Drafting Appeal and Procedure in Income Tax Appeals before CIT (Appeals) and ITAT
Drafting of Appeal
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
|Relevant provisions||Sections 246A to 251||Sections 252 to 255|
|Appealable Orders Specified in section||246A||253|
|Time limit||30 days||60 days|
|Prescribed Form||Form No. 35 (Rule 45)||Form No. 36 (Rule 47(1)|
|Cross objection||—||Form No. 36A|
(Rule 47(1) Time Limit 30 days)
|Fees payable||As prescribed – As per Annexure|
|Documents accompanying the Memo of Appeal||Statement of Facts, Ground of Appeal. Notice of Demand and copy of order against which appeal is preferred (In case of appeal against penalty order assessment order also to be annexed).||Grounds of Appeal order of CIT (A) and Form No. 35 with entire set filed along with it|
|No. of copies to be filed||Duplicate||Triplicate|
|Filed with||CIT(A) mentioned in Notice of Demand||The Asst. Registrar, Income-tax Appellate Tribunal|
SCHEDULE OF FEES FOR FILING APPEALS TO THE COMMISSIONER OF
INCOME-TAX (APPEALS) AND INCOME-TAX APPELLATE TRIBUNAL
|Particulars||Fees for filing appeal before CIT (A)||Fees for filing appeal before I.T.A.T|
|Under Income-tax Act, 1961|
|Assessed total income Rs. 1 lakh or less||Rs. 250||Rs. 500|
|Assessed total income more than Rs. 1 lakh but not more than Rs. 2 lakhs||Rs. 500||Rs. 1,500|
|Assessed total income more than Rs. 2 lakhs||Rs. 1000||1% of assessed income subject to a maximum of Rs. 10,000|
|Where subject matter is not covered under any of above||Rs. 250||Rs. 500|
|Under other Direct taxes (Wealth Tax Act/Gift Tax Act etc) In an appeal under Wealth Tax Act, in the case an appeal is not relatable to net wealth as computed by A.O||—||Rs. 500|
|Miscellaneous application u/s. 254(2)||—||Rs. 50|
|Stay Petition||—||Rs. 500|