully and truly all material facts. It was not even noted in the recorded reasons as to 

                  what other primary facts were required to be disclosed by the assessee before the Assessing Officer at the time of assessment made u/s.143(3). 

                  Therefore, the notice u/s.148 is illegal and without jurisdiction and therefore, quashed – Mercury Travels Ltd. Vs. DCIT (2003), 258 ITR 533 (Cal).

                   2. Section 149(3) : In the case of an agent of a non-resident, notice u/s.148 in his capacity an agent of non-resident cannot be issued after the 

                   expiry of 2 years from the end of the relevant assessment year. Students may note that the restriction shall apply only to an agent of non resident 

                   and not for a non-resident.

                    3. Section 150: Notwithstanding anything contained in section 149, notice u/s.148 may be issued at any time in consequence of or to give effect 

                    to, (a) any finding or direction in an order passed by any authority in appeal, reference, revision or, (b) by a Court in any proceeding under any 

                    other law – sub – section (1). However, notice u/s.148 cannot be issued, if at the time when the order which was subject-matter of appeal, 

                    references, revision, was passed, the time-limit for the issue of such notice had expired – such – section (2) You may note that sub – section (1) 

                    of section 150 operates to relax the time restriction stipulated under section 149. Such relaxation can be made use of by the Assessing Officer 

                    only if the restriction placed under sub-section (2) of section 150 does not effect the operation of sub-section (1). You may also note that the 

                    restriction placed under sub-section (2) is applicable only in respect of appeal, references or revision referred to in sub-section (1) but it does not 

                    apply with reference to an order passed by a court in any proceeding under any other law.

                    Illustration on the applicability of section 150

                    The case of Mr. A assessment is made under section 143(3)  for the assessment year 1993-94 on 31-3-95 making an addition of Rs. 1,75,000/- 

                     being compensation received. Assessee contested the addition but lost the case in the first appeal. In the second appeal, the Appellate Tribunal 

                     passes an order on 5-1-99 holding that the sum of Rs. 1,75,000/- is chargeable to tax but the year of chargeability is not the year of receipt but it 

                     is the year in which it accrued namely the previous year 1987-88 relevant to the assessment year 1988-89. The Assessing Officer issues notice 

                     under section 148 for the assessment year 1988-89 in March 1999 to bring to tax the sum of Rs. 1,75,000. Is the notice valid? What will be your 

                     answer if the assessment order for the assessment year 1993-94 was passed on 5-4-95 ?

                     Ans: The normal time limit available u/s.149 for issue of notice under section 148 in order to assess Rs.1,75,000/- escaping assessment is 6 

                     years from the end of the relevant assessment year. Therefore, for assessment year 1988-89, notice u/s.148 cannot be issued in March 99. 

                     However, in order to give effect to a finding contained in an Appellate order notice can be issued at any time by virtue of sub-section (1) of 

                     section 150. The operation of sub-section (1) of section 150 is subject to the restriction placed under sub-section (2) of section 150. According to 

                     sub-section (2), if on the date of passing of the order which was the subject-matter of appeal was passed on 31-3-95. such notice cannot be 

                     issued by availing the relaxation made under sub-section (1). In this case, the order which was subject matter of appeal was passed on 31-3-95.

                     Therefore, it needs to be examined whether notice could have been issued on 31-3-95 for the assessment year 1988-89 in order to assess Rs. 

                     1,75,000/- as income escaping assessment. From the end of assessment year 1988-89, 31-3-95 falls within 6 years (it is the last day of the 6th 

                      year) and therefore, notice could have been issued then. Therefore, restriction placed under sub-sections (2) does not effect the operation of 

                      sub-section (1) in this case. The notice issued by the Assessing Officer in March 99for the assessment year 1988-89 is valid in view of 

                      applicability of sub-section (1) of section 150 If the order of assessment for the assessment year 1993-94 was passed on 5-4-1995, it falls 

                      beyond 6 years from the end of the assessment year 1988-89. Consequently, notice u/s.148 could not have been issued on 5-4-95                     

                      for the assessment year 1988-89 to assess Rs. 1,75,000/- being income escaping assessment. What could not have been done on 5-4-95 

                      cannot be done now also. In other words, sub-section (2) applies in such a case and effects the operation of sub-section (1). Therefore, notice 

                      issued will be invalid.

                     Circumstances under which proceeding u/s.147 may be dropped – Sec.152

                      In the following circumstances, the assessee is entitled to claim that the reassessment proceeding u/s.147 shall be dropped:

                     1) Where the assessee has not filed any appeal to CIT ( Appeals) or revision petition before the CIT u/s.264 against the original assessment 

                      order;

                     2) Where the assessee has established that; (i) the original assessment order has been made properly and in accordance with law by the 

                     Assessing Officer; or (ii)  he has already assessed on an amount not lower than what he would be rightly liable for even if the income alleged to 

                     have escaped assessment had been taken into account.

                     In any case, it may be noted that the assessee shall not be entitled to reopen matters concluded by an order under section 154, 155, 260, or 263.

                     You may not that apart from the provision of section 152, in the following situations, the reassessment proceeding u/s.147 may be dropped:

                    (a) Where prior approval has not been sought in accordance with the law, wherever necessary;

                    (b) Where Assessing Officer initialed without issuing notice or by issuing time barred notice u/s 148.

                    6. Time Limits and other Provisions

                    Time Limit for completion of Assessments & Reassessments – Sec.153

            Exception – Sec.153(3)

            The time limits prescribed u/s.153(1) and 153(2) will not apply in the following cases:-

            a) Where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding     

            or direction contained in an order passed by CIT(A) or by Supreme Court on an appeal or by an Appellate Authority or by the Commissioner of 

            Income-tax by way of revision or by any Court under any other proceeding, other than appeal or references.

            Exclusion of time – Explanation 1 to section 153

            In computing the period of limitation for the purpose of this selection-

            i) The time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee to be re-heard under sec. 129, or

            ii) The period during which the assessment proceeding is stayed by an order or injunction of any court, or

            iii) The period commencing from the date on which the assessing officer intimates the central government or prescribed authority of the contravention 

            of conditions by entities covered u/s.10(21), 10(22B), 10(23A), 10(23C), ending with date on which the copy of the order withdrawing the approval or 

            rescinding the notification under those calluses is received by the assessing officer.

            iv) The period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under section 142(2A) and 

            ending with the date on which the assessee required to furnish such audit report.

            v) The period (not exceeding 60 days) commencing from the date on which the Assessing Officer receives declaration u/s.158A for avoiding repetitive 

            appeals on the same issue for different years and ending with the date of order passed under that section.

            vi) In a case where an application made before the Income-tax Settlement Commission under section 245C is rejected by it or is not allowed to be 

            proceed with by it, the period commencing from the date on which such application is made and ending with the date on which the order u/s.245D(1) 

            is received by the Commissioner.

            vii) The period commencing from the date on which an application is made before the Authority for Advance Ruling under section 245Q(1) and ending 

            with the date on which, order rejection the application is received by the Commissioner u/s.245R(3) or the advance ruling pronounced by it is received 

            by the Commissioner u/s.245R(7).

            vii) If after exclusion of the aforesaid time or period, the period of limitation available to the Assessing Officer is less than 60 days, such remaining     

            period shall be extended to 60 days and the period of limitation shall be deemed to be extended accordingly – for proviso to explanation 1.

            7. Special procedures in assessment of search cases

            Assessment in case of search or requisition – Sec.153A

            (1) Once the search is initiated u/s.132 in the case of any person or requisition is made u/s.132A. the Assessing Officer shall proceed to assess the 

            income in the case of such period in accordance with the provisions of this section.

            (2) The Assessing Officer shall serve a notice to the person concerned requiring him to furnish the return of income in respect of each of assessment 

             year falling within six assessment year immediately preceding the assessment year relevant to the previous year in which such search is conducted or 

             requisition is made.

            (3) The assessee shall furnish return of income in response to the above notice within the time period specified in the notice. The provision of the Act 

             shall apply as if the return was required to be furnished u/s.139.

            (4) The assessing officer shall assess or reassess the total income in respect of each assessment year falling within such 6 assessment years.

            (5) Any assessment or reassessment relating to any assessment year falling within the period of 6 assessment year pending on the date of initiation of 

             the search u/s.132 or making of requisition u/s.132A shall abate. If the search assessment order in annulled in appeal or any other proceedings, the 

             abated proceedings shall stand revived w.e.f., date of receipt of order of annulment by the Commissioner. However, if the order of annulment of the 

             search assessment is set side, the revived proceedings shall cease to have effect.

             (6) No order of assessment or reassessment shall be passed by an assessing officer below the rank of Joint Commissioner in respect of each 

              assessment year, except with the prior approval of the Joint Commissioner- Sec.153D.

             (7) The income determined under this section shall’be taxed as per the rates of tax applicable for each of the relevant assessment year.

              The Limit for completion of assessment u/s.153A – Sec.153B

             (1) The time available for completion of assessment or reassessment in respect of each assessment year falling within 6 assessment years referred 

              above shall be 21 months from the end of the financial year in which the last of the authorizations for search u/s.132 or for requisition u/s.132A  was 

              executed.

              (2) In respect of the assessment year relevant to the previous year in which search is conducted u/s.132 or requisition is made u/s.132A, a period of 

              21 months from the end of the financial year in which the last of the authorizations for search u/s.132 or for requisition u/s. 132A was executed shall     

              be allowed.

              (3) Where during course of assessment proceedings, a reference to the Transfer pricing officer is made u/s.92CA, the time available for completion 

              of assessment or reassessment in respect of each assessment year falling within 6 assessment years shall be 33 months from end of the financial 

              year in which the last of the authorizations for search u/s.132 or for requisition u/s.132A was exacuted.

              (4) In case of annulled search assessment, the time limit of completion of revived assessment shall be one year from the end of the month in which 

              the abated assessment revives or within the time limit specified in sec. 153 or sec.153B whichever is later.

              (5) In computing the period of limitation as above and in the case of assessment u/s.153C the following shall be excluded:

               i) Period during which stay or injunction is granted by any Court:

              ii) Period allowed for special audit u/s.142(2A) to be carried out and for furnishing of the said audit report;

              iii) Time taken for reopening any proceedings or for opportunity given to assessee u/s.129;

              iv) In case the assessee files the application before the Settlement Commission and the admission of such applications has been levied by the 

              commission, the period from date of filling to the date of rejection by the Settlement Commission.

              v) In case the assessee approaches to the Authority for advance rulings, the period from the date of filling of application to the date of rejection the 

              application or pronouncing the advance ruling as the case may be.

             vi) In case of annulment of search assessment order set aside, the period commencing from the date of annulment till the date of receipt of the order 

              setting aside such order of annulment.

             (6) If after extending the time, the period available to the assessing officer for making an order is less than 60 days, then the remaining period shall be 

              extended to 60 days.

              (7) For this purpose, the authorization for search shall be construed to have been executed only on the conclusion of the search as recorded in the 

               last panchanama drawn. In the case of requisition u/s.132A the authorization for requisition shall be constructed as executed only on the actual 

               receipt of the books of account  or other documents or assets by the authorized officer.  

               Case Study

               A search was conducted u/s.132 of the Income-tax Act in the premises of Mr. A on 14.11.2009. Discuss which are the assessment years covered for 

               which notice can be issued. What will be the time limit within which the A.O. shall complete the assessment?

               Ans: 1. The notice u/s.153A can be issued for six assessment years proceeding the provisions year in which the search is conducted. In this case 

               the previous year in which search is conducted is 2009-10. The relevant assessment year is 2010-11. The notice shall be issued for the previous six 

               assessment year. i.e., for assessment year 2004-05 to 2009-10.

               2. The time available for completion of assessment in respect of each assessment year from 2004-05 to 2009-10. shall be twenty one months from 

               the end of the assessment year (i.e.,2009-10) in which the search was initiated. As the search was initiated on 14.11.2009, the last day for 

               completion of assessment shall be 31.12.2011.

               3. The time available for completion of assessment in respect of the financial year 2009-10 in which search was initiated shall also be twenty one 

               months from the end of the financial year. Therefore, the A.O. shall complete the assessment for the assessment year 2010-11 by 31.12.2011.

               Assessment of income of any other person – Sec. 153C

               Where the assessing officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or  documents seized 

               or requisitioned belongs to any other person other than a person in whose case search was made u/s.132 or requisition was made u/s.132A, then 

               the seized or requisitioned records and assets shall be handed over to the assessing officer having jurisdiction over such other person, Thereafter, 

               such assessing officer shall proceed to issue notice to such other person and assess or reassess his income in accordance with the provisions of 

               sec. 153A for a period of six years preceding the previous year in which search or requisition took place.

                Other points

                1. Any assessment or reassessment may be made, relating to any assessment year falling with in a period or six years immediately preceding the 

                assessment year relevant to the previous year in which search or requisition was made pending as on the date of receiving the books of accounts 

                or documents or assets seized or requisitioned by the assessing officer having jurisdiction over such other person.

                 2. The assessing officer having jurisdiction over such other person can assess or re-assesses the total income of such other person for the 

                 previous year in which search or requisition took place in the manner provided in section 153A, if he receives the books income of that assessment 

                 year and in respect of such assessment year –

                 a) no return of income has been furnished by such other person and no notice u/s. 142(1) has been issued to him, or

                 b) a return of income has been furnished by such other person but no notice u/s.143(2) has been served and limitation of services the notice 

                 u/s.143(2) has expired, or

                 c) assessment or reassessment, if any, has been made.

                 3. The assessment for the six years period and the year of search shall be completed with in period of 21 months from the end of the financial year 

                 in which the last of the authorization was executed or within 9 months from the end of the financial year in which the books of accounts or documents 

                 or assets are handed over to the assessing officer, having jurisdiction over such person, whichever is later.

                 4. Where  references to the TPO u/s 92CA is made in the course of assessment u/s 153C, the period of limitation shall be 33 months from the end 

                 of the financial year in which last of authorization for search u/s 132 or requisition u/s 132A is drawn or within 21 months from the end of the financial 

                  year in which books of account or documents or assets seized or requisitioned are handed over to the Jurisdictional AO.

                  Case study

                  Mr. A’s premises were searched u/s.132. During the course of search, certain records belonging to Mr.B were found. Mr.C’s  business premises 

                  were surveyed u/s.133A during course of survey, records were found which indicated undisclosed income of Mr. D. All the four persons seek to 

                  know from you the consequences. Advise them.

                  Ans: The case of Mr. A is covered by Sec. 153A. The Assessing Officer having Jurisdiction will issue notice calling for returns of income for the 6 

                  assessment year preceding the assessment year relevant to the previous year in which search is conducted. For all the 6 assessment years total 

                  income shall be computed and tax shall be levied at the rates applicable to the respective assessment years. The return for the year of search shall             

                  be filed in the normal course. The assessment for the 6 assessment years and also the assessment year relevant to the previous year in which 

                  search was conducted shall be completed within 21 months from the end of the financial year in which the last of the authorization for search 

                  u/s.132 or requisition u/s.132A was executed. Interest, penalty and prosecution provision shall apply as they apply to the regular assessment. If in

                  respect of these assessment yeas if regular assessment or re-assessment proceedings are pending, then such proceeding shall abate and the 

                  officer shall proceed to make the assessments only u/s.153A. As regards Mr.B, the provisions of Sec.153C apply. Consequently, in his case also         

                  the assessing officer shall proceed in accordance with the provisions of Sec.153A. The points mentioned above in the case of  A are equally 

                  applicable to Mr. B. Although there is no time limit for issue a notice calling for the returns for the 6 assessment years, in both the cases of A & B 

                  assessing officer shall send the notice at the earliest as the time limit for completion of assessment commences with conclusion of the search. In 

                  the case of Mr. C, only survey has been conducted. The provision of sec.153A, 153B and 153C are not applicable. In case income is found to have 

                  escaped assessment for the earlier years, assessing officer has to record the reasons and issue notice u/s.148 in respect of the assessment year 

                  for where there is reason to believe that income has escaped assessment. There is no mandate to reopen assessment 6 assessment years if no

                  income has escaped assessment in some of those years. Hear again, normal rates of tax applicable to the respective years shall apply. Interest, 

                  penalty and prosecution provisions as may be applicable can be invoked. In case of the year of search, if there is any income offered, Mr. C can 

                  pay advance tax and file the return in the normal course including such income. As regards Mr.D is concerned, the provisions of sec.153A, 153B 

                  and 153C are not applicable since his records have not been found during the course of search u/s.132 nor they have been requisitioned 

                  u/s.132A.The records found the during the course of survey in the premises of Mr. C belonging to Mr. D. Should be perused by the assessing 

                  officer. On such examination, if there is reason to believe that income has escaped assessment in D’s case. then officer can records and issue 

                  notice u/s.148 in respect of assessment year for which such belief is warranted. The consequences shall be same as applicable to Mr. C. In the 

                  cases of Mr. C & D, any regular assessment pending in respect of assessment year for which sec. 148 notice is issued shall not abate. They shall 

                  be continued separately and completed. The time limit for completing any of the reopened assessment shall be nine months from the end of the 

                  financial year in which the notice u/s. 148 was served. In respect of the year of survey for which regular return is filed, the time limit shall be 21 

                  months from the end of the relevant assessment year.

                  Case Law

                  An income-tax authority acted as the authorized officer in conducting the search and later functioned as the assessing officer and completed the 

                  assessment. This alone does not render the assessment invalid. There are no provision of the Act imposing restriction that assessing officer and 

                  officer gathering information should not be the same. The question of bias will have to be decided on the facts of each case. If the assessee is able

                  to establish that the assessing officer was in fact biased in the sense that he was involved or interested in his personal capacity in the outcome of 

                  the assessment then it would be a good ground for setting aside the assessment order – UOI & Others Vs. Vipan Kumar Jain & Others (2003), 

                  260 ITR 1 (SC).

                  Association/Institution

                  In case any association or institution contravenes any provisions, the assessing officers may intimate the Central Government or the prescribed 

                  authority about such contravention. Where, any such intimation has been sent by the assessing officer, no order shall be passed making an 

                  assessment without giving effect to the provisions of Sec. 10, unless the approval granted to the entity has been withdrawn or rescinded. In all

                  such cases, the period commencing from the date  of intimation by the Assessing Officer and ending with the date of withdrawal or rescinding shall 

                  be excluded in computing the time limit u/s.153 for completion of assessment.

                  8. Rectification of mistake apparent on the record – Sec.154

                  1. Any mistake apparent form the record can be rectified by an Income-tax authority by:

                  a) Amending any order passed by such authority under Income-tax Act;

                  b) Amending any intimation or deemed intimation u/s.143(1)

                  2. Where any matter has been considered and decided any proceeding by way of appeal or revision relating to an order, the authority passing 

                  such order may amend the order in relation to any matter other than the matter which has been so considered and decided.

                  3. The mistake apparent on record can be rectified by an Income-tax authority either on its own motion or on an application by an assessee to that 

                  effect. Where the authority is Commissioner (Appeals), rectification can be done if any mistake has been brought to his notice by the assessee or 

                   by the assessing officer.

                   4. The amendment of an order, which has the effect of enhancing an assessment or reducing the refund or otherwise increasing the liability of the 

                   assessee, shall not be made without giving reasonable opportunity to the assessee of being heard. Amendment shall be by way of an order in 

                    writing.

                   5. Where an amendment gives rise to a demand, the AO shall serve a notice of demand on the assessee and it shall be deemed to be issued 

                   u/s.156.

                   6. In case where an assessee make an application for rectification u/s.154, then the income-tax Authority to whom such application is made shall 

                   pass an order within a period of 6 months from the end of the month in which the application is received from the assesee.

                   7. The order making amendment, shall be in writing and it should be made within a period of 4 years from the end of the financial year in which the 

                   order sought to be amended was passed.

                   8. The subsequent decision of a Jurisdictional High Court or Supreme Court may give rise to mistake apparent on record. Amendments made to 

                   the Income-tax Act with retrospective effect may also give  rise to mistake apparent on record. However, a contrary view was expressed by the 

                   Madras High Court in T.T.K. Pharma Ltd. Vs. CTT (2008) 300 ITR 346 wherein it was held that subsequent decision of Supreme Court cannot 

                   justify rectification u/s. 154

                   9. “Mistake apparent on record” could be mistake of fact or a mistake of law but it should not be a debatable matter on which there could be two 

                   plausible interpretation.

                   10. If the assessment order is plainly and obviously in contract with specific and clear provision a amended retrospectively, there was a mistake 

                    apparent from the record. In the light of the retrospective amendment, the assessment order has to be revised – CIT Vs. E. Sefton and Co. (P.) 

                    Ltd, (1989) 179 ITR 435 (Cal).

                    11. The order referred to u/s.154 does not necessarily means the original order. It could be even rectified or amended order. 4 years time limit is 

                     to be reckoned with reference to order sought to be rectified. Hind Wire Industries Ltd., Vs. CIT (1995) 212 ITR 639 (SC).

                     Other Rectification – Sec.155

                     Where any assessment made any respect of any assessment year is required to be Amended on account of any specific provision in the Act 

                     mentioned here below, such amending order can passed at any time within 4 year from the end of the year in which such provisions is attracted:

                    (1) Where is partner is assessed for any remuneration from a firm u/s. 28(v) and later in the assessment of the firm such remuneration is found not 

                    deductible u/s.40(b), the assessment order of the partner shall be amended to exclude such remuneration which is not deductible from the firm’s 

                    case. This is in view of the provision under clause (v) of section 28 which states that the remuneration disallowed in the firm’s case cannot be

                    charged to tax in the partner’s case – sub – section (14). (2) Where TDS/TCS certificates are not furnished along with return of income and such

                    certificates produced before Assessing Officer within two years from the end of the A.Y. in which the income covered by the TDS/TCS certificate 

                    is assessable, the assessing officer shall amend the order of assessment or any intimation as the case may be, to give credit to such TDS/TCS 

                    certificates-sub-section (14). (3) Where loss or depreciation is recomputed in proceedings u/s.147, necessitating recomputation of total income 

                    of the following years, which were computed after set off of such loss or depreciation, AO can amend assessment orders of the relevant years

                    within 4 years from end of the year in which order u/s.147 was passed. (4) When a holding company transfers a capital assets to its wholly owned 

                    subsidiary company or when such subsidiary company transfers a capital asset to its holding company, exemption from capital gains is allowed 

                    u/s.47(iv) and u/s.47(v). Subsequently, if the provision of section 47A are attracted then the capital gains which was originally assessment year in 

                    which the exemption was so granted – sub –section (7B). Within 4 years from the end of year in which section 47A was attracted. (5) Where the 

                    assessing officer adopts stamp duty value as full value of consideration u/s.50C and later such value is revised in any appeal or revision or 

                    reference, the assessment order shall be amended to give effect to such revised value for recomputing the capital gains –sub-section (15).

                    (6) Where capital Gains arising on compulsory acquisition under any law, of an asset is charged to tax and subsequently the assessee makes 

                    investment to claim exemption within the extended period allowed u/s.54H, the AO shall rectify the order of assessment to exclude the capital gain 

                    so exempt.

                    (7) Where capital gain arising from compulsory acquisition of capital assets under any law of referred in sec. 45(5) (a) or 45(5)(b), as the case 

                    may be is computed and subsequently the compensation is reduced, the assessment order shall be amended to recomputed the capital gain 

                    taking into consideration the reduced compensation –subsection(16).

                    (8) Where deduction u/s. 80RRB allowed and subsequent to the allowance of such deduction in respect of any patent, the Controller or the High 

                    Court passes an order under the Patent Act, 1970 revoking the patent or excluding the name of the assessee from the Patent Register as 

                    Patentee in respect of that patent, the assessment order shall be amended withdrawing the deduction granted u/s.80RRB-subsection(17). 

                    (9) Where deduction u/s.10A, 10B, is not allowed because the assessee does not receive the export sales proceeds before the expiry of the 

                     stipulated period and the assessee subsequently receives the export sales proceeds, the assessment order shall be amended to allow 

                     deduction in respect of proceeds received after the stipulated time – section 155(11A)

                     9. Notice of demand – Sec.156

                     When any tax, interest, penalty, or any  other sum is payable inconsequence of any order passed, any Assessing Officer shall serve upon the 

                     assessee, a notice of demand in the prescribed form specifying the sum so payable. Difference between “specifying” and “determining”You

                     may note that a notice of demand can also specify the amount payable by way of tax, interest, penalty, etc. Amount payable cannot be 

                     determined under this section. While framing the assessment, the income and tax payable thereon shall be determined u/s.143(3) or 144 as the 

                     case may be. Assessing  the taxable income u/s.143(3) without determining tax thereon, cannot be made good by determining the tax while 

                     serving notice of demand u/s.156. In case any sum was determined to be payable by an intimation u/s.143(1). such intimation deemed to be the 

                     notice of demand. Therefore in such cases the Assessing Officer need not issue a separate demand notice u/s.156 – proviso to Sec.156

                     Failure to pay the tax wholly or in part and interest shall result in the assessee being treated as an “assessee in default”.

                    Case Law

                    1) Service of notice of demand is mandatory before initiating recovery proceedings. Sec. 156 provides for a vital step to be taken by the 

                    Assessing Officer without which the assessee can not be termed as the defaulter. Failure to serve notice of demand rendered the

                    recovery proceeding invalid – Sri Mohan Wahi Vs. CIT, 246 ITR 799 (SC).

                    2) Secton 156 provides for servicing upon the assessee a notice of demand specifying the amount of tax, interest, penalty, fine or any other sum 

                    payable in consequences of any order passed under the Act. Where the assessment does not indicate levy of interest under sections 234A and 

                    234B it cannot be included in a notice of demand – CIT Vs. Ranchi Club Ltd. (2001) 247 ITR 209 (SC).

                     Intimation of loss – Sec.157

                     In the course of the assessment of the total income of an assessee, if it is established that a loss has been suffered which the assessee is 

                     entitled to carry forward, the Assessing Officer shall notify the assessee by an order in writing, the amount of such loss, as computed by him.

                     Representative assessee – Sec.160

                     In the case of certain assessee the assessment may be made on some other person as a representative assessee. According to Sec.160, 

                     ‘representative assessee’ with reference to the following person means:

                   Every representative assessee is deemed to be assessee under this Act.

                  Case studies

                  1. Can intimation u/s.143(1) succeed notice u/s.143(2) ?

                  Section 143(1) enables the assessing officer to send intimation under that section without prejudice to the provision of the issue of notice u/s.

                  143(2)  for regular assessment. Section 143(2) enables the assessing officer to serve a notice to the assessee requiring the assessee to produce 

                   the evidence on which the assessee may rely in support of the return of income. In view of the above language of law, intimation u/s.143(1) cannot

                   succeed the notice issued u/s.143(2). Therefore, any intimation sent after the service of notice u/s.143(2) is invalid in law – CIT Vs. Gujrat 

                    Electricity Board – 260 ITR 84 (SC).

                    2. Distinguish notice issued u/s.142(1) and notice u/s.143(2). Where the assessee has not furnished a return within the due date prescribed 

                    u/s.139(1) the provision of Sec.142(1) enable an Assessee Officer to serve a notice upon the assessee calling for furnishing a return of income. 

                    Besides, even where a return of income has been filed u/s.139, notice u/s.142(1) can be issued calling upon the assessee to-

                    i. produce books of accounts and documents of the  preceding three years;

                    ii. furnish particulars or information on any matter relevant to the assessment; and

                    iii. submit a list of assets and liabilities not reflected in the balance sheet, after obtaining the approval of Joint Commissioner.

                    As compare to these point, a notice u/s.143(2) can be issued only in a case where the assessee has filed a return of income. The objective of 

                    issuing of notice u/s.143(2) is to ensure that the assessee has not understated his income or has not overstated the loss or has not under paid the 

                    tax in any manner. While, the Assessing Officer prescribes the books, documents etc., to be furnished in response to sec.142(1) notice, the 

                    assessee has the choice of records, documents etc., to be produced in support of the return of income filed in response to the notice served u/s.

                    143(2).

                    3. Can assessment order u/s.143(3)/144 and notice of demand u/s. 156 be sent to the assessee after the expiration of the period         

                    stipulated u/s.153 for completion of assessment?

                    According to Sec.143(3), after hearing such evidence as the assessee may produce and such other evidence as the assessing officer may 

                    required and after taking into account all relevant material which has been gathered, the assessing officer shall by an order in writing-

                    a)  make an assessment of the total income or loss of the assessee; and

                    b) determine the sum payable by the assesee or refund of any amount due to him on the basis of such assessment.

                    Sec.153 prescribed the time limit as 21 months from the end of the assessment year in which income was first assessable for completion of 

                    assessment. An assessing officer is required not only to assess the total income but also determine the tax payable while passing the order, 

                    within the time limit stipulated u/s.153. According to Sec.156 where any tax, interest, penalty etc. is payable in consequence of any order passed, 

                    the assessing shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable. There is no time limit 

                    stipulated for service of notice of demand. However, it should be served within a reasonable period. Therefore, if the amount payable is 

                    determined in the order passed within the time limit, the assessment and notice of demand cannot be invalid merely because they are served 

                    after the end of the stipulated period.

                    4. Can notice of demand be prepared after the expiry of stipulated period when the assessment order was made before the expiry

                     of stipulated period?

                    By virtue of the provision of sec.153, the time limit of completion of regular assessment is 21 months from the end of the relevant 

                    assessment year. The passing of an assessment order involves not only the assessment of total income but also the determination of tax. 

                    Unless the tax is determined on the basis of total income assessed, it cannot be construed that the process of assessment in complete. 

                    Sec143(3) and sec.144 specify that the Assessing Officer shall assess the total income or loss and shall also determine any sum payable by the 

                    assessee. According to the Gujrat High Court, both these steps may be taken up simultaneously or separately but both will have to be taken within 

                    the time prescribed. – CIT Vs. Purushottam Das T. Patel (1993) 209 ITR 52. Therefore, preparing the notice of demand after the period specified 

                    for completion of assessment shall make the order invalid.

                    5. Can reassessment proceeding be initiated, when intimation alone was sent to the assessee and no assessment was made 

                    earlier ?

                    Where the Assessing Officer has reason to believe that income has escaped assessment, he can issue notice u/s.148 even if the assessee has 

                    already been served with an intimation u/s.143(1). Explanation 2(b) to sec.147 provides that where the return of income has been furnished. but 

                    no assessment has been made, it can be considered that income has escape assessment if there is reason to believe that the assessee has

                    understated his income or overstated the loss. Therefore, Assessing Officer is empowered to issue notice u/s.148 initiate reassessment 

                    proceedings when intimation was alone sent to the assessee but no assessment was made earlier. This view was upheld by Supreme Court is 

                    Rajesh Jhaveri stock Brokers case.

                    6. Can reassessment proceedings be initiated, when reassessment was already made in the case of assessee?

                    Assessment or reassessment proceeding can be initiated u/s.147 if the Assessing Officer has reason believe that income has escaped 

                    assessment. For this purpose notice u/s.148 has to be issued within the time prescribed u/s.149 and with the sanction required u/s.151. There is 

                    no restriction about the number of times an Assessing Officer may initiated reassessment proceeding so long as above mentioned conditions

                    are satisfied. Therefore, reassessment proceeding can be initiated when the assessment proceeding already completed.

                    7. Can reassessment proceeding be initiated when the assessment or reassessment proceeding are pending to be completed?

                    If the earlier assessment or reassessment proceeding remain pending with Assessing Officer, there is no need to issue another notice 

                    u/s.148. Once the assessment or reassessment proceeding is validly initiated, the Assessing Officer can proceed to include any other income 

                    also during the same proceeding. Thus, in suc  a situation, the Assessing Officer would not have the authority to issue another notice u/s.148 to

                    initiate reassessment proceedings.

                    8. Can the status of the assessee be changed in the assessment or reassessment proceedings?

                    Where the status claimed in the return is alternate while making the original assessment, it can be challenged – CIT Vs. Adinarayana Murthy, 65 

                    ITR 601 (SC). Changing the status without serving a fresh notice requiring the assessee to file a return has been held to be beyond the 

                    Jurisdiction of the powers of the Assessing Officer by the Bombay High Court in CIT Vs. Associated Cement and Steel Agencies (1983) 147 ITR 

                    776; Allahabad High Court in CWT Vs. Srivastava and  sons (1983) 142 ITR 183 and by the Rajasthan

                     High Court in CWD Vs. Ridhkaran (1971) 84 ITR 705. A contrary view has been expressed by the Kerala High Court in CIT Vs. A.P. Parukutty 

                     Mooppilamma and others (1983) 149 ITR 131 and the Andhra Pradesh High Court in CIT Vs. Seshagiri Rao (1989) 182 ITR 24. According to 

                     these decisions, there is no prvision in law requiring issue of a fresh notice and the  Assessing Officer  is competent to change the status during the

                     course of assessment. However, at the of making re-assessment u/s.147, the Assessing Officer can change the status as held by Punjab High Court, in the case of Dr. 

                     surmukh Singh Uppal Vs. CIT, (1982) 144 ITR 200.

                    9. Can the Assessee demand refund of the tax paid voluntarily on the ground that no assessment was made in his case? Can the assessee seek refund 

                    of tax paid in the event of assessment made on him being declared time barred?

                    The liability to pay tax on the income earned is fastened by the charging section 4 of the Income-tax Act. Such a charge exist, even if no assessment is made. An         

                    assessment is only a process of quantifying the charge and the charge is not obliterated in the absence of such an assessment. Therefore, the claim of refund on the ground 

                    that no assessment was made cannot be sustained as held by Gujarat High Court in the case of Saurashtra Cement and Chemical Industries Ltd. Vs. CIT (1992) 194 ITR 

                    659. Further, under the existing assessment procedure, assessment shall not be made in all case, but it shall be made only in selected cases. Therefore, assessee cannot 

                    demand refund of the tax paid voluntarily, on the ground that the assessment made on him. Even where the assessment order of the Assessing Officer is held as void ab     

                    initio, the assessee the is not eligible for the refund of the tax paid on the reason that no assessment was made, as held by the Supreme Court in CIT vs. Shelly Products 

                    261 ITR 367 (SC).

                    10. The value of closing stock is enhanced in the assessment. Can the assessee demand that the opening stock of subsequent year to be correspondingly 

                    adjusted?

                    The contention of the assessee is correct as the amount of closing stock valued by the assessing officer for one particular assessment year will naturally be the amount to             

                    be taken as the opening stock for the subsequent year as per the IT records. Therefore, the claim of the assessee is justifiable – CIT Vs. Travancore Cochin Chemicals 

                    Limited (2000) 161 CTR 124 (Ker).

 APPEALS AND REVISIONS-

Introduction to Procedural Aspects :-

The assessee is given a right of appeal by the Income Tax Act, 1961, if he feels aggrieved by

the order of Assessing Authority. The assessee has following two remedies available against

the order of Assessing Officer :-

A) Appeal to Commissioner of Income Tax (Appeal) :- First Appeal in all cases shall lie with

CIT (A).

OR

B) Revision by Commissioner of Income Tax : Alternatively if the appeal is not preferred or

if it could not be filed within time limit allowed, the assessee has option to apply u/s 264 to the

Commissioner of Income Tax for revision of order of AO.

There are four stages of appeal under the Act. The flow chart on Appellate mechanism is as

under :

APPEALABLE ORDER OF AO

First Appeal u/s 246 A within 30 days from date of service of order

COMMISSIONER (APPEALS)

Second Appeal u/s 253 within 60 days from date of service of order

Income Tax Appellate Authority (ITAT

)

(Final Fact Finding Authority)

Third Appeal u/s 260 A within 120 days from date of service of order

High Court

(only if substantial question of law is involved)

Final Appeal u/s 261 within 90 days from date of service of order.

Supreme Court of India

Basic Propositions :

1) Appeal can be filed only to Superior Authority than the one passing the Order. As such

appeal against an order passed by a Commissioner u/s 12 AA, or 80 G (5) (vi), 263, 271

or order passed by him u/s 154 amending his order u/s 263, and order passed by Chief

Commissioner or Director General or a Director u/s 272 A, can only be made to ITAT.

2) Appeal can be filed by a person who is aggrieved by the order passed.

3) The right to appeal must be given by express enactment and cannot be implied. The

appeal for its maintainability must have clear authority of law and appellant has to

adhere to all conditions, procedures and restrictions which are attached to the

proceedings.

4) The order must be an “Appealable Order” i.e. it should fall within the orders mentioned

u/s 246 A and 253 of the Act. For example some of the orders are not appealable eg :

Order of refusal to grant stay of demand, Order to levy interest u/s 234 A, 234 B, 234C.

5) The impact of order on previous assessments, imposition of penalty, reopening of

assessment etc should be examined before filing of appeal.

6) It should be ascertained whether the issue is worth appealing for the assessee and

matter should be clearly discussed with the assessee.

First Appeal : Appeal to CIT (A)

1)

Appealable Orders : An assessee aggrieved by any of the following orders may appeal

to the CIT (A) against such order u/s 246 A :-

a) i) an order against the assessee, where the assessee denies his liability to be assessed

under the Income-tax Act; or

ii) an intimation under sub-section (1) or sub-section (1B) of section 143, where the

assessee objects to the making of adjustments; or

iii) any order of assessment under sub-section (3) of section 143 or section 144, where the

assessee objects to the amount of income assessed, or to the amount of tax

determined, or to the amount of loss computed, or to the status under which he is

assessed;

b) an order of assessment, reassessment or computation u/s 147 or section 150;

c) an order of assessment or reassessment of search cases u/s 153 A;

d) an order made under section 154 or section 155 having the effect of enhancing the

assessment or reducing a refund or an order refusing to allow the claim made by the

assessee under either of the said sections;

e) an order made under section 163 treating the assessee as the agent of a non-resident;

f) an order made under sub-section (2) or sub-section (3) of section 170 assessing the

successor when predecessor cannot be found or when tax cannot be recovered from the

predecessor;

g) an order made after partition of HUF under section 171;

h) an order made u/s 201 levying interest for delay in remitting tax deducted at source or

failure to deduct at source;

i) an order made u/s 206 C (6A) levying penalty for failure to collect tax at source or delay

in remitting the tax collected at source;

j) a refund order made under section 237;

k) an order imposing a penalty under –

i) sec. 221; or

ii) sec. 271, sec. 271 A, sec. 271 AAA, sec. 271 F, section 271 FB, section 272 AA

or sec. 272 BB;

l) an order of imposing or enhancing penalty under section 275 (1A);

m) an order of assessment made by an Assessing Officer under clause (c) of sec. 158 BC,

in respect of search initiated u/s 132 or books of account, other document or any assets

requisitioned u/s 132 A;

n) an order imposing penalty under sub-section (2) of sec. 158 BFA;

o) an order imposing penalty u/s 271 B or sec. 271 BB;

p) an order made by a Joint Commissioner imposing a penalty under sec. 271 C, sec. 271

CA, sec. 271 D or sec. 271 E;

q) an order made by a Joint Commissioner or Joint Director imposing a penalty u/s 272 A;

r) an order made by a Joint Commissioner imposing penalty u/s 272 AA;

s) an order imposing a penalty under chapter XXI;

t) an order made by an Assessing Officer other than a Joint Commissioner under the

provisions of the Income-tax Act in the case of such person or classes of person, as the

Board may, having regard to the nature of the cases, the complexities involved and other

considerations direct;

u) an order of assessment u/s 115 WE (3) or section 115 WF, where the assessee being

an employer objects to the value of fringe benefits assessed;

v) an order of assessment or reassessment u/s 115 WG.

2) Form of appeal and Limitation (Sec. 249 and Rule 45)

i) Prescribed Form :- The appeal should be filed and verified in prescribed manner in

Form No. 35 (Rule 45). The person authorized to sign the return u/s 140 should sign

Form No. 35.

ii) Time Limit :- The appeal to CIT (A) should be filed within 30 days of the following dates,

that is to say;

a) Appeal is under section 248, the date of payment of tax.

b) Where the appeal relates to any assessment or penalty, date of service of notice

of demand relating to assessment or penalty.

c) In any other case the date of intimation of order sought to be appealed against is

served.

The delay in filing of appeal can be condoned if the Commissioner (A) is satisfied that

the appellant had sufficient cause for not presenting the appeal within the prescribed

period.

3) Payment of Tax :- According to section 249 (4) no appeal shall be filed unless at the time

of filing of appeal:-

a) Where the return is filed by assessee, the assessee had paid the tax due on Income

returned.

b) Where no return has been filed by the assessee the assessee had paid an amount equal

to amount of advance tax which was payable.

4) Payment of Appeal Fees :- The assessee has to pay an appeal fees as mentioned u/s

249 (1) of the Act . Details enclosed herewith.

5) Documents to be filed with the Appeal :- The appeal should be filed in DUPLICATE

along with following document :

a) Statement of facts :- The brief facts of the case should be mentioned after careful

reading of the order appealed against.

b) Grounds of Appeal : This should be prepared very carefully as this forms the base of the

case and will be required in higher appeals.

c) A general ground for raising additional ground should be mentioned eg :- “any other

ground of appeals, which may be raised at the time of hearing”.

c) Copy of order against which appeal is preferred.

d) Original notice of demand (u/s 156).

e) Copy of challan for payment of fees.

f) Power of Attorney on stamp paper as per Bombay Stamp Act (presently Rs.100).

g) Court fees stamp. (presently Rs.10)

II.

Second Appeal : - Appeal to Income Tax Appellate Tribunal (ITAT).

1. The ITAT is Constituted by the Central Government (Ministry of Law) and consist of

Judicial and Accountant Member. The criteria of selection of Members of ITAT is

prescribed u/s 252 (2) and (2A) of the Act. The appeal to ITAT can be made both by

assessee and by the Department.

2. Appeallable Orders :- As per Section 253 of the Act the assessee aggrieved by any of

following orders may appeal to appellate tribunal :

a) An order passed by a Commissioner (Appeals) under section 115 VZC, 154, 250, 271,

271 A or sec. 272 A; or

b) An order passed by a Commissioner under section 12 AA, 80 G(5) (vi), 263, 271, 272 A

or an order passed by him u/s 154 amending his order u/s 263 or an order passed by a

Chief Commissioner or a Director General or a Director u/s 272 A.

3. Fees :- Assessee has to pay appeal fees as specified in section 253 (6) [Details

enclosed herewith].

4. Time limit : Every appeal shall be filed within sixty days of date on which the order

sought to be appealed against is served on the assessee or the CIT as the case may be.

The delay in filing the appeal may be condoned by ITAT if it is satisfied that there is

sufficient cause for not presenting it within time.

5. Form of Appeal :- Appeal is to filed in Form No. 36, as stated in Rule 47 and should be

verified in prescribed manner. Memorandum of Cross objection shall be in Form 36 A.

6. Documents to filed with Form 36 :- The appeal in Form 36 in

Triplicate shall be

accompanied by :-

a) Statement of facts : - The brief facts of the case should be mentioned after careful

analysis of the order of Assessing Officer.

b) Grounds of appeal (grounds not raised before CIT (A) cannot be raised before ITAT

which can be allowed by ITAT)

c) Copy of order of CIT(A) against which the appeal is preferred with ITAT.

d) Copy of order of the Assessing Officer.

e) Grounds of appeal before CIT (A).

f) Statement of facts filed before CIT (A).

g) Original Challan of fees.

h) Power of Attorney on stamp paper

i) Court fees Stamp

Memorandum of Cross objection

:

On receipt of notice from the tribunal intimating that an appeal against the order of first appellate

authority has been preferred under section 253 (1) or 253 (2) by the other party, the assessing

officer or the assessee may file a memorandum of cross – objections within 30 days from the

date of receipt of such notice. It shall be in Form No. 36A. No fee is required to be paid for

filing such memorandum of cross objection. Even where the assessee or the Assessing Officer

has not preferred an appeal against any part of the order of the first appellate authority (i.e. CIT

(Appeals), they may present a memorandum of cross objection after receipt of notice from the

ITAT. The ITAT may admit any memorandum of cross objections filed after the expiry of 30

days, if it is satisfied that there was sufficient cause for not presenting it within the due date.

Procedures in Appeal (Sec. 250) :-

1) The Commissioner (Appeals) shall fix a day and place for the hearing of the appeal, and

shall give notice of the same to the appellant and to the Assessing Officer against whose

order the appeal is preferred.

2) The following shall have the right to be heard at the hearing of the appeal –

a) The appellant, either in person or by an authorized representative,

b) The Assessing Officer, either in person or by a representative.

3) The Commissioner (Appeals) shall have the power to adjourn the hearing of the appeal

from time to time.

4) The Commissioner (Appeals) may, before disposing of any appeal, make such further

inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and

report the result of the same to the Commissioner (Appeals).

5) The Commissioner (Appeals) may, at the hearing of an appeal, allow the appellant to go

into any ground of appeal not specified in the grounds of appeal, if the Commissioner

(Appeals) is satisfied that the omission of that ground from the form No. 35 of appeal

was not willful or unreasonable.

6) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and

shall state the points for determination, the decision thereon and the reason for the

decision.

7) In every appeal, the Commissioner (Appeals), where it is possible, may hear and decide

such appeal within a period of one year from the end of the financial year in which such

appeal is filed before him under sub-section (1) of section 246A.

8) On the disposal of the appeal, the Commissioner (Appeals) shall communicate the order

passed by him to the assessee and to the Chief Commissioner or Commissioner.

Powers of the Commissioner (Appeals) (Section 251)

In disposing off an appeal, the Commissioner (Appeals), shall have the following powers :

i) In an appeal against an order of assessment, he may confirm, reduce, enhance or annul

the assessment; or

ii) In an appeal against the order of assessment in respect of which the proceedings before

the settlement commission abates under section 245 HA, confirm, reduce, enhance or

annul the assessment.

iii) In an appeals against an order imposing a penalty – he may confirm or cancel, such

order or vary it so as either to enhance or to reduce the penalty;

iv) In any other case – he may pass such orders in the appeal as he thinks fit.

In disposing of an appeal, the Commissioner (Appeals) may consider and decide any

matter arising out of the proceedings in which the order appealed against was passed,

notwithstanding that such matter was not raised before the Commissioner (Appeals) by

the appellant.

v) The Commissioner (Appeal) does not have any power to set aside the order for fresh

assessment by the Assessing Officer. [w.e.f. 01.06.2001]

ADMISSION OF ADDITIONAL EVIDENCE :

1) Production of additional evidence. (Rule 46A) :- The CBDT has framed Rule 46A which

provides that the appellant shall not be entitled to produce additional evidence before

appellate authority except in the following circumstances :

1) Where assessing officer refused to admit the said evidence which ought to have

been admitted.

2) Where appellant was prevented by sufficient cause from producing evidence

called upon by the assessing officer or relevant to any ground in appeal.

3) Where the appellant was prevented by sufficient cause from producing before the

assessing officer any evidence which is relevant to any ground of appeal.

4) Where assessing officer made the impugned order without giving sufficient

opportunity to appellant.

However, the appellate authority must record in writing the reasons for admission of

additional evidence.

2) As regards the powers of appellate authority are concerned, it is well settled that the

appellate authority’s powers are wide enough to cover power to admit additional

evidence. [Babula Chhapalia (1966) 18 STC 17 (SC)].

3) The Commissioner (Appeals) shall not take into account any evidence produced above

unless the Assessing Officer has been allowed a reasonable opportunity :

- To examine the evidence or document or to cross examine the witness produced

by the appellant, or

- To produce any evidence or document or any witness in rebuttal of the additional

evidence produced by the appellant.

ORDERS OF APPELLATE TRIBUNAL (SECTION 254)

1) The appellate Tribunal may, after giving both the parties to the appeal an opportunity of

being heard, pass such orders thereon as it thinks fit. (Sec. 254 (1)).

2) In an appeal filed by the assessee, the appellate tribunal, where it is possible, may hear

and decide such appeal within a period of four years from the end of the financial year in

which such appeal is filed under sub-section (1) or (2) of section 253. [Sec. 254 (2A)].

3) Where an order of stay is made in any proceedings relating to an appeal filed under sec.

253 (1), the Appellate Tribunal shall dispose of the appeal within a period of 180 days

from the date of such order (Proviso 1).

4) The cost of any appeal to the Appellate Tribunal shall be at the discretion of that Tribunal

(sec. 254 (2B)).

5) The Appellate Tribunal shall send a copy of any orders passed by it to the assessee and

to the commissioner. (sec. 254 (3)).

6) The order passed by appellate tribunal shall be final unless appeal is made under

section 260 A to the High Court.

Major Distinction in Powers of CIT (A) & ITAT :-

1) Commissioner (Appeals) has no power to set aside an order whereas Income-tax

Appellate Tribunal has power to do so.

2) Commissioner (Appeals) cannot award costs to parties. Income-tax Appellate Tribunal

can award costs to parties.

3) Commissioner (Appeals) can do enhancement of assessment, Income-tax Appellate

Tribunal cannot do so.

Stay of disputed demand

[section 220 (6)]

1) Although an appeal can be filed by the assessee after depositing the tax due on the

returned income, by the Assessing Officer normally continue with the recovery proceedings of

the tax, demanded as per notice of demand. In such cases the assessee who has presented an

appeal against such order can apply to the Assessing Officer for stay of the disputed demand.

Where an assessee has presented an appeal under section 246A, the Assessing Officer may, in

his discretion, and subject to such conditions as he may think fit to impose in the circumstances

of the case, treat the assessee as not being in default in respect of the amount in dispute in the

appeal, even though the time for payment has expired, as long as such appeal remains

undisposed of.

2) No appeal is possible against the refusal of assessing officer to grant stay under section

220 (6).

3) Under Board Circular No. 530, dated 06.03.1989, the assessing officer will exercise his

discretion under section 220 (6) of the Act (subject to such conditions as he may think fit to

impose) so as to treat the assessee as not being in default in respect of the amount in dispute in

the appeal in the following situations :

i) The demand in dispute has arisen because the assessing officer had adopted an

interpretation of law in respect of which there exists conflicting decisions of one or more High

Courts or the High Court of jurisdiction has adopted a contrary interpretation but the Department

has not accepted that judgment, or

ii) The demand in dispute relates to issues that have been decided in favour of the

assessee in an earlier order by an appellate authority or court in the assessee’s own

case.

4) The filing of an appeal does not result in an automatic stay of the demand. [Union of

India v B.C. Nawan & Others (1972) 84 ITR 526 (Cal)].

5) Stay can also be granted by CIT (A). [Paulsons Litho Works v ITO (1994) 208 ITR 676

(Mad)]

6) The CBDT has issued instructions which states that recovery proceeding may be stayed

where the income determined in assessment is substantially, greater than the returned income

(High Pitch assessment) F. N. 1.6.69 – ITCC dt, 21.08.1969. [Also refer case of N. Rajan Nair

vs ITO (1989) 63 CTR (Ker) 33.]

7) Where income determined on assessment is more than twice the income returned, the

stay should be granted during the appeal. [Maharana Shri Bhagwat Singhji of Mewar vs ITAT

(1997) 223 ITR 192.]

Suggestions :

1.

On fixation of hearing of Appeal :- Initial Aspects :-

a) Acquiring knowledge of client’s profile, general and specific, relevant to issues involved

in appeal, and call for all necessary documents and records.

b) Careful reading of grounds of appeal, order of first appellate authority and the

assessment order (in case of 1

st Appeal Grounds of Appeals & Assessment Orders).

Determining the substantial grounds of appeal and identification of thrust area. Study of various

allegations made by the Assessing Officer for each grounds and respective findings of first

appellate authority.

c) Determination as to need of any additional ground to be taken.

d) Discuss the issues clearly with the client.

e) State only facts in the appeal proceedings. Assumption or incorrect statements or

evidences will undermine your credibility .

2.

Preparation for presentation of Case:-.

a) Thorough preparation of the case in relation to all the aspects is necessary .

b) Through study of allegations of Assessing Officer and findings of Commissioner of

Income –tax (Appeals) on each of the relevant issues in appeal.

c) Study of notices / query letters issued by the assessing officer or the Commissioner of

Income-tax (Appeals) and replies filed in response thereof. Study the written submissions, if

any, filed before the Commissioner of Income-tax (Appeals).

d) Thorough study of all the papers in the paper book and specific relevance of all of them

in the case.

e) All aspects of such thrust areas should be studied thoroughly before hand and notes

prepared for them.

f) Prepare brief note on arguments covering all the allegations, findings, legal issues and

other aspects. The note should cover all the arguments and should be arranged in systematic

and logical sequence so as to assist at the time of hearing. Be however, prepared to vary the

sequence as per the developments in the appeal proceedings.

g) If the case is complex or lengthy, it is advisable to prepare synopsis of arguments and

submit the same to the Tribunal and the other side for convenience at the time of hearing.

h) Prepare a separate groundwise gist of case laws along with their citations to submit at

the time of hearing. Each and every case to be cited should have been thoroughly studied.

Keep ready the case laws with marking at the relevant places to be read before the Tribunal at

the time of hearing if required. Also carefully study the case-laws against the assessee and

prepare a counter reply.

i) If any authoritative books are to be referred, extracts should be kept handy.

j) Keep ready to take before the Tribunal, the relevant important books of accounts and

other relevant documents, etc. or extracts thereof to present before the Bench if required.

3. Preparation & Filing of Paper Book with ITAT.

i) Determining the papers / documents required to be relied upon during the course of

hearing and important for deciding the issue under appeal.

ii) Compilation of paper book containing all such papers / documents, serially numbered

and indexed is to be filed in duplicate with the Tribunal at least a day before the date of hearing

of the appeal along with the proof of service of a copy thereof to the other side at least a week

before, in case of 1

st Appeal, Paper Book can be filed at the time of hearing.

iii) All the papers contained in the paper book should be legible and each paper should be

certified as a true copy by the party filing the same. A retyped / rewritten copy of illegible papers

should be filed. The paper book should be indexed in such a manner as to give brief description

of the relevance of the paper.

iv) All the papers in the paper book should be the papers, which were filed in the

proceedings before the authorities below. A certificate to that effect should also be given on the

index of the paper book by the assessee or his authorized representative.

v) If any party desires to file additional evidence, then the same shall be filed by way of

separate paper book accompanied by an application stating the reasons for filing such

additional evidence and prayer for admission of the same.

vi) The parties shall not be entitled to submit any supplementary paper-book except with the

leave of the Tribunal

4. Presence in ITAT :-

a) Observing dress code

b) Punctuality

c) Observing Court decorum

d) Presentation should be in dignified manner, polite and unambiguous.

Some Important Case Laws:-

1) Agreed additions cannot be challenged - No appeal lies under section 246 (c) against

an assessment relating to an addition where the assessment in that regard was made on

agreed basis – [Sterling Machine Tools v CIT (1980) 123 ITR 181 (All).]

2) Order under section 220 (2) – Order charging interest under section 220 (2) is neither a

part of assessment order nor there is any appeal provided under section 246 and,

therefore, order charging interest under section 220 (2) is not an appealable order –

[ANZ Grindlays Bank PLC v CIT (2000) 108 Taxman 328 (Cal).]

3) An appeal is maintainable in respect of grievances arising out of original assessment

order passed under section 143 (3) even when reassessment proceedings in respect of

that assessment have been initiated under section 147 – [Metal Import (P) Ltd. v CIT

(1994) 72 Taxman 375 (Cal).]

4) Modification Order giving effect to appellate order is appealable - [Bakelite Hylam Ltd. v.

CIT (1988) 171 ITR 344 (AP).]

5) Appellate authority is statutorily bound to consider condonation of delay is filling of an

appeal – [Shrimant Govindrao Narayanrao Ghorpade v CIT (1963) 48 ITR 54 (Bom).]

6) Delay in filing appeal is condonable if appeal is based on a subsequent Supreme Court

decision – [CIT v Sathia Mining & Mfg. Corporation Ltd. (1989) 46 Taxman 195 (Cal.).]

7) Amended law will apply – If during the pendency of appeal or reference, law is amended

retrospectively, the amended law is to be applied by the authority deciding the appeal /

reference – CIT v Straw Products Ltd. (1966) 60 ITR 156 (SC).

8) Appeal once filed cannot be withdrawn – CIT v Rai Bahadur Hardutroy Motilal Chamaria

(1967) 66 ITR 443 (SC) / CIT v B. N. Battachargee (1979) 118 ITR 461 (SC).

9) Revenue can object to delay in filing appeal – Mela Ram & Sons v CIT (1956) 29 ITR

607 (SC).

10) Before admitting additional evidence, ITO must be allowed opportunity – CIT v

Valimohmed Ahmedbhai (1982) 134 ITR 214 (Guj).

11) CIT (A) has discretion to permit the raising of additional grounds – Jute Corporation of

India Ltd. v CIT (1991) 187 ITR 688 (SC).

12) The powers of the CIT (A) are not confined to the subject matter of the appeal but

extend to the subject matter of the assessment – CIT v Ahmedabad Crucible Co. (1994)

206 ITR 574 (Guj).

13) Appellate power conferred on CIT(A) is not confined to matter which had been

considered by ITO and thus additions made by CIT(A) on account of unexplained hundi

loans which had not been considered by ITO would be justified – CIT v Nirbheram

Deluram (1997) 91 Taxman 181 (SC).

14) The Commissioner (Appeals) has inherent powers to stay recovery proceedings –

Paulsons Litho Works v ITO (1994) 208 ITR 676 (Mad).

15) Whenever the question of taxability of income from a new source of income is

concerned, which had not been considered by the Assessing Officer, the jurisdiction to

deal with the same in appropriate cases may be dealt with under section 147 / 148

(reassessment) and section263 (revision), if requisite conditions are fulfilled. It is

inconceivable that in the presence of such specific provisions, a similar power is

available to the first appellate authority. (Decision in CIT v. Union Tyres (1999) 240 ITR

556 / 107 Taxman 447 does not need reconsideration) – CIT v Sardari Lal & Co. (2002)

120 Tax man 595 (Delhi).

16) CIT (A) has powers to reject books of account accepted by the ITO – CIT v McMillan &

Co. (1958) 33 ITR 182 (SC).

17) Appeal against a dead person is void – CIT v Smt. Santosh Rani (1996) 219 ITR 301 /

88 Taxman 209 (MP).

18) ‘Person aggrieved’ has wide meaning – The right to appeal to the Tribunal from an order

passed by the AAC is not confined technically to the party who is a party to the appeal

but is a much wider right which may be exercised by any person who becomes liable to

pay tax by any order against which the appeal is preferred – CIT v N.CH.R Row & Co.

(1983) 144 ITR 557 (Cal).

19) Right to file cross-objections is an independent right – Which may or may not be

exercised by the assessee under section 253 (1) or by the ITO at the instance of the

Commissioner under section 253 (2). – CIT v New India Assurance Co. Ltd. (1983) 141

ITR 367 (Bom).

20) Tribunal is not bound by circular dated 27.03.2000 – CBDT’s Circular, dated 27.03.2000

is only an instruction issued to income tax authorities not to file appeals where tax effect

is less than Rs. One lakh, the Tribunal is not bound by any such instruction. Once

department files an appeal, Tribunal is bound to decide the same on merits – Rani

Paliwal v CIT (2004) 136 Taxman 135 (Punj. & Har).

21) New or additional points must be admitted – It is open to the Tribunal. If as a result of a

judicial decision given while the appeal is pending before the Tribunal, it is found that a

non-taxable item is taxed or a permissible deduction is denied, there is no reason why

the assessee should be prevented from raising that question before the Tribunal for the

first time, so long as the relevant facts are on record in respect of that item – National

Thermal Power Co. Ltd. v CIT (1998) 229 ITR 383 (SC).

22) An appellant before the Tribunal can raise any new or additional point for the first time in

appeal before the Tribunal – CIT v Kerala State Co-operative Marketing Federation Ltd.

(1992) 193 ITR624 (Ker), Kirtidev Chinmebhai HUF v CIT, CIT v Commnwealth Trust

(India) Ltd.(1996)

23) Power to stay recovery of tax is incidental and ancillary – ITO v M. K. Mohammed Kunhi

(1969) 71 ITR 815 (SC).

24) Tribunal must independently decide application for stay – Ashok Kumar Aggarwal v.

ITAT (1997) 226 ITR 490 / 95 Taxman 117 (Delhi).

25) Tribunal must pronounce its judgment in open court – CIT v Sudhir Choudhrie (2005)

147 Taxman 306/278 ITR 490 (Delhi).

26) Revenue authorities has to follow decision of jurisdictional High Court – CIT v G. M.

Mittal Stainless Steel (P) Ltd. (2003) 130 Tax man 67 / 263 ITR 255 (SC).

27) Dispute between Government department and / or public sector undertakings cannot

come before Courts without clearance from high powered Committee – Mahanagar

Telephone Nigam Ltd. v Chairman, CBDT (2004) 137 Taxman 242 / 267 ITR 647 (SC).

I. APPEALS

II. REVISIONS

III. RECTIFICATION

Drafting Appeal and Procedure in Income Tax Appeals before CIT (Appeals) and ITAT

Drafting of Appeal

1. Drafting of Statement of Facts and Grounds of appeal before Commissioner of Income-tax (Appeals) and Income-tax Appellate Tribunal.

The Income-tax Rules, 1962 ( the Rules) only provides that an appeal to the Commissioner (Appeals) shall be made in Form No. 35 and that the form of verification shall be signed and verified by the person who is authorised to sign the return of income under section 140 of the Income-tax Act, 1961 (the Act) (Rule 45) . However, Income-tax (Appellate Tribunal ) Rules, 1963 ( the Tribunal Rules) specifies as to the contents of the memorandum of appeal. Rule 8 mandates that every memorandum of appeal shall be written in English and shall set forth, concisely and under distinct heads the grounds of appeal without any argument or narrative and such grounds shall be numbered consecutively. Rule 47 of the Rules prescribes Form No. 36 for an appeal to the Income-tax Appellate Tribunal (the Tribunal) and Form No. 36A for filing memorandum of cross-objections. Both the memorandum of appeal and memorandum of cross-objections are to be verified by the person specified in Rule 45 as narrated above. Form No. 35 requires to set out a statement of facts along with the ground of appeal. No statement of fact is required to be filed with the memorandum of appeal to be filed with the Tribunal. This is for the reason that the annexures to the memorandum of appeal to be filed before the Tribunal includes Form No. 35 in which statement of facts are narrated. Therefore, it is necessary to present the statement of facts in such a manner so as to clearly bring out the issues in the assessment/penalty proceedings leading to the order under challenge. Rule 22 of the Tribunal Rules provides that memorandum of cross-objection shall be numbered as an appeal and all the rules so far as may be, shall apply to such appeal.

A specimen draft of grounds of appeal is as under:

“On the facts and in the circumstances of the case and in law the Assessing Officer (or ‘ the Commissioner of Income–tax (Appeals)’ where an appeal is filed before the Tribunal against the order of Commissioner (Appeals)) erred in …….without appreciating …………”.

A prayer should be made for deletion or addition/disallowance after taking relevant ground as under :

“The Appellant prays that the addition/ disallowance of Rs. _________ made in respect of/out of ……………. be deleted.”

And at the end the Appellant should crave leave for variation or withdrawal of grounds of appeal as under:

“The Appellant craves leave to add, amend , alter vary and / or withdraw any or all the above grounds of Appeal.”

If the statement of facts /grounds of appeal are separately annexed then the same should be signed by the Appellant.

1. Procedure in appeal

1. As stated hereinabove, an appeal to the Commissioner (Appeals) is to be filed in Form No. 35 and to the Tribunal in Form No. 36. Cross-objections are to be filed in Form No. 36A.

As per notes to the Form No. 35 the memorandum of appeal, statement of facts and the grounds of appeal must be in duplicate and should be accompanied by a copy of the order appealed against and the notice of demand in original, if any. However, it is advisable that an assessee prepares three identical sets of appeal papers which would include the order for the sake of convenience so that he can file two sets with the Commissioner (Appeals) and take the acknowledgment on the third. The memorandum of appeal should be accompanied by the prescribed fee. The schedule of fee is given hereinafter. Further, where the appeal is filed against an order imposing penalty under section 271(1)(c) of the Act , a copy of assessment order must also be attached.

Rule 9 of the Tribunal Rules provides that every memorandum of appeal to be filed before the Tribunal shall be in triplicate and shall be accompanied by two copies (at least one of which is a certified copy) of the order appealed against, two copies of the order of the assessing officer, two copies of the grounds of appeal, before the first Appellate authority and two copies of statement of facts, if any, filed before the said Appellate Authority. In a case of appeal against the order of penalty, the memorandum of appeal shall also be accompanied by two copies of the assessment order. Where an assessment order is passed under section 143(3) rws 144B or under section 143(3) rws 144A or under section 143(3) rws 147, the memorandum of appeal shall also be accompanied by the two copies of the draft assessment order under section 144B or directions under section 144A or the original assessment order as the case may be. The memorandum of appeal before the Tribunal shall also be accompanied by the prescribed fees. However, it is advisable that four identical sets consisting of memorandum of appeal in Form No. 36, order of Commissioner (Appeals), Form No. 35 with annexures and the assessment/penalty order from which the appeal arises are prepared for the sake of convenience so that three sets could be filed before the Tribunal and an acknowledgment can be taken on the fourth. It may be noted that, explanation to Rule 9 clarifies that “certified copy ” will include the copy which was originally supplied to the assessee as well as photostat copy thereof duly authenticated by the assessee or his authorised representative as a true copy.

The Supreme Court in CIT vs. Calcutta Discount Co. Ltd., (1973) 91 ITR 8 (SC) observed that in considering an appeal the Appellate Authority should deal with the substance of the matter at issue and not be unduly influenced by mere procedural technicalities, for example, whether the memo of appeal was or was not in proper form etc.

2. Appeal fees

A fees payable for filing the appeal are given hereunder as Annexure to the chart regarding filing of appeals under the Income-tax Act. However, it may be noted that the Hyderabad Bench of the Tribunal in Andhra Pradesh State Electricity Board vs. ITO (1994) 49 ITD 552 (Hyd) have held that even where total income is computed at a loss and such loss exceeds Rs.1 lakh, the fees payable would be as per the slab prescribed for the income more than Rs. 1 lakh and therefore fees are to be determined on the basis as if loss determined is income. The Mumbai Bench of the Tribunal in Chiranjilal S. Goenka vs. WTO (2000) 66 TTJ (Mum) 728 have held that the stay application for more than one year or for more than one order for the same assessment year can be made on payment of fees of Rs. 500/- only. Further, the Mumbai Bench of Tribunal in Amruta Enterprises vs. Dy. CIT (2003) 84 ITD 172 (Mum) have held that the quantum of penalty under section 271(1)(c) cannot be linked with the assessed income and therefore the fees payable is as per the provisions of section 253 (6)(d). Also, in Narendra Valji Shah vs. ACIT (ITA/3545/M/99 dated 24-5-2000).

The Tribunal (Mumbai Bench C) held that the levy of penalty u/s. 271B is not in any way related to the total income and hence fees would be Rs. 500/- as contemplated in section 253(6)(d). A similar view was taken in Chromatte India Ltd. vs. ITO (ITA/3486-87/M/02 dated 12-2-2002) where the Tribunal held that in an appeal against an order u/s 263 the fees are to be paid as per section 253(6)(d). Also, in Mrs. Nimu R. Thodani vs. Jt. CIT (ITA/5437/M/97 dated 1-2-2000) the Tribunal held that in cases filed with respect to interest under sections 234A, 234B, 234C or any other interest appeal fee would be Rs. 500/- as per section 253(6)(d) because interest is in no way related to the assessed income but is linked with tax payable. The ratio of the said decisions will also apply to the appeals to be filed before Commissioner (Appeals).

3. Who can sign the appeal memo

As stated hereinabove, the form of appeal is to be signed and verified by the person who is authorised to sign the return of income under section 140 of the Act. As such the appeal to be filed by an individual must be signed and verified (i) by the individual himself, (ii) where he is absent from India, by the individual himself or by some person duly authorised by him in this behalf (a valid Power of Attorney should be attached with the appeal) (iii) where he is mentally incapacitated from attending to his affairs, by his guardian or any other person competent to act on his behalf., and where, for any other reason, it is not possible for the individual to sign the appeal, by any person duly authorised by him in this behalf (a valid Power of Attorney should be attached with the appeal). Therefore, unless any of such exceptional circumstances be present, an appeal in order to be valid, has to be signed by the individual himself. In case of the Hindu undivided family, the appeal is to be signed by the Karta and where the Karta is absent from India or he is mentally incapacitiated from attending to his affairs, the appeal is to be signed and verified by any other adult member of such family. If the Hindu undivided family has no major member as Karta, appeal may be validly signed by any male adult member of the family who is in receipt of the income. [pl. see Shridhar Uday Narayan vs. CIT (1962) 45 ITR 577(All)]. “Adult “is a person who has attained the age of discretion which in India is 16 years. A person attains majority at the age of 18 years. In a case of a company an appeal is to be signed and verified by the Managing Director thereof or where for any unavoidable reason, such Managing Director is not able to sign, by any Directors thereof or where there is no Managing Director by any Director thereof. The Calcutta High Court in National Insurance Co. Ltd vs. CIT (1995) 213 ITR 862 (Cal) held that the return signed by a Director and not by the Managing Director was invalid in absence of any explanation. A company which is being wound up or for whose assets any person has been appointed as a receiver, the appeal is to be signed and verified by the liquidator referred to in section 178(1). In case of a firm the appeal is to be signed by the Managing Partner thereof or where for any unavoidable reason, such Managing Partner is not able to sign, by any partner thereof not being a minor or where there is no Managing Partner as such, by any partner thereof not being a minor. In other cases, it is the principal officer who has to sign the appeal. The Bombay Bench of the Tribunal in Mrs. Leezo Salidan vs. CIT 16 TTJ 243 (Bom) , Pyrkashim Stores vs. CIT 9 ITD 93(Bom) and Hariledge vs. ITO 29 Taxman 122 (Bom) as also the Gujarat High Court in Rajendrakumar Maneklal Sheth( HUF) vs. CIT (1995) 213 ITR 715 (Guj) have held that the appeal signed by an advocate / Chartered Accountant is valid. The correctness of this decisions is however not free from doubt. However, there are divergent views on the issue as to whether the defect in signature would render the appeal a nullity. The Allahabad High Court in Court of Wards, Naraindas Narsinghdas vs. CIT in (1950)18 ITR 204 (All) has held the appeal to be invalid whereas a Calcutta High Court in Sheonath Singh vs. CIT (1958) 33 ITR 591 (Cal) has held it to be an irregularity which can be rectified. Please also refer to Gouri vs. CIT (1959) 37 ITR 220 (Pat), Gianchand Virbhan vs. CIT (1960) 39 ITR 414 (Pat), and V.K. Padmalochan Sahu (1974) 95 ITR 113 (Ori) whose views are those in line with that of Calcutta High Court. The Madras High Court in Arunachalam Chettiar vs. CIT (1962) 45 ITR 407 (Mad) and Andhra Pradesh High Court in Chelamala Setti Adeyya vs. CGT (1964) 54 ITR 339 (AP) held that failure to attach notice of demand to memorandum of appeal is mere irregularity which can be subsequently rectified. [Also see Gyan Manjari Kuari vs. CIT (1944) 12 ITR 59 (Pat); Ag IT v. Keshab Chandra Madanlal (1950) 18 ITR 569, 573(SC)]. The Bombay High Court in Malani Trading Co. vs. CIT (2001) 252 ITR 670 (Bom) have held that merely because there is defect in the memo of appeal, dismissal of appeal without giving opportunity to cure said defect will be improper. Where revenue filed appeal without including therein grounds of appeal and statement of facts as required and Tribunal did not issue defect memo, the Gauhati Bench of the Tribunal in Asst. CIT vs. Rayang Timber Products (P) Ltd. (2002) 82 ITD 73 (Gau)(TM) held that appeal was to be deemed to have been accepted and it had to be further presumed that Tribunal had already exercised its discretion under sub-rule (3) of rule 9 of ITAT rules in favour of appellant.

4. Presentation of appeal

A memorandum of appeal to the Commissioner (Appeals) must be presented to the office of the Commissioner in person or by an agent or sent by Registered Post addressed to the Office of the Commissioner (Appeals). A memorandum of appeal to the Tribunal must be presented by the Appellant in person or by an agent to the Registrar at the Head Quarters of the Tribunal at Bombay or to an Officer authorised in this behalf by the Registrar or sent by Registered Post addressed to the Registrar or to such officer. Vide order No. 1 of 1973 dated 1.10.1973, the Registrar of the Tribunal has authorised Asst. Registrars of the Appellate Tribunal situated at different places to be the authorised Officer to receive the appeals or applications as per Rule 7 of the Tribunal Rules. In the case the applicant apprehends that it is last day of the limitation for presentation of his appeal and application, he may present it to the Assistant Registrar at his residence or any other place wherever he may be or to Member of the Tribunal at his residence or wherever he may be. If an appeal is send by post it shall be deemed to have been presented on that day on which it is received by the office of the Commissioner (Appeals) or the Tribunal (pl.see Rule 6(2) of the Tribunal Rules and F.N.Roy vs. Collector of Customs AIR 1957 (SC) 648 – postal authorities are not considered as a agents of the addressee but are the agents of the sender).

5. Time for filing an appeal

An appeal to the Commissioner (Appeals) should be filed within a period of 30 days of the service of the order against which the appeal is preferred. The Calcutta High Court in Charki Mica Mining Co. Ltd. vs. CIT (1978) 111 ITR 193 (Cal) has held that the period of limitation for filing an appeal to the Commissioner (Appeals) is to be computed from the date of the receipt of demand by the assessee and not from the date of receipt of assessment order by the assessee. An appeal to the Tribunal should be filed within a period of 60 days from the date on which the order sought to be appealed against is communicated.

Where the assessment order was served on the person who was not an authorised agent of the assessee, and later on, the assessee applied for and obtained a copy of the assessment order for purpose of filing an appeal, it was held that the time limit for filing the appeal should be reckoned from the date on which the assessee obtained the copy of the assessment order and notice of demand and not from the earlier date of service of the assessment order – CIT vs. Prem Kumar Rastogi (1980) 124 ITR 381 (All). Also see, Jayalakshmi Cloth Stores vs ITO (1981) 132 ITR 764 (AP), Rasipuram vs. CIT (1956) 30 ITR 687 (Mad) and Malayalam Plantations Ltd vs. CIT (1959) 36 ITR 205 (Ker). Where postal acknowledgment in file of Assessing Officer did not bear signature of any person and so also it did not bear any date of service, it was reasonable to believe that the assessee was not served with the order of assessment and the demand notice and in such case appeal filed by the assessee on 10-8-1980 against the order of assessment for the assessment year 1981-82 could not be said to be barred by limitation. (Badri Singh Thakur vs. ITO (1995) 78 Taxman 206(Jab).

6. Delay in filing an appeal

Section 249 (3) gives a power to the Commissioner (Appeals) to condone the delay in filing the appeal to the Commissioner (Appeals). Similarly, section 253(5) empowers the Tribunal to admit an appeal or permit the filing of memorandum of cross-objection after the expiry of the relevant period if it is satisfied that there was sufficient cause for not presenting it within that period. When an application for condonation of delay in filing an appeal is preferred, it is statutory obligation of the appellate authority to consider whether sufficient cause for not presenting the appeal in time was shown by the appellant – Shrimant Govindrao Narayanrao Ghorpade vs. CIT (1963) 48 ITR 54(Bom). An assessee has a statutory right to present an appeal within prescribed period without any order being required from the Appellate Authority for admission of the appeal. But after the expiry of the prescribed period, an appeal can be entertained only if it is admitted by the appellate authority after condoning the delay [CIT vs. Mysore Iron & Steel Ltd. (1949) 17 ITR 478, 480 (Bom)]. But the power to condone the delay is discretionary and the discretion must be judicially exercised. (J & K Small Scale Industries Development Corpn Ltd., v. Dy. CIT (1949) 71 ITD 367 (Asr). The Supreme Court in Collector of Land Acquisition vs. Mrs. Katiji & Others (1987)167 ITR 471(SC), held that Court should have pragmatic and liberal approach. [Also see Raja Jagadambika Pratap Narain Singh vs. CBDT 100 ITR 698 (SC)] The Supreme Court in N. Balkrishnan vs. M. Krishnamurthy (1998) 7 SCC 123 had condoned a delay of 833 days. It was observed that condonation of delay is a matter of discretion of the Court and the only criterion is the acceptability of explanation irrespective of the length of delay. A subsequent decision of the Supreme Court/High Court was considered as sufficient cause for condoning delay in filing the appeal. State of Andhra Pradesh vs. Venkataramana Chudava & Muramura Merchant (1986) 159 ITR 59 (AP). The Courts have also held that the mistake of an Advocate or Chartered Accountant is a reasonable cause for delay in filing an appeal. (pl. see Rafiq C. Munshilal AIR 1981 SC 1400 (1401), Mahavir Prasad Jain vs. CIT (1988) 172 ITR 331 (MP), Concord of India Insurance Co. Ltd. vs. Smt. Nirmaladevi & Sons (1979) 118 ITR 507 (SC). Punam Singh vs. ITO (2002) 257 ITR 38 (Chennai) ( Trib). Shakti Clearing Agency P. Ltd. vs. ITO (127 Taxman 49 (Mag) (Raj.). For other reasons, please see Vijayeshwari Textiles Ltd. vs. CIT (2002) 256 ITR 560 (Mad), Meenakshy Lucky Centre vs. Jt. CIT (2002) 122 Taxman 266 (Coch) (Mag). Revenues petition for condonation of delay was dismissed in Asst. CIT vs. Taggas Industries Development Ltd. (2002) 80 ITD 21 (Cal); Asst. CIT vs. Punna Textiles Industries P. Ltd., (2002) 122 Taxman 264 (Cal) (Mag), Asst. CIT vs. Mahadeo Agarwalla (2002) 125 Taxman 229 (Cal) (Mad).

7. Payment of admitted tax

As far as appeal before the Commissioner (Appeals) is concerned, section 249 (4) provides that no appeal shall be entertained under chapter XX unless at the time of filing the appeal the assessee has paid (a) the taxes due on the returned income or (b) where no return is filed, an amount equal to the amount of advance tax which was payable by him. The Commissioner (Appeals) is empowered, for any good and sufficient reason, to exempt the assessee from operation of this provision in case of (b). Prior to amendment from 1-4-1989 the Commissioner (Appeals) had power to exercise his power to exempt in case (a) also. Order refusing to exercise such discretion is an appealable order – CIT vs. Smt. Nanhibai Jaiswal (1988) 171 ITR 646 (M.P.). Filing of appeal before Tribunal also falls under chapter XX , hence provisions of section 249(4) are applicable to an appeal filed before the Tribunal. (V. Baskaran vs. Asst. CIT (1998) 62 TTJ (Chennai) 698). But the Indore Bench of the Tribunal in Pawan Kumar Lodha vs. ACIT (2003) 78 TTJ (Ind) 983 held that prepayment of tax does not apply to appeal filed before the Tribunal. However, it does not apply to appeals filed to the Tribunal from assessment framed under Chapter XIV B. [V.S.N. Sudhakaran vs. Asst. CIT (2002) 83 ITD 159 (Chennai); Anil Sanghi vs. ACIT (85 ITD 73 (Del) (SB)]. The Madras High Court in CIT vs. Smt. G.A. Somanth Kamani (2002) 125 Taxman 424 (Mad) held that section 249 (4) cannot be read down so as to restrict it to appeal against assessment only it will be applicable in case of appeal against penalty also.

8. Appeal is not maintainable where tax is not deducted at source from payment made to non-resident and is not paid to the Govt. prior to filing of appeal (ITO vs. Tata Iron & Steel Co. Ltd. (2001) 71 TTJ (Cal) 323. Crucial date for deciding the applicability of amended provisions to section 249(4) was the date of issue of notice under section 143(2) and not date of filing return. (Satyendra Pal Chaudhary vs. Asst. CIT (2002) 74 TTJ (Mum) 741) . Where despite adjustment of seized amount full amount of tax due from assessee was not paid before filing appeal, assessee’s appeal was not maintainable (Bharatkumar Sekhsaria vs. Dy. CIT (2002) 82 ITD 512 (Mum) . Also see CIT vs. Smt. G.A. Samonthakamani (2002) 125 Taxman 424 (Mad).

In Shri Parasram G. Purohit vs. ACIT, ITA No. 2689/Bom/93 Bench ‘B’ Assessment year 1989-90, the Hon’ble Bombay Tribunal, held that once the tax required to be paid u/s. 249(4) has been paid before the final date of hearing, it is incumbent to consider the appeal having been filed on the date of payment. (Decision of Supreme Court in CIT vs. Filmistan 42 ITR 163 referred to). Where appellant was ‘notified entity under the Special Court (Trial of offences relating to Transactions in Securities) Act, 1992 and all properties had been attached, in view of this fact that the Appellant had requested the Assessing Officer to approach special Court to release amount of self assessment tax payable and such request had been made by Assessing Officer, assessee could be said to have made implied compliance with the provisions of section 249(4). (Divine Holdings (P) Ltd vs. Dy. CIT (2001) 119 Taxman 27 (Mum) (Mag) (Also see, Ashwin S. Mehta (HUF) vs. Asst CIT (2002) 75 TTJ (Mum) 960). Where assessee filed appeal on 2.4.1976 and 4.11.1997 was last date on which AAC heard appeal by which time assessee had paid entire tax due, the Delhi High Court in CIT vs. Rama Body Builders (2001) 250 ITR 825 (Del), AAC was not justified in refusing to entertain appeal on the ground that tax due had not been paid by 2.4.1976, the date on which the appeal was filed, [also see S. Venkatesh vs. Asst. CIT (2000) 112 Taxman 31 (Chennai) (Mag)].

9. Death of an assessee

Where an assessee to an appeal dies or is adjudicated insolvent or in the case of the company wound up, the appeal will not abate and will continue against the executor, administrator or other legal representatives of the assessee or by or against the assignee, receiver or liquidator as the case may be. In case of a death of assessee, the legal heirs of the assessee must file copy of death certificate and an affidavit of they being the legal heirs. A fresh memorandum of appeal signed by the legal heirs must be filed before the Commissioner (Appeals) or the Tribunal as the case may be where the assessee is the appellant so that the legal heirs are brought on record.

CHART REGARDING FILING OF APPEALS UNDER THE INCOME-TAX ACT, 1961

SCHEDULE OF FEES FOR FILING APPEALS TO THE COMMISSIONER OF

INCOME-TAX (APPEALS) AND INCOME-TAX APPELLATE TRIBUNAL

CIT(A) can set aside assessment not made in accordance with ITAT’s direction

IT is clear that the Commissioner (Appeals) in his impugned order dated 29-4-2004 has not passed an order as if he was setting aside the order of assessment and referring the matter back to the Assessing Officer for making fresh assessment in accordance with his directions. The fact of the matter has been that the order as passed by the Assessing Officer earlier had already been subjected to appeal before the Commissioner (Appeals) and then before the Tribunal. As noticed, the Tribunal in its orders dated 22-11-2001 and 23-11-2001 restored the question of claim of higher depreciation to the file of the Assessing Officer for decision afresh after inspection of the building. In the orders, the Commissioner (Appeals) found that such directions of the Tribunal had not been complied with. The directions of the Tribunal were in any case required to be complied with by the Assessing Officer. The Commissioner (Appeals), in fact, had done nothing more than issuing directions for implementation of the order of the Tribunal. In this position, when the Commissioner (Appeals) was hearing the appeal against an order of assessment passed after the directions of the Tribunal, his power to annul the assessment order if found contrary to the Tribunal’s directions and directing the Assessing Officer to carry out the requirements of the order of the Tribunal cannot be denied.

Even if the amendment in the clause (a) of section 251(1) has been made so as to provide that the Commissioner (Appeals) may not set aside the assessment and refer the case back to the Assessing Officer for making fresh assessment with a view to help bringing an early finalization of the assessment, it cannot be assumed that the Commissioner (Appeals) is divested of the power to annul the assessment and then to pass appropriate consequential order.

In the instant case, the factual aspect has been that the order as passed by the Assessing Officer which was subject of appeal before the Commissioner (Appeals), was not an original order of assessment but was an order of assessment passed after remand by the Tribunal. The directions in remand order having not been complied with, the course as adopted by the Commissioner (Appeals) cannot be said to be de hors the powers available to him under the statute.

On the facts and in the circumstances of the instant case, it appears that even if the appeal had been filed after amendment to section 251(1)(a), the order as passed by the Commissioner (Appeals) directing the Assessing Officer to decide the matter in accordance with the directions of the Tribunal cannot be said to be unauthorized.

There being no illegality or infirmity in the principal order, the Commissioner (Appeals) was justified in rejecting the rectification applications and the Tribunal was also justified in dismissing the appeals filed by the revenue.

HIGH COURT OF RAJASTHAN

CIT v. Hindustan Zinc Ltd.

AND 31, 35, 70, 117 & 142 OF 2008

APRIL 27, 2012

JUDGMENT

Dinesh Maheshwari, J. – These six income-tax appeals by the revenue under section 260A of the Income-tax Act, 1961 ['the Act of 1961'] in relation to the same assessee, arising out of similar nature and inter-related orders, and involving similar nature substantial question of law, have been considered together; and are taken up for disposal by this common judgment.

2. Put in a nutshell, these appeals, relating to the assessment years 1979-80, 1980-81. and 1981-82, have their genesis in the orders dated 29.04.2004 wherein the Commissioner of Income Tax (Appeals), Udaipur ['the CIT(A)'] found that the Assessing Officer ['the AO'] had failed to carry out the directions given by the Income Tax Appellate Tribunal ['ITAT'] in the orders passed in the earlier round of the proceedings when the matters were restored to the file of the AO for decision afresh; and whereby the CIT(A) directed the AO to deal with the issue regarding claim of higher rate of depreciation on the building allegedly forming the part of plant and machinery in accordance with the directions of the ITAT. The respective appeals filed by the revenue against the aforesaid order dated 29.04.2004 were dismissed by the ITAT by a common order dated 20.02.2007. First three of the present appeals by the revenue (ITA Nos. 139/2007, 35/2008, 31/2008) arise out of this common order dated 20.02.2007. The revenue also made the respective rectification applications under section 154 of the Act, 1961 before the CIT(A) who proceeded to reject the same by the common order dated 12.08.2004. The appeals filed by the revenue against this order dated 12.08.2004 were also dismissed by the ITAT by another order of the even date i.e., 20.02.2007. Next three appeals by the revenue (ITA Nos. 117/2008, 70/2008, 142/2008) arise out of this other order dated 20.02.2007.

3. The sum and substance of the matter remains that in the respective orders dated 20.02.2007. the ITAT found the CIT(A) perfectly justified in issuing directions to the AO for compliance of its order as made in the earlier round of the same proceedings. The ITAT, thus, found no case for interference. Assailing the orders so passed by the ITAT and CIT(A) in these appeals, the revenue seeks to contend that in an appeal filed after the amendment to clause (a) of sub-section (1) of section 251 of the Act, 1961, as made w.e.f. 01.06.2001, the Commissioner (Appeals) has no power to remand the matter to the Assessing Officer, and hence, the order dated 29.04.2004, as passed by the CIT(A), remains wholly unauthorised.

4. Only the question of power of the Commissioner (Appeals) after the aforesaid amendment being in question in these appeals, we need not elaborate on all the factual aspects. A brief reference to the background aspects would suffice.

5. The relevant background aspects in ITA No. 139/2007 pertaining to assessment year 1979-80 are as follows: The assessment in this case was earlier completed by the AO on 20.01.1983 at nil income. The appeal against this order was decided by the CIT(A) on 08.03.1994. The assessee’s appeal [ITA No. 1232 (JP)/94] against this order was decided by the ITAT on 22.11.2001. In its order dated 22.11.2001, the ITAT restored essentially two issues to the file of AO for consideration afresh namely, the issue regarding disallowance of the provision for bad debts and written off advances: and regarding the assessee’s claim for higher depreciation on the building, said to be the part of plant and machinery, after inspection of the building by the AO.

6. Such relevant background aspects in ITA No. 35/2008 in relation to the assessment year 1980-81 are as follows; The AO passed the assessment order dated 24.01.1984 at nil income. The appeal was decided by the CIT(A) on 09.03.1994; and the assessee’s appeal [ITA No.1233(JP)/94] against this order was decided by the ITAT on 23.11.2001. In this matter, pertaining to assessment year 1980-81. the ITAT restored three issues to the file of AO for consideration afresh namely regarding non-allowance towards bad debts; the claim under section 80J; and the same issue regarding assessee’s claim for higher depreciation towards the building after inspection of the same by the AO.

7. Similar are the background aspects relating to ITA No. 31/2008 pertaining to assessment year 1981-82 wherein the assessment was made on 06.03.1985, the appeal by the CIT(A) was decided on 09.03.1994, and the ITAT considered the appeal of the assessee [ITA No.1234(JP)/94] in its similar nature order dated 23.11.2001, In this case, pertaining to assessment year 1981-82, the ITAT restored the three issues of same nature to the file of AO. In all these appeals, the issue regarding higher depreciation for the building remains the bone of contention.

8. It is borne out that the AO proceeded to decide all the remanded cases by the different orders of the even date i.e., 10.03.2003. The AO rejected the claim of higher depreciation essentially with the observations that the assessee did not file the requisite details for inspection despite granting of sufficient time. Against the aforesaid orders dated 10.03.2003, separate appeals were filed by the assessee on 22.04.2003 before the CIT(A). All these appeals were decided by separate but similar nature orders dated 29.04.2004. So far the issue at hands is concerned, regarding the claim of depreciation, the CIT(A) found that the AO failed to carry out the requirements of the orders as earlier passed by the ITAT on 22.11.2001 and 23.11.2001 restoring the issue to the file of AO. Thus, the CIT(A) did not approve of the order passed by the AO and directed that the AO, after inspecting the constructed building and keeping in view the directions of ITAT, should come to a finding as to whether the building was a part of the plant and allow depreciation accordingly. For ready reference, the observations as made by the CIT(A) in the order pertaining to assessment year 1979-80 could be noticed as under:-

“3.2 I have considered the observations of the AO and the contentions of the appellant. The Hon’ble ITAT, Jodhpur Bench vide its order in ITA No. 1232(JP)/94 dated 22-11-2001, looking to the nature of buildings claimed as plant restored the matter back to the AO for considering the matter afresh with the following directions:

“A characteristic of plant is that it is an adjunct to the carrying on of a business and not the essential site or core of the business itself. Keeping in view the facts of the case it is necessary to restore this issue to the file of the AO with direction that after proper appraisal of facts and inspection of the building constructed and keeping in view the various judgments discussed above, he should decide this issue afresh as to whether the building is a plant or not.”.

As per the direction of the Hon’ble ITAT, the AO was to decide whether the buildings are plant or not after proper appraisal of the facts and inspection of the buildings constructed and keeping in view the various judgments discussed in the order From the facts as discussed above it is clear that the AO has not followed the directions of the Hon’ble ITAT. The appellant company had submitted that name and address of the units where the buildings were constructed as also photographs of the buildings. The appellant company also offered its assistance for inspecting the buildings at units. Therefore, the AO was not justified in stating that the appellant did not furnish proper information for inspecting the buildings. In view of the above, the AO is directed to comply with the directions of the Hon’ble ITAT as contained in its order dated 22-11-2001. The AO after inspecting the buildings constructed and keeping in view the above directions of the Hon’ble ITAT should come to a finding whether the buildings are plant or not and accordingly allow the depreciation on the same.”

9. Aggrieved by the aforesaid orders dated 29.04.2004, the revenue preferred respective appeals which have been dismissed by the ITAT alongwith other appeals in its common order dated 20.02.2007. The relevant part of the said order dated 20.02.2007 reads as under:-

“ITA NOS. 372 to 375/JU/2004 (A.Y.1979-80 to 1981-82 & 1992-93)

7. Following solitary effective common ground has been raised by the Revenue in these appeals:

“On the facts and in the circumstances of the case, the ld. CIT(A) has erred in directing the Assessing Officer to decide the matter afresh after inspecting the building to ascertain whether it is forming part of plant ignoring the material and other facts brought on record by the Assessing Officer.”

8. Briefly stated, the facts of this ground are that the assessee claimed building to be eligible for higher depreciation. In the absence of the assessee having assisted properly by furnishing necessary details, the Assessing Officer came to hold that higher rate of depreciation was not eligible. The ld. CIT(A) directed the Assessing Officer to decide the matter afresh after inspecting the building to ascertain whether or not it is forming part of plant.

9. Having heard the rival submissions and perused the relevant material on record, we find that the ld. CIT(A) has not decided the issue in assessee’s favour. Rather, the matter has been restored to the Assessing Officer for deciding it afresh. The Hon’ble Jurisdictional High Court in the case of Prem Agencies v. CIT [1988] 173 ITR 110 (Raj.) has held that no infirmity can be traced in the restoration of the matter to the lower authorities. We observe that the ld. CIT(A) has given a simple direction that the Assessing Officer should make inspection of the building constructed and then decide as to whether it should be considered as plant. In our considered opinion, there is no cause of grievance at the Revenue’s end because the issue is open at large before the departmental authorities. We are, therefore, not inclined to disturb the finding of the first appellate authority on this count.

10. Similar ground raised on similar facts and finding of the ld. CIT(A) has been assailed by the Revenue in the other years. Both the sides are in agreement that the facts and circumstances of this ground are mutatis mutandis similar to all the other years. We, therefore, uphold the impugned order as it is not suffering from any infirmity.”

10. As noticed above, the first three appeals herein (ITA Nos. 139/2007, 35/2008 and 31/2008) have been filed against the aforesaid common order dated 20.02.2007 whereby the ITAT has affirmed the order passed by CIT(A) on 29.04.2004 while essentially contending that the CIT(A) had no authority to remand the matter to the AO after the amendment to section 251(1)(a) of the Act, 1961 with effect from 01.06.2001 taking away his powers of remand.

11. For completion of background aspects, it could be noticed that as against the order dated 29.04.2004 the revenue made the respective rectification applications under section 154 of the Act, 1961 before the CIT(A) who proceeded to reject the same by the common order dated 12.08.2004. The appeals preferred against this order dated 12.08.2004 were dismissed by ITAT by the common order of even date i.e., 20.02.2007. The next three appeals herein (ITA Nos. 117/2008, 70/2008 and 142/2008) relate to this other order dated 20.02.2007.

12. Coming to the matters concerning rectification applications later, appropriate it shall be to take up for consideration at the first the three appeals (ITA Nos. 139/2007, 35/2008, 31/2008) arising out of the basic similar nature orders dated 29.04.2004 as passed by the CIT(A) in the respective appeals filed on 22.04.2003. Similar nature substantial question of law as formulated in these three appeals relating to the assessment years 1979-80, 1980-81, and 1981-82 respectively reads as under:-

“Whether the learned Commissioner had the power to send the matter back to the Assessing Officer to decide the matter afresh in view of the amendment made in section 251(1)(a) taking away such power, which was made with effect from 1.6.2001, while the appeal in the present case before the learned Commissioner was filed on 22.04.2003?”

13. The learned counsel for the appellant has questioned the orders impugned essentially with the submission that for the appeals filed on 22.04.2003 i.e., after amendment to section 251(1)(a), the CIT(A) was having no power or authority to remand the matter to the AO. Per contra, the learned counsel for the respondent assessee has referred to the decision of the Hon’ble Supreme Court in the case of S. Shanmugavel Nadar v. States of Tamil Nadu [2003] 263 ITR 658 to submit that the orders earlier passed by the AO merged in the orders passed by the ITAT on 22.11.2001 and 23.11.2001. According to the learned counsel, the AO was, thereafter, duty bound to carry out the compliance of the directions of the ITAT and if he failed to do so, the CIT(A) cannot be faulted at directing him to carry out the compliance of the order of ITAT that had become final. The learned counsel also referred to the decision in the case of Union of India v. Umesh Dhaimode [2002] 124 Taxman 422 (SC) to submit that the appellate authority has power to annul the order and the order of remand necessarily annuls the decision which is under appeal. The learned counsel yet further referred to the decision of the Hon’ble Gujarat High Court in the case of CCE v. Medico Labs 2004 (173) ELT 117 to submit that in relation to section 35A of the Central Excise Act, 1944, similar nature amendment was made by the Finance Act, 2001 in regard to the powers of Commissioner (Appeals); and the Hon’ble Gujarat High Court, with reference to the decision in Umesh Dhaimode (supra), held that even after amendment, such powers of remand have not been taken away specifically.

14. The relevant provision i.e., Section 251(1)(a) of the Act, 1961 reads as under :-

“251. Powers of the Commissioner (Appeals)

(1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers-

(a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment;”

15. Noticeable it is that earlier, there existed an expression after semicolon in the above-quoted clause (a), which conferred other powers on the Commissioner (Appeals); and which was deleted by the Finance Act, 2001 with effect from 01.06.2001. The said deleted portion as occurring in clause (a) after semicolon was as under:-

“or he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by the Commissioner (Appeals) and after making such further inquiry as may be necessary, and the Assessing Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment;”

16. The only question is whether for such deletion of the aforesaid wordings in clause (a) of sub-section (1) of Section 251, the CIT(A) was not justified in restoring the matter to the file of AO in the present cases.

17. Taking into comprehension the factual scenario and particularly the background aspects, it is, at once, clear that the CIT(A) in his impugned orders dated 29.04.2004 has not passed an order as if he was setting aside the order of assessment and referring the matter back to the AO for making fresh assessment in accordance with his directions. The fact of the matter had been that the order as passed by the AO earlier had already been subjected to appeal before the CIT(A) and then before the ITAT. As noticed, the ITAT in its orders dated 22.11.2001 and 23.11.2001 restored the question of claim of higher depreciation to the file of AO for decision afresh after inspection of the building. In the orders dated 29.04.2004, the CIT(A) found that such directions of ITAT had not been complied with. The directions of ITAT were in any case required to be complied with by the AO. The CIT(A), in fact, had done nothing more than issuing directions for implementation of the order of the ITAT. In this position, when the CIT(A) was hearing the appeal against an order of assessment passed after the directions of ITAT, his power to annul the assessment order if found contrary to the ITAT’s directions and directing the AO to carry out the requirements of the order of ITAT cannot be denied.

18. In the case of Umesh Dhaimode (supra) in relation to the appeal under the Customs Act, 1962, the Hon’ble Supreme Court has observed as under:-

“The then judicial Commissioner, Goa, Daman and Diu, took the view that s. 128(2) of the Customs Act, 1962 as it then read, did not vest the appellate authority with the power to remand. Accordingly, he set aside such order and the Revenue is in appeal.

2. As the order under appeal itself notes, the aforesaid provision vested the appellate authority with powers to pass such order as it deemed fit confirming, modifying or annulling the decision appealed against. An order of remand necessarily annuls the decision which is under appeal before the appellate authority. The appellate authority is also invested with the power to pass such order as it deems fit. Both these portions of the aforesaid provision, read together, necessarily imply that the appellate authority has the power to set aside the decision which is under appeal before it and to remand the matter to the authority below for fresh decision.”

19. Even if the amendment in the aforesaid clause (a) of section 251(1) has been made so as to provide that the Commissioner (Appeals) may not set aside the assessment and refer the case back to the AO for making fresh assessment with a view to help bringing an early finalisation of the assessment, it cannot be assumed that the CIT(A) is divested of the power to annul the assessment and then to pass appropriate consequential order.

20. This apart, in the present case, as observed hereinbefore the factual aspect has been that the order as passed by the AO which was subject of appeal before the CIT(A), was not an original order of assessment but was an order of assessment passed after remand by the ITAT. The directions in remand order having not been complied with, the course as adopted by the CIT(A) cannot be said to be de hors the powers available to him under the statute.

21. On the facts and in the circumstances of the present cases, we are clearly of the view that even if the appeal had been filed after amendment to section 251(1)(a) of the Act, 1961, the order as passed by the CIT(A) directing the AO to decide the matter in accordance with the directions of the ITAT cannot be said to be unauthorised. These first three appeals (ITA Nos. 139/2007, 35/2008 and 31/2008) deserve to be dismissed.

22. In view of what has been discussed and held hereinabove, the issues raised in other three appeals (ITA Nos. 117/2008, 70/2008 and 142/2008) are rendered rather academic. There being no illegality or infirmity in the principal order dated 29.04.2004, the CIT(A) was justified in rejecting the rectification applications by the common order dated 12.08.2004; and the ITAT was also justified in dismissing the appeals filed by the revenue by the other common order dated 20.02.2007. The ITAT, in fact, decided four appeals together, three of them relating to the present appeals and another one relating to the assessment year 1992-93 with a short common order that is reproduced in extenso as under:-

“This is a bunch of four appeals, which have been filed by the Revenue in relation to Assessment Years 1979-80, 1980-81, 1981-82 and 1992-93. For three assessment years, viz., 1979-80 to 1981-82, there is a common appellate order, which is dated 12.08.2004. For A.Y.1992-93, there is separate appellate order dated 04.08.2004. In all these appeals, however, exactly identical issue is involved. Therefore, for the sake of convenience and brevity, we are deciding them all by a common order.

2. The relevant facts are that the ld. CIT(A) set aside the issue of depreciation on building, forming part of plant and machinery, by giving a direction to Assessing Officer as per the directions of the Hon’ble ITAT, to decide whether the buildings in question are plant or not after proper appraisal of facts and inspection of the buildings constructed, in view of the various judgments discussed in the order. This order of the Tribunal is dated 22.11.2001. Section 251(1)(a) came into effect from 01.06.2001, according to this amended provision, the power of the ld. CIT(A) to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with his directions, has been withdrawn. In view of these amended provisions the ld. ACIT, Circle-2, Udaipur filed petition u/s 154 of the Act to rectify the order by calling the order back. The ld. CIT(A), however, rejected the application so filed u/s 154, by observing that the specific directions given by him are in consonance and in compliance with the direction of the Hon’ble ITAT so his order was very well within the four-corners of law, and these directions could not be considered as simple set aside of the issues or that of the assessment order. This finding of the ld. CIT(A), is the subject-matter of all these four appeals. The facts and issues involved in all these appeals are, mutatis mutandis, identical.

3. We have heard the rival submissions and perused the evidence available on record.

4. The department has raised similar plea as was raised before the ld. CIT(A). The subject matter of all the above appeal is exactly similar. Having gone through the orders of the CIT(A), the applications u/s 154 so filed, the provisions of section 250 as amended upto date and the ITAT order referred to in this regard, we are of the considered opinion that the ld. CIT(A) has given his direction in compliance of the order of Hon’ble ITAT. The ld. CIT(A) is perfectly correct when he says that this set aside is not a simplicitor set-aside as has been envisaged by the amended provisions of section 251(1)(a) of the Act. We are totally in agreement with the ld. CIT(A), who has done nothing more than getting the order of the Tribunal implemented in its letters and spirit. This is not a simple set aside, which is barred now. Therefore, we confirm the finding of the ld. CIT(A), for all the four years. The grounds taken in all these years, thus, have to fail. This order was pronounced in the open Court, at the end of the hearing.

4. In the result, all the appeals of the Revenue for Assessment Years 1979-80 to 1981-82 and 1992-93, stand dismissed.”

23. We may observe that these three appeals arising out of the aforesaid order of the ITAT, whereby the order passed by the CIT(A) on 12.08.2004 in rejection of the rectification application was affirmed (ITA Nos. 70/2008, 117/2008 and 142/2008), have been admitted on the lines of the other three appeals and while formulating similar nature substantial question of law with change of date of filing of appeal as under:-

“Whether the learned Commissioner had the power to send the matter back to the Assessing Officer to decide the matter afresh in view of the amendment made in section 251(1)(a) taking away such power, which was made with effect from 1.6.2001, while the appeal in the present case before the learned Commissioner was filed on 29.4.2004?”

24. There appears to be an obvious error in the question abovementioned because none of the appeals in question was filed before the CIT(A) on “29.04.2004″ . In fact, this date i.e., 29.04.2004 has been date of the basic order passed by the CIT(A), as noticed and discussed hereinbefore. Be that as it may, the core question as to whether the CIT(A) was right in passing the order dated 29.04.2004 has already been answered against the revenue. As a necessary consequence, it follows that the CIT(A) has rightly rejected the rectification applications and the ITAT has rightly dismissed the appeals relating thereto. Hence, these appeals also deserve to be dismissed.

25. As a result of the discussion aforesaid, all these appeals fail and are dismissed. No costs.

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Income-tax Appellate Tribunal

1.    Introduction

The Appellate Tribunal is the next Appellate Forum available under the Income tax Act, 1961, after the Commissioner of Income Tax (Appeals) decides the appeal filed by the assessee. The Appellate Tribunal provides an opportunity to both the assessee and the assessing authority to come in appeal against the orders passed by the first appellate authority. On the recommendations of the Enquiry Committee in 1936 section 5-A was introduced in the Income-tax Act, 1922 to constitute Income Tax Appellate Tribunal (hereafter referred to as "Appellate Tribunal") which came into force with effect from 25-1-1941. Thus, the Appellate Tribunal has been consistently pursuing its motto ` Sulabh Nyyay Satwar Nyyay’ for the last 62 years. The efficient dispensation of justice by the Appellate Tribunal has made it a model judicial forum. The legislature constituted Tribunals under various fiscal and civil laws, for efficient dispensation of justice and to fight the menace of ever increasing pendency. In 1941 the Central Government sanctioned 3 Benches which were constituted at Bombay, Delhi and Calcutta. Initially the head office was at Delhi and the same was shifted to Bombay in the year 1942. The total sanctioned strength of Benches as on today is 53 benches stationed at 24 different places. The maximum number of benches are; i.e., 10 benches, are in Mumbai itself. All the sanctioned Benches are operational.

2.    Constitution of Appellate Tribunal

The Income Tax Appellate Tribunal is constituted by the Central Government under section 252(1) of the Act. The sub-section (1) to section 252 further vests the Central Government with the power to appoint Members of the Appellate Tribunal as Judicial Members and Accountant Members. As per sub-section (2) to section 252 the Members of the Appellate Tribunal can be selected from the profession as well as from the Department. A person with 10 years experience as advocate or a judicial officer within the territory of India or a member of the Indian Legal Service and has held a post in Grade II of that service or any equivalent or higher post for at least three years is eligible to be appointed as a judicial member. Similarly, an accountant member shall be a person who has for at least ten years been in the practice of accountancy as a Chartered Accountant under the Chartered Accountants Act, 1949 or as a registered accountant under any law formerly in force or partly as a registered accountant and partly as a chartered accountant, or who has been a member of the Indian Income Tax Service, Group A and has held the post of Additional Commissioner of Income Tax or any equivalent or higher post for at least three years. Sub-section (3) to section 252 authorises the Central Government to appoint either the Senior Vice President or one of the vice-Presidents as the President of the Appellate Tribunal. The provisions of sub-section (4) and (4A) of section 252 deal with the appointment of Senior Vice President and Vice-Presidents. Sub-section (5) of the section 252 authorizes the President to delegate the powers of the President to the Senior Vice President or a Vice President.

3.    Sittings of Bench & Territorial Jurisdiction

Rule 3 of the Income-tax Appellate Tribunal Rules provides that a bench shall hold its sitting at its headquarters or at such other place or places as may be authorised by the president. The standing order under Income Tax (Appellate Tribunals) Rules, 1963 dated 16-9-1997 provides that for the place of sitting of the benches and their territorial jurisdiction. The notification mentions that the ordinary jurisdiction of the Bench will be determined not by the place of business or residence of the assessee but by the location of the office of the Assessing Officer.

The President is vested with the powers to constitute the Benches under the provisions of sub-section (1) of section 255. The Benches constituted from among the Members by the President shall exercise the powers vested with the Appellate Tribunal.

4.    Benches

1.    Division Bench

As per the provisions of sub-section (2) to section 255 a Bench of the Appellate Tribunal shall consist of two Members, one shall be a Judicial Member and another shall be accountant member. A division Bench consists of more than one Member. Sub-section (3) provides exemption to usual practice of a Bench consisting of two Members by laying down the pecuniary jurisdiction. Here, it may be relevant to refer to the provision provided under section 24 of the Wealth Tax Act, 1957, which deals with the provisions pertaining to the Appellate Tribunal. Sub-section (11) to section 24 of the Wealth Tax Act provides that the provisions of sub-sections (1), (4) and (5) to section 255 of the Act shall apply to the Appellate Tribunal in the discharge of its functions. Thus, the provisions of sub-section (2) of section 255 of the Act, which lays down the condition that the Bench should consist of one Judicial Member and one Accountant Member is not applicable to the bench constituted under the Wealth Tax Act, 1957. Therefore, the Wealth Tax Bench of the Appellate Tribunal may consist of two judicial Members or two accountant Members. As per the provisions of sub-section (3) to section 255 an appeal, irrespective of the quantum of disputed issue, has to be heard by a division Bench where the assessed income as determined by the Assessing Officer is more than Rs. 5 lakhs. The maximum penalty leviable u/s. 271B is Rs. 1 lakh. An appeal against the levy of the penalty u/s. 271B can be heard by a division Bench only if the assessed income is more than Rs. 5 lakhs. In a case where the assessed loss is more than Rs. 5 lakhs, the pecuniary jurisdiction requires that any appeal pertaining to that assessment year shall have to be heard by the Division Bench only. The Apex Court, though in a different context, has held that the word income includes positive as well as negative profits in the case of CIT vs. Golta 156 ITR 323 (SC). The ratio of this decision is applied for allocating an appeal to a division Bench.

2.    Single Member Court (SMC)

Sub-section 3 to section 255 provides that where the assessed income is less than Rs. 5 lakhs the appeal can be heard and disposed of by the president or any other Member of the Appellate Tribunal, authorised by the Central Government, sitting singly. Here it is important to note that only the Members who have been authorised by the Central Government can constitute Single Member Court (SMC). The provisions of sub-section 3 to section 255 lays down the pecuniary jurisdiction on the basis of assessed income and not on the basis of the quantum of the issue or issues raised before the Appellate Tribunal. Therefore, in a case where the disallowance of Rs. 10 lakhs results into an income of Rs. 2,00,000/- only, the Appeal can be heard by a Single Member Court.

There is no provision for SMC Bench under the Wealth Tax Act , 1957, Gift Tax Act, 1958 or Interest Tax Act, 1972.

3.    Third Member Bench

As mentioned earlier usually a bench of the Appellate Tribunal shall consist of one judicial member and one accountant member. If the members of a Bench differ in opinion on any point, then as per the provisions of sub-section (4) to section 255, the case shall be referred by the president of the Appellate Tribunal for hearing on such point or points by one or more of the other members of the Appellate Tribunal. The point or points referred to the Third Member shall be decided according to the opinion of the majority of the members of the Appellate Tribunal who have heard the case, including those who first heard it (JCIT vs. Jindal Tractbel Power Co. Ltd. (1999) 240 ITR 189 (Kar). While assigning an appeal to the third Member, the president of the Appellate Tribunal must identify and frame points of difference which arose between the members of the Division Bench (ACIT vs. Nageshwar Prasad (late) (2000) 244 ITR 38 (Patna). Section 255 (4) contemplates difference of opinion among the members of the Bench of the Appellate Tribunal with respect to the conclusion. Where the members agree on the conclusion on a point but differ in the reasoning or reasons for arriving at the conclusion there is no need for any reference to the Third Member. (A.N. Seth vs. CIT (1969) 74 ITR 852 (Del.) The Third Member has to confine himself to the point or points of difference referred to him. (ITO vs. ITAT (1985) 155 ITR 310 (Mad.) Once specific differences are referred to the third member and referral order does not express any difference at all, in identifying difference between members the third member cannot alter questions referred to him or cannot modify question and/or reframe questions and decide reframed questions instead of original questions. [Niraj Petrochemicals Ltd. vs. ITO (2000) 73 ITD 1 (Hyd.) (T M).] Regarding the scope of the powers of the Third Member the Hon’ble Allahabad High Court in the matter Jan Mohammed vs. CIT (1953) 23 ITR 15 (All.) has observed that the third member can give his opinion only on the issue on which there was difference of opinion and cannot decide any other issue. The Jurisdiction of Third Member is not confined to the language of question(s) framed in reference but it extends to the entire sum and substance of opinion on specified point(s). The Third Member has power to consider the entire material, reasoning and conclusions recorded by learned members as well as contentions advanced on behalf of the parties and record his findings in such a manner that difference of opinion amongst members can be decided by a majority view — 74 ITD 25 (Pune) (TM) Khopade Kisanrao Manikrao vs. ACIT).

4.    Special Bench

Section 255(3) also provides for Constitution of Special Bench consisting of three or more members. The President, for disposal of particular case or cases, may constitute such Special Bench. At least one of the members of such Special Bench must necessarily be a judicial member and one accountant member. Such Bench may dispose of cases allotted by the President to it for disposal. In M/s. M.V. Visvesvaraya Industrial Research & Development Centre vs. Dy. CIT ITA Nos: 695 & 696/M/98, Asst. Years 1991-92 & 1991-92, order dated 20-6-2000, the Special Bench has held that the President has the power to constitute a Special Bench for the disposal of an appeal for any year even though the reference is pending before the High Court on the same issue for any other assessment year. The Supreme Court in ITAT vs. DCIT (Assts) 218 ITR 275 (SC) has held that ‘The High Court in the exercise of its power under Article 226 of the Constitution cannot sit in appeal or judgement against the administrative decision of the President of the Appellate Tribunal who might have felt that the case was of all India importance and was required to be decided by a larger Bench of the Tribunal of three members. Such an administrative order is not open to scrutiny under Article 226 of the Constitution of India except in extraordinary cases wherein the order is shown to be a mala fide one’.

5.    Appealable orders

As per section 253 any assessee who is aggrieved by an order passed by Commissioner (Appeals) or an order passed by a Commissioner u/s. 263 or u/s. 12AA or u/s. 272A or u/s. 154 amending the order passed u/s. 263 or an order passed by the Chief Commissioner or a Director General or a Director u/s. 272A, may prefer an appeal to the Appellate Tribunal. Sub-section (2) to section 253 specifies that the Department can also prefer appeal against the orders passed under section 250 and section 154. The appeal against the assessment order passed under chapter XIV B of the Act where search action is initiated after 30-6-1995 but before 1-1-1997, lies directly before the Appellate Tribunal and the period prescribed for filing of appeal to Tribunal is 30 days. Where the search is conducted on or after 1-1-1997, the appeal against such orders can be made before the Commissioner (A).

However, certain issues arise where the search action is conducted after 30-6-1995 but before 1-1-1997 and the Tribunal has set aside the assessment order for the block period. Now, against the fresh order passed by the Assessing Officer, whether the appeal lies to the Commissioner (A) or to the Appellate Tribunal is a matter of debate. However, in our opinion, the appeal to such fresh orders should be filed directly before the Appellate Tribunal, due to the reason that for filing appeal relating to the block assessment, the legislature has provided the forum of appeal on the basis of the date of search rather than on the basis of the date of passing of the order. Thus, for filing appeal against the fresh orders or the order giving effect to the higher authority’s orders, the date of search action conducted is important and not the date of passing the order.

6.    Who can file appeal

As per the provisions section 253(1) and (2) the assessee or Commissioner can prefer an appeal. Thus, apparently it seems that an appeal can be preferred by a direct party. However, it has been held by several High Courts that even a third party has a right of appeal if, as a result of an order passed in an appeal by the first appellate authority before whom he is not a party, he is saddled with a liability for any tax or other sum. 32 ITR 762 (Bom) Kikabhai Abdulali vs. ITAT; 234 ITR 617 (Ker) Benoy Kurian vs. Agrl. ITO; 144 ITR 557 (Cal) CIT vs. N. Ch. R. Row & Co.

The Commissioner of Income-tax authorizes the Assessing Officer to file appeals as per sub-section (2) to section 253 CBDT has been issuing notifications laying down the monetary limit with respect to tax effect for preferring an appeal by the Commissioner. Bombay High Court took notice of such circulars/notifications in the case of CWT vs. Executors of Late D.T. Udeshi (1991) 189 ITR 319 (Bom.) and again in the case of CIT vs. Camco Colour Co. (2002) 254 ITR 565 (Bom) observed that considering the instructions issued by CBDT, the Board has taken a policy decision not to file appeal in this type of case. The same is binding on the Revenue. The Madras High Court in the case of CWT vs. S. Annamalai (2002) 258 ITR 675 (Mad.) has followed the abovementioned decision of the Bombay High Court.

7.    Fees payable in an appeal

The appeal should be in conformity with the provisions of section 253(6). This section provides that the appeal shall be in the prescribed form and verified in prescribed manner. It further provides that appropriate fees should be paid. The appeal fees has to be paid as per the scale provided under the section and the proof should be furnished along with the appeal itself. This topic has been dealt with in detail else where in this issue.

8.    Grounds of appeal

The grounds of appeal to be agitated before the Appellate Tribunal should be in conformity with the Rule 8 of Income Tax (Appellate Tribunal) Rules, 1963. The grounds of appeal are the various grounds on which the Appellant challenges the impugned order. The grounds of appeal should be precise and unambiguous. The grounds of appeal should not include arguments. It should be limited to grounds of challenge. But it is very important to bear in the mind that the Grounds of Appeal should be exhaustive and should include all the issues which the Appellant wants to agitate before the Appellate Tribunal. Any grounds of Appeal which is not arising out of the order impugned before the Appellate Tribunal and is being raised for the first time before the Appellate Tribunal should be separately mentioned. The provisions pertaining to the appeal under the Income Tax (Appellate Tribunal) Rules, 1963 are similar to the provisions under section 541 (2) of CPC. This section provides that the memorandum shall set forth, concisely and under distinct heads, the grounds of objection to the decree appealed from without any argument or narrative, and such grounds shall be numbered consecutively. The grounds of objection must arise from the pleading and evidence, and are necessary for the decision of the case.

9.    Additional grounds of appeal

Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, provides that the appellant, shall not, except by leave of Tribunal, urge to be heard in support of ground not set forth in the memorandum of appeal. However, the Tribunal is competent to allow the appellant to raise at the time of hearing of the appeal, additional grounds of appeal even without a formal amendment of the memorandum of appeal (CIT vs. Nelliappan 66 ITR 722 (SC).

New India Life Ass. Co. Ltd. vs. CIT 31 ITR 844, 846 (Bom.)

In Ahmedabad Electricity Co. Ltd. vs. CIT 199 ITR 413 (Bom) (FB), the Court held that Rules 11 and 29 of the Appellate Tribunal Rules indicate that the scope of enquiry before the Tribunal can be wider than the points which are raised before the Tribunal. The Tribunal, therefore, would ordinarily have the power to allow additional points to be raised before it so long as they arise from the subject matter of the proceedings and not necessarily only the subject matter raised in the memorandum of appeal.

The Tribunal has jurisdiction to permit additional grounds to be raised before it, even though they may not arise from the order impugned before it as long as these grounds are in respect of the subject matter of the entire tax proceedings. The Apex Court in the case National Thermal Power Corporation vs. CIT (1998) 229 ITR 383 (SC) observed that Tribunal is confined only to issues arising out of the appeal before the CIT(A) takes too narrow a view of the powers of the Appellate Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceeding we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.

The Rajasthan High Court in the case of Shilpa Associates vs. ITO (2003) 181 CTR (Raj.) 92 has held that the additional grounds of Appeal cannot be rejected on the ground that the same have been filed beyond the time limit provided u/s. 253(3).

Leave to urge additional grounds may be sought either in writing or by oral prayer. Rule 11 of the Appellate Tribunal Rules speaks only of leave and the leave may be sought for either in writing or by an oral prayer — Amines Plasticizers Ltd. vs. CIT, 223 ITR 173 (Gauhati).

Grounds of appeal can be amended by taking leave of the Tribunal orally — Assam Carbon Products Ltd. vs. CIT 224 ITR 57 (Gauhati).

10. Cross objections

If the assessee or the Assessing Officer prefers an appeal to the Tribunal u/s. 253(1) or (2) as the case may be, and the appeal is not rejected under rule 12 of the Income Tax (Appellate Tribunal) Rules, 1963, a notice is to be given by the Appellate Tribunal to the respondent informing him of the fact of such filing, also enclosing the memorandum and grounds of appeal. The respondent can file, u/s. 253(4), a memorandum of cross objections in Form No. 36A, within 30 days from the date of receipt of such notice, against any part of the order of the first appellate authority deciding any issue against him. These provisions are similar to the provisions of section 561 of the CPC. Under CPC the nature of the right to take a cross objection in an appeal is recognized as nothing but the exercise of the same right of appeal which is given to an aggrieved party. Rule 22 of the Income Tax (Appellate Tribunal) Rules, 1963 provides that a cross objection shall be registered and numbered as on appeal and all the rules shall apply to such appeal. In a cross objection the respondent can raise issues which are independent of the grounds of appeal raised by the Appellant. The cross objections need not be confined to the points taken by the opposite party in the main appeal. (CIT vs. Purbanchal Paribahian Gosthi , (1998) 234 ITR 663 (Gauhati). The right to file a memorandum of cross objection is an independent right given to the opposite party in an appeal. The cross-objection of the respondent cannot be rejected on the ground that it had already filed an appeal. (CIT vs. New India Assurance Co. Ltd. (1983) 141 ITR 367 (Bom). The respondent is not required to pay any filing fees and the Tribunal shall dispose of such memorandum of cross objections as if it were an appeal.

11. Rule 27

Rule 27 of the ITAT Rules, 1963, empowers the respondent to defend the order appealed against on any of the grounds decided against him, though he may not have appealed or filed a cross objection. Vahivatdars of Ambaji Temple vs. CIT 58 ITR 675, 684 (Guj.). The Madras High Court in the case of CIT vs. Smt. S. Vijayalakshmi (2000) 242 ITR 46 (Mad.) has held that the absence of appeal by the assessee of cross objection would not prevent the Tribunal from admitting new contention by an assessee when the necessary facts are before the Tribunal.

12. Payment of Tax mandatory on returned income before filing appeal

Section 249(4) provides that no appeal shall be entertained under this chapter unless at the time of filing the appeal the assessee has paid the taxes due on the returned income or where no return is filed, an amount equal to the amount of advance tax which was payable by him. Filing of appeal before Tribunal also falls under this chapter, hence provisions of section 249(4) is applicable. The Chennai Bench of the Appellate Tribunal in the case of V. Bhaskaran vs. ACIT (1998) 62 TTJ 698 held that provisions of section 249(4) are mandatory in nature and do apply and operate for admission of appeals before Tribunal in accordance with section 253. However, the Indore Bench of the Appellate Tribunal has dissented from the above in the case of Pawan Kumar Ladha vs. ACIT (2003) 78 TTJ (Ind.) 983 and held that the condition of prepayment of tax does not apply to appeals filed before the Tribunal. Word ‘chapter’ in section 249 (4) (a) does not cover both chapters; viz., XXA and XXB.

13. Duties of Tribunal

The Appellate Tribunal enjoys special status under Income-tax jurisprudence. It is a creation of the Act, which is enforced by the Finance Ministry of the Central Government. But the Appellate Tribunal is under the administrative supervision of Ministry of Law, Justice and Company Affairs. The role of the Central Government is also limited to the appointment of President, Sr. Vice President, Vice President and the Members. Sub-section (5) to section 255 vests the appellate Tribunal with the power to regulate its own procedure and the procedure of the Benches. Thus, the unique status enjoyed by the Appellate Tribunal makes it a judicial body whose duties and functions are very vital in the enforcement of the Direct tax laws. In my personal view the analysis of the duties and functions of the Appellate Tribunal takes precedence over the power vested with it to perform them.

1.    Primary duties

Opportunity of being heard:

One of the primary duties of the Appellate Tribunal is to settle the lis between the assessee and the Department in terms of the provisions of section 254 (1). The Appellate Tribunal is duty bound to dispose of the appeals filed before it after affording an opportunity of being heard to both the parties. This is a vital requirement of the sub-section (1) to section 254. This duty assumes further importance due to the fact that the order passed under sub-section (1) shall be final subject to the orders of the High Court in a reference u/s. 256 or appeal u/s. 260A. Therefore, it is duty of the Appellate Tribunal to provide an opportunity of being heard which is very vital and the same cannot be whittled down by the provisions of Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 which provides that on an appointed date of hearing, the Appellant does not appear in person or through an authorised representative when the appeal is called on for hearing, the Tribunal may dispose of the appeal on merits after hearing the respondents.

2.    Speaking order should be passed

The Appellate Tribunal being the final authority as far as facts are concerned, it is necessary and it is the requisite of the law that in disposing the appeal it clearly sets out the facts. (E.A. Venkataramien & Sons vs. CIT 65 ITR 416 (Mad.).The Bombay High Court in the case of Anusayaben A. Doshi vs. Jt. CIT (2002) 256 ITR 685 (Bom) emphasized that the conclusion of the Tribunal should be substantiated with reasons.

The Tribunal in deciding a case should not be unduly influenced by trivial procedural technicalities. The memo of appeal should be liberally seen and entertained. No specific formula is necessary for seeking relief at the hands of a court or Tribunal, if the necessary grounds have been taken in the appeal memo. CIT vs. Calcutta Discount Co. Ltd. 91 ITR 811 (SC).

14. Powers of the Appellate Tribunal

As discussed earlier, there are many features which make the Appellate Tribunal a unique judicial forum. The Appellate Tribunal is vested with all the powers the income tax authorities referred to in section 131 by virtue of section 255 (6). The same section further clarifies that any proceeding before the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code. The Appellate Tribunal shall be deemed to be a Civil Court for all the purposes of section 195 and Chapter XXXV of the Code of Criminal Procedure, 1898.

Thus, Appellate Tribunal is a judicial body exercising judicial powers under the statute. It is not empowered to employ its jurisdiction arbitrarily. Whatever it does must be done in consonance with sound judicial principles and in accordance with well-accepted doctrines applicable to judicial bodies. The words "pass such orders thereon as it thinks fit" of section 254(1) were subject matter of judicial scrutiny by various courts and the Apex Court had to define and determine the scope of the powers of the Appellate Tribunal. The powers conferred on the Tribunal to pass "such orders thereon as it thinks fit" in respect of an appeal before it, must be exercised within the limits which can be discovered with reference to the jurisdiction of the authority whose order has given rise to the appeal (CIT vs. Ram Murti 87 ITR 577 (All).) Hon'ble Andhra Pradesh High Court in the case of Thakur Hari Prasad vs. CIT 167 ITR 603 (AP) had observed that the power and jurisdiction of the Tribunal are of wide amplitude and depending upon the exigencies in a given case it has the power to make such appropriate orders thereon as justice of the case demands. The powers of the Tribunal are expressed in the widest possible terms similar to the power of the Appellate Court under section 96 of the Code of Civil Procedure. The words "as it thinks fit" are of wide amplitude to give directions to authorities below to afford an opportunity to the assessee and to the Revenue to adduce evidence afresh and consider the same and to submit a report. However, the Mysore High Court opined that the expression "thereon" clearly and undoubtedly points to the conclusion that the powers of the Appellate Tribunal are limited to the subject matter of the appeal. [Pathikonda Balasubba Setty vs. CIT 65 ITR 252 (Mys)]

As per the observations of the Calcutta High Court in the case of CIT vs. Amaredranath Mukherjee & Bros. 1973 TLR 119 (Cal) the Appellate Tribunal has wide powers in respect of subject matter of an appeal before it, it can decide any question which is material to the subject matter before it even though it was not specifically raised.

The Bombay High Court in the case of CWT vs. N.A. Narielwalla 126 ITR 344 (Bom) observed that before the Appellate Tribunal the point of jurisdiction can be challenged for the first time and it has got all the powers to entertain the same.

1.    Power to call for documents

Under section 255(6), read with section 131, the Tribunal has the power to call for documents relevant for deciding the appeal. In Union of India vs. Shree Shankar Sitaram 95 ITR 523 (All) at the request of assessee the Tribunal directed the department to produce certain records, which pertained to the assessment and penalty proceedings and the department’s claim of privilege under section 124 of the Evidence Act, was negated by the court.

2.    Power to remand

There are no provisions u/s. 254 which are coterminous with the provisions of sub-section (4) to section 250 which gives the first appellate authority the power to direct the Assessing Officer to make further inquiry and report the result of it. However, if the Appellate Tribunal finds in a particular case before it that substantial justice requires the claim of the assessee to be raised before the first appellate authority for the first time should have been investigated by that authority, it is competent to direct it to hear parties and give a finding on the contention. The Gujarat High Court in the case of Saurashtra Salt Mfg. Co. vs. CIT 66 ITR 404 (Guj.) observed that the power to set aside an assessment and to direct the Assessing Officer to make a fresh assessment is clearly comprehended in the words "pass such orders as it thinks fit.: The Madras High Court in the case of V. Ramaswamy Iyengar vs. CIT 40 ITR 377 (Mad.) observed that under Rule 28 the power of remand is only incidental to its power to hear and dispose of the appeal. But the power of remand cannot exceed the jurisdiction under section 254(1). Hence, Tribunal cannot exercise the power of remand for the purpose of enhancing the tax.

3.    Power to award cost

With effect from 1-6-1999, sub-section 2B is inserted to section 254, which gives the discretion to the Tribunal to award costs in suitable cases if the facts so warrant. In ACIT vs. Shanti Star Builders ITA No. 9601/B/91 dated 30-6-1999, Bench ‘B’, Mumbai, the Tribunal awarded a cost of Rs. 2,000/- for the inconvenience caused to the assessee. In that case, the departmental counsel had sought an adjournment though on earlier occasions, it was agreed that on the next date, the case would be argued. The assessees’ counsel had come from Calcutta on both the occasions. In another case, the Appellate Tribunal awarded costs while disposing of dept. appeal holding the issue involved in the appeal as self-evident and appeal as frivolous (M/s. Jay Brothers Investment & Trading vs. DCIT ITA No. 6542/M/97, dated 6th November, 2000 )

4.    Power for rectification of mistake apparent on record

The Tribunal’s power to rectify its orders is derived from the provisions contained in section 254(2) of the Act. The said section provides that the Tribunal shall rectify any mistake apparent from the record by amending any order made by it under sub-section (1) within four years from the date of the order if the mistake is brought to its notice by the assessee or the Assessing Officer. The proviso to section 254(2) makes it clear that any amendment which has the effect of enhancing an assessment or reducing a refund or increasing the liability of an assessee cannot be made unless the Tribunal has heard the assessee of its intention to do so. The Appellate Tribunal Nagpur Bench in the case of Bhilai Engg. Corpn. Ltd. vs. DCIT 92002) 81 ITD 282 (Nag) has held that setting of section 254(2) suggests that words ‘at its own’ are implied, and therefore, time limit of four years is in the context of suo motu rectification and where rectification is to be done in accordance with the prayer made by either parties, such time limit is not much relevant.

1.    Fees

Miscellaneous Applications filed after 1-10-1998 shall be along with the fees of Rs.50/-.

2.    Rule

Rule 34A of the Appellate Tribunal Rules 1963 which was inserted w.e.f. 25th July, 1991 provides for the procedure for dealing with application under section 254(2). It provides that an application shall clearly and concisely set out the mistake apparent from the record of which rectification is sought. The application must be in triplicate and the procedure for filing of appeals is to apply mutatis mutandis to such applications. The Bench which originally heard the matter must ordinarily hear the application, unless the President, Senior Vice President, Vice President or the Senior Member present at the station otherwise directs. The application must be disposed of after hearing both the parties. The proviso to sub-rule (3) of Rule 34A provides that it would not be necessary to post a Miscellaneous Application for hearing if it prima facie appears to be a petition for review. Sub-rule (4) provides that an order disposing of an application under sub-rule (3) shall be in writing with reasons in support of its decision.

5.    No power of review

The Appellate Tribunal does not have any power to review its own order. The statute only permits rectification of mistake apparent on record.

The power of review is not an inherent power but must be conferred by law either specifically or by necessary implication. (Patel Thackersy vs. Profyumansinghji Arjunsinghji AIR 1970 SC 1273. The Courts have consistently held that review proceedings imply those proceedings where a party as of right can apply for consideration of the matter already decided after a fresh hearing on the merits of the controversy between the parties and that such a remedy is available only if provided by the statute. As early as in Trikamlal Maneklal In Re : (1958) 33 ITR 725 (Bom) the Bombay High Court held that the Tribunal having once delivered a judgment which has by operation of law become final is not entitled to review its decision in a subsequent proceeding.

It is said that an exception proves the rule and the same is true with respect to this rule also. One of the exceptions is that a Judicial Tribunal can always recall and quash its own order when it is shown that it was obtained by fraud or by palpable mistake or was made in utter ignorance of the statutory provision. (Mangat Ram Kutiala vs. CIT (1960) 38 ITR 1 (Pun). However, an inherent power to rectify a wrong committed by itself cannot be construed to be a power of review. (Shew Paper Exchange vs. ITO (1974) 93 ITR 186 (Cal.). Thus a Court or Tribunal can be said to have an inherent power and jurisdiction to rectify a wrong or correct an error committed by itself. (S.B. Singar & Sons vs. ITAT (1965) 58 ITR 626 (All.)

It is a moot point as to when the Tribunal can be said to be exercising its inherent power to correct a mistake or its statutory power to correct a mistake apparent from the records under section 254(2) and when the exercise of the power tantamounts to a review of its earlier order.

CERTAIN IMPORTANT CASE LAWS TO ILLUSTRATE THE POINT

1.    Failure to consider material on record rectifiable In CIT vs. Mithalal Ashokkumar (1986) 158 ITR 755, the Madhya Pradesh High Court laid down the principle that although the Appellate Tribunal has no power to review its own order, yet it can certainly correct its mistakes by rectifying the same in case it is brought to its notice that the material which was already on record before deciding the appeal on merits was not considered by it.

2.    Non-consideration of relevant provision of law rectifiable Non-consideration of a provision of law which would have material bearing on the decision is a glaring, obvious and self-evident mistake apparent from the record. Such a mistake would be required to be corrected. (CIT vs. Quilon Marine Produce Co. (1986) 157 ITR 448); Modu Finblo vs. 1st WTO (1995) 53 ITD 53 (Pune) (TM) ; ITO vs. Gilard Electronics (1986) 18 ITD 176 (Jp); ACIT vs. Sornamy Alkington Ltd. (1994) 49 ITD 207 (Del.) Similarly, non consideration of a Rule would also be rectifiable CIT vs. Ballabh Prasad Agarwalla (1997) 90 Taxman 283 (Cal.).

3.    Order contrary to pronouncement constitutes mistake apparent on the record A decision which is delivered contrary to a pronouncement made in the court would constitute a mistake rectifiable. The announcement made in the open court, would constitute an order of the Tribunal. The order which is written subsequently merely consists of reasons for coming to the conclusion which it announced in the court. If the written order is at variance with the pronouncement made in the case there is a mistake in the order which can be rectified. CIT vs. G. Sagar Suri and Sons (1990) 185 ITR 484. (Del).

4.    Order can be amended in the light of retrospective amendment It is, of course, well settled by the decision in M. K. Venkatachal vs. Bombay Dyeing and Mfg., Co. Ltd. (1958) 34 ITR 143 that an amendment with retrospective effect would require a rectification consequent to the retrospective amendment. Also refer CIT vs. Eva Raha (1980) 121 ITR 293 (Gau); CIT vs. Kelvin Jute Co. Ltd. (1980) 126 ITR 679 (Cal.).

5.    Order can be amended in the light of a subsequent Supreme Court decision It is well settled that where no further investigation of facts is called on the facts found, the principle of law declared by the Supreme Court be straightaway applied with the consequence of rendering order mistaken, it would be case of a mistake apparent from record [Walchandnagar Industries Ltd. vs. V. S. Gaitonde (1962) 44 ITR] 260 (SC); CBDT Circular No. 68 dated 17/11/1971 – Chaturvedi & Pithisaria – Circular Book Vol. II page 1847.; ITO vs. Shashi Raj Kapoor (1987) 21 ITD 406 (Bom.) ; His Highness Sir Rama Varma vs. ITO 1982) 2 ITD 491 (Coch).

6.    Failure to consider alternative argument rectifiable In CIT vs. ITAT (1988) 172 ITR 158 (MP) the issue which arose before the Tribunal was as regards the genuineness of certain cash credits and an alternative argument was raised that in any event only the peak ought to have been added. The Tribunal rejected the main contention, but omitted to give its findings on the alternative ground raised. On a Miscellaneous Application moved, the Tribunal held that the non-consideration of the alternative ground as regards the excessiveness of the addition was a mistake apparent on record. The High Court upheld the order of the Tribunal. However, the above decision has to be understood along with the decision of the Bombay High Court wherein, failure to consider argument advanced was held not an error apparent on the record [CIT vs. Ramesh Electric and Trading Co. (1993) 203 ITR 497 (Bom)]. The High Court was concerned with the question whether the non-consideration of an argument constitutes a mistake apparent on the record or not. The Bombay High Court held that such non-consideration would be an error of judgment but not an error apparent on record. It is submitted with due respect that an application of such a principle would be erroneous. The ratio of this decision must be considered in the light of the facts therein and in view of the observation of the court that one of the alleged failures was of the Income-tax Officer and not of the Tribunal. This is also because Bombay High Court in Khushalchand B. Daga vs. ITO (1972) 85 ITR 48 had endorsed the principle that a Tribunal has an inherent jurisdiction to rectify a wrong committed by itself when that wrong causes prejudice for which that party was not responsible. Unfortunately the High Court’s attention had not been drawn to Daga’s case in Ramesh Electric.

7.    Order rejecting Miscellaneous Application cannot be rectified In CIT vs. ITAT (1992) 196 ITR 838, the Orissa High Court took the view that an order rejecting an application for rectification under section is not an order passed under section 254 (1) and therefore it cannot rectified under section 254(2). It is submitted, however, that a Miscellaneous Application would lie if the mistake which is sought to be corrected is in the original order made under section 254(1).

8.    Order made under misconception or misapprehension rectifiable In Maharaja Martant Singh Ju Deo vs. CIT (1988) 171 ITR 586 (MP) Tribunal rectified its order and substituted its earlier findings. The High Court held that the earlier findings where the Tribunal under some misapprehension or misconception. Therefore, when the Tribunal corrected its earlier order it had rightly exercised power under section 254(2) and it was not a review of its earlier order.

9.    Order rejecting Miscellaneous Application cannot be rectified In CIT vs. ITAT (1992) 196 ITR 838, the Orissa High Court took the view that an order rejecting an application for rectification is not an order passed under section 254 (1) and therefore it cannot be rectified under section 254(2). It is submitted, however, that a Miscellaneous Application would lie if the mistake which is sought to be corrected is in the original order made under section 254(1).

6.    No power of enhancement

Under section 254(1), the Appellate Tribunal is not competent to give a finding which is adverse to the assessee and make the latter’s position worse than before, thus resulting in an enhancement of assessment, [Puranmal Radhan Kishore & Co. vs. CIT 31 ITR 294 (Bom)]. It is not open to the Tribunal to give a finding adverse to the assessee which does not arise from any question raised in the appeal nor it is open to it to raise any ground which would work adversely to the appellant and pass an order which makes his position worse than it was under the order appealed against [J.K. Bankers vs. CIT 94 ITR 107 (All)]; so much so that where a set aside of the entire order of assessment and a remand order has the effect of the probability of resulting in an enhancement of the assessment under appeal. The Tribunal is not empowered to do indirectly what it cannot directly do [V. Rama Swamy Iyengar vs. CIT 40 ITR 377 (Mad); Pathi Kanda Balasubba Setty vs. CIT 65 ITR 252 (Mys.)].

However, the Appellate Tribunal’s bench constituted under section 24 of the Wealth Tax Act, 1957 can dispose of the appeal in the manner in which it thinks fit, the order passed by the Appellate Tribunal can enhance the assessment or penalty. But any enhancement to the assessment of penalty should be in conformity with the conditions mentioned in section 24.

Tribunal’s power is limited to the subject matter of the appeal before it. The powers of the Tribunal in dealing with appeals are expressed in section 254(1) in the widest possible terms. The word ‘Therefore of’ restricts the Jurisdiction of the Tribunal to subject matter of the appeal [Hukumchand Mills Ltd. vs. CIT 63 ITR 232 (236, 237) (SC)]. The power restricted to the year under appeal, incidental observations relating to other years, if any, made is not strictly speaking, a finding. The Tribunal has no jurisdiction to give direction with regard to the proceedings of the earlier year or to include deleted amount in other years assessment. ITO vs. Murlidhar Bhagwan Das 52 ITR 335 (SC).

7.    No power to pronounce upon validity of the Act

In CIT vs. Straw Products Ltd. 60 ITR 156 (163-4) the Supreme Court held that the Tribunal and the tax authorities being preservers of this Act, cannot pronounce upon the constitutional validity or vires of any provision of this Act, therefore such a question cannot arise out of the order of Tribunal and cannot be made subject matter of reference to the High Court. Such a question of validity can be raised only in writ petition.

Venkatraman & Co. Ltd. vs. State of Madras 60 ITR 112 (SC)

Dhorggdhra Chemical Works Ltd. vs. CIT 101 ITR 491 (Bom).

15. Ex parte order

Rules 24 and 25 of Appellate Tribunal Rules, 1963, deals with procedure for hearing ex parte by the Tribunal. Proviso to rule 24 provides that when an appeal has been disposed of ex parte and the appellant applies afterwards and satisfies the Tribunal that there was sufficient cause for his non-appearance when the appeal was called out for hearing, the Tribunal shall make an order setting aside the ex parte order and restoring the appeal. If a notice is sent to the assessee by Registered Post, the postal authorities may send back the notice stating that refused to accept or postal authorities may deliver to a person who is not authorised to receive. If on receiving the acknowledgment from postal authorities, ex parte order is passed, if an assessee files an affidavit and brings to the notice to the Tribunal that he has not received or he has not been served, the Tribunal should restore the matter. In Meghji Kanji Patel vs. Kundanmal Chamanlal AIR 1968 Bom 387, the Hon’ble Bombay High Court held that where an affidavit is filed the same has to be accepted. This view of Bombay High Court, is affirmed by the Supreme Court in Puwada Venkateswara Rao vs. Chindamana Venkata Ramana AIR 1976 SC 869, 871.

In CIT vs. Multiplan India (P) Ltd. 38 ITD 320, the reference was filed by the department. On the date of hearing neither the representative of the department was present nor an adjournment application was moved. The Tribunal passed the order after 5 days dismissing the appeal of department, treating the appeal as unadmitted. Against the order, the department filed reference application to refer the matter to High Court. Hon’ble Tribunal rejected the reference application on the ground that the department should have made application for restoration of appeal under rule 24 of the Income tax Appellate Tribunal Rules and observed that revenue chose to add to the litigation for no justifiable reason, hence no question of law arise.

However, the Tribunal has not considered the ratio laid down by Supreme Court in CIT vs. Chenniahha Mudaliar 74 ITR 41 (SC), wherein the Court held that the Tribunal must decide the case on merit and cannot dismiss it for non-appearance of appellant, hence judgment in Multiplan India requires reconsideration.

It has been observed that in number of cases, matters have been dismissed by the Tribunal applying the ratio of Multiplan India and thereafter when an assessee makes an application for restoration under rule 24 of the Income-tax Appellate Tribunal Rules, the same is restored. This results in multiplicity of litigation. The matters come for hearing before the Tribunal after 6 years of filing, it may be possible that the appellant might have changed its address, consultant etc. In such case, before passing the ex parte order, if a notice is sent through Assessing Officer lot of unintended paper work and time can be saved. When an assessee pays the Tribunal fees, it cannot be said that he has no interest in pursuing the matter. It is therefore urged that before applying the ratio of Multiplan India (P) Ltd, a notice may be sent to the assessee through Assessing Officer.

Where an ex parte order is passed against the assessee, great responsibility is cast on the members of Tribunal. The Members have to act not only as Judges but also as representative for the party who is not represented. Duty of the Court is to decide correct interpretation of Law, hence it may not be desirable to decide the issue which is an important question of Law in an ex parte order, however it is inevitable, then the Tribunal may request any member of Bar to help the court as amicus curaie to help the Tribunal. In such situation help of Bar Association may be sought. If such system is developed, it may go a long way in building the confidence of institution in the mind of public. Even ex parte order, should not lead to punishment to an assessee who may not be in a position to engage a competent representative.

16. Preparation of paper book

The provisions regarding filing of paper book before the Income-tax Appellate Tribunal are contained in Rule 18 of the Income-tax Appellate Tribunal Rules, 1963.

Rule 18 of the Appellate Tribunal Rules, 1963:

If the appellant or the respondent, as the case maybe, proposes to refer or rely upon any document or statements or other papers on the file of or referred to in the assessment or appellate orders, he may submit a paper book in duplicate containing such papers duly indexed and paged at least a day before the date of hearing of the appeal along with proof of service or a copy of the same on the other side at least a week before:

Provided, however, the Bench may in an appropriate case condone the delay and admit the paper book.

The Tribunal may suo motu direct the preparation of a paper book in triplicate by and at the cost of the appellant or the respondent containing copies of such statements, papers and documents as it may consider necessary for the proper disposal of the appeal.

The papers referred to in sub-rule(1) above must always be legibly written or typewritten in double space or printed. If xerox copy of a document is filed, then the same should be legible. Each paper should be certified as a true copy by the pary filing the same, or his authorised representative and indexed in such a manner as to give the brief description or the relevance of the document, with page numbers and the authority before whom it was filed.

The additional evidence, if any, shall not form part of the same paper book. If any party desires to file additional evidence, then the same shall be filed by way of a separate paper book containing such particulars as are referred to in sub-rule (3) accompanied by an application stating the reasons for filing such additional evidence.

The parties shall not be entitled to submit any supplementary paper book, except with the leave of the Bench.

Paper/paper books not conforming to the above rules are liable to be ignored.

The Hon’ble Tribunal in exceptional cases accept the paper book even on the day of hearing provided the other side does not object for the same.

As regards the case laws which are not reported in the ITR or ITD, it may be desirable to file the copies of the same as separate paper book which may help the members for speedy disposal of matters.

17. Procedure of Appellate Tribunal

The sub-section (5) to section 255 provides that subject to the provisions of the Act, the Appellate Tribunal shall have power to regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise of its power. The sub-section (6) further provides that the Appellate Tribunal shall, for the purpose of discharging its functions, have all the powers which are vested in the income-tax authorities referred to in section 131, and any proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code (45 of 1860), and the Appellate Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXXV of the Code of Criminal Procedure, 1898 (5 of 1898).

18. Guidance to authorised representative

Rule 16 of the Income Tax Appellate Tribunal Rules, 1963

In any appeal by any assessee, where the memorandum of appeal is signed by his authorised representative, the assessee shall append to the memorandum a document authorizing the representative to appear for him and if the representative is a relative of the assessee, the document shall state what his relationship is with the assessee, or if he is a person regularly employed by the assessee, the document shall state the capacity in which he is at the time employed.

It is important to note that Rule 17 provides that the letter of authority shall be furnished before the Bench before the commencement of the hearing.

Persons who are not authorised to appear u/s. 288 may be permitted to produce books of account should, however, be given by the assessee himself or by a person who is entitled to appear on behalf of an assessee u/s. 288 Circular No. 19-D(XL-62) of 1964, dated 3-7-1964.

A brother-in-law or father-in-law of an assessee can appear as authorised representative u/s. 288(2)(i).

A person who works part time as an accountant for any assessee regularly will be one who is ‘regularly employed’ within the meaning of section 288(2)(i).

An employee, who merely holds a power of attorney to represent his employer at every stage in the income-tax or sales tax or any Court case will not be considered as a person ‘regularly employed’ within the meaning of section 288(2)(i).

However, if he is qualified to represent an assessee otherwise than as an employee

u/s. 288 he may appear on the basis of a power of attorney executed by the assessees. Letter: F.No. 21/4/63-IT, dated 14-6-1963.

The practice of filing power of attorney/ vakalatnama/general power of attorney in favour of a firm or a legal body is not correct and the President, Income-tax Appellate Tribunal, has decided that proper authority in favour of the individual or a joint authority in favour of two or more individuals, only should be filed before the Tribunal.

Notification No. F. 161-Ad(AT)/70, dated 30-12-1971.

19. Dress code for authorised representative

Rule 17A of the Income-tax Appellate Tribunal Rules prescribes the dress for the authorised representative of the parties (other than a relative or regular employee of the assessee) appearing before the Tribunal. As per this rule, in the case of a male, a suit with a tie or buttoned up coat over a pant or National Dress; i.e. a long buttoned up coat or dhoti or churidar pyjama is prescribed. The colour of the coat shall preferably be black. In the case of a female, black coat over white or any other sober colour saree. However, if the authorised representative belongs to a profession like that of lawyers or Chartered Accountants and they have been prescribed a dress for appearing in the professional capacity before any Court. Tribunal or other such Authority, they may at their option appear in that dress in lieu of the dress mentioned above.

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