The Income Tax Appellate Tribunal (ITAT) functions as the second appellate authority under the Direct Taxes Acts, allowing appeals from decisions of the Commissioner of Income Tax (Appeals). Established in 1941, ITAT includes both Judicial and Accountant members. Filing an appeal requires the submission of a scrutiny report by the Assessing Officer (AO), consideration of the tax effect, framing pertinent questions, and proper completion of Form No. 36. Timelines for the appeal process span 55 days from the receipt of the first appellate order to actual filing in ITAT. The structure of ITAT includes various roles, such as the President, Vice Presidents, and departmental members. In corporate insolvency, Assessing Officers should actively engage in Committee of Creditors (CoC) meetings when debts exceed 10% of total liabilities. The Special Leave Petition (SLP) is a crucial legal remedy allowing individuals to appeal to the Supreme Court against lower court decisions. The Supreme Court has broad discretion to grant SLPs based on substantial questions of law or instances of judicial errors. Filing an SLP involves adhering to specific procedural rules and timelines, with requirements such as obtaining a fitness certificate from the High Court and preparing necessary documentation. Key considerations for SLP proposals include ensuring the tax effect is significant, addressing revenue audit objections, and filing within the prescribed timeframe.
Hand Book On Judicial Matters
Chapter-I
FUNCTIONS OF ITAT AND ISSUES RELATED
TO REPRESENTATION BEFORE ITAT
1. Introduction: –
The Commissioner of Income Tax (Appeals) serves as the first appellate authority, while the Income Tax Appellate Tribunal (ITAT) is the second appellate authority. Established in January 1941, the ITAT is a quasi-judicial institution that specializes in handling appeals under the Direct Taxes Acts. Both taxpayers and Assessing Officers can file appeals to the ITAT if they are dissatisfied with the decision of the first appellate authority. The ITAT operates under the Ministry of Law and comprises two types of members: Judicial members and Accountant members.
2. Pre-requisite for Filing Appeal before ITAT:-
1. Scrutiny Report: The Assessing Officer (AO) or Range Head must submit a scrutiny report under Section 253 of the Act to the concerned Principal Commissioner of Income Tax (PCIT), as per the Central Board of Direct Taxes (CBDT) Instruction No. 08/2011 [F NO. 279/MISC./M-43/2011-ITJ], dated August 11, 2011.
2. Tax Effect: Consider the tax effect for Income Tax and Wealth Tax cases, along with any exceptions.
3. Framing Questions: Properly frame both question of fact and question of law.
4. Form No. 36: Ensure the correct completion and submission of Form No. 36.
3. Timelines for filing Appeals to ITAT: –
| Sr. No. |
Stages | Number of Days |
Total Time |
| 1. | Receipt of CIT(A)’s order in the office of Pr.CIT/CIT. | 0 day | 0 day |
| 2. | Sending the order to AO for necessary action along with a copy to Range Head | 5 days | 5 days |
| 3. | Entry in the relevant regis ter and submission of scrutiny report in prescribed proforma by AO to Range Head after giving appeal effect. | 25 days | 30 days |
| 4. | Submission of recommendation by Range Head on scrutiny report to Pr.CIT/CIT along with draft grounds of appeal | 10 days | 40 days |
| 5. | Decision making by the Pr.CIT/CIT including finalization of grounds of appeal and sending the same to AO | 7 days | 47 days |
| 6. | Actual filing of appeal in ITAT by AO | 6 days | 53 days |
| 7. | Intimation of Diary/lodging to the office of Pr.CIT/CIT | 2 days | 55 days |
4. Constitution & Departmental setup in ITAT: –
i. Registrar
ii. Judicial Members
iii. Accountant Members
iv. Vice Presidents
v. President
Departmental Setup.
i. CIT (DR) – CIT
ii. Sr. AR-JC/Addl. CIT
iii. ITO(HQ) to CIT(DR) or Sr. AR
iv. CIT (DR)(ITAT)(Admin.)
v. ITO (ITAT)(HQ)(Admin.)
vi. Inspectors
vii. OS/TA/MTS
5. Benches of ITAT: –
i. Two Member Bench:
a. Typically consists of one Judicial Member and one Accountant Member.
ii. Single Member Bench:
b. At least one bench headed by either a Judicial Member or an Accountant Member.
iii. Special Benches:
c. Constituted to decide issues with wider ramifications.
iv. Third Member Bench:
d. Formed when members of a division bench disagree on a particular issue.
6. Appellate Proceedings Before ITAT: –
i. Filing and Review:
The appellant files the appeal using Form No. 36, which is then reviewed by the Regis trar of ITAT. The Registrar checks for correctness, completeness, and ensures that all required fees are paid. If any discrepancies are found, notices are issued to the appellant for rectification.
ii. Communication:
Once the appeal is accepted for further processing, the Registrar sends an appeal memo to the Respondent. At this stage, the Respondent has the option to file cross-objections if deemed necessary.
iii. Hearing and Presentation:
Cases are listed in the cause list, and the proceedings are scheduled accordingly. During the hearing, the appellant presents facts, arguments, and supporting evidence as outlined in the paper book. Following this, the Respondent presents their rebuttal to the appellant’s contentions.
iv. Order and Timeframe:
After the completion of arguments and evidence presentation, the Bench declares the case as heard. From this point, the Bench has a mandate to pass an order within 90 days. If there are complexities or clarifications needed, the Bench may extend this timeframe by an additional 30 days.
v. Resolution:
In cases where the members of the Bench are unable to reach a consensus or decision, the matter may be referred to a third member for resolution. If the case is released, it is listed for a fresh hearing before a new Bench to ensure a fair and thorough consideration of the issues at hand. The third member conducts hearings and must pass an order within 60 days of declaring the case as heard, with an option to extend this timeframe to 90 days for thorough deliberation.
7. Powers & Limitations of ITAT:-
1. Case Handling:
– ITAT has the authority to hear cases and issue orders based on the merits presented.
2. Admission of Evidence:
– ITAT can admit additional evidence if reasons are recorded for doing so.
3. Fresh Assessments:
– ITAT can set aside orders for fresh assessment by the Assessing Officer, either entirely (“de novo”) or regarding specific issues.
4. Review by CIT(A):
– ITAT can also set aside orders for a fresh decision by the CIT(A), either entirely or on specific issues.
5. Mistake Correction:
– ITAT can correct mistakes apparent from the record based on applications from the parties involved.
6. Limitation on Order Recalls:
– ITAT cannot recall orders that have been decided on their merits.
8. Issues of Presentation Before ITAT:-
Analysis of the order under scrutiny:
| I
ii |
Whether it is combined order for more than one assessment years
If yes, specify assessment years involved and identify specific issues related to different assessment years for filing separate appeals. Use Annexure, if required. |
Yes/No |
| iii | Whether it is combined order for more than one assessee group case? | Yes/No |
| iv | If yes, whether jurisdiction of all assessees falls in the same Range? | Yes/No |
| v | If reply to (iv) above is no. identify the AO/Range CIT having jurisdiction over other assessees for communication of stand taken on common issues? | |
| vi | If the proceedings of order under scrutiny were dependent on some other proceedings (say order under section 263, set aside order, Registration under section 12A etc.), specify the present appellate status of the other proceedings along with ITA No./WP No. etc. | |
| Vii | Whether any additional ground was admitted by the CIT(A)? | Yes/No |
| viii | If yes, whether the AO was intimated of the new grounds? | Yes/No |
| ix | Whether any additional evidence was admitted by CIT(A)? | |
| x | If yes, whether opportunity to AO was granted under Rule 46A to give comments or for countering the same? | Yes/No Yes/No |
Chapter-II
APPEALS TO ITAT
Appealable Orders to appeal by the Commissioner
Hearing of the appeal by the ITAT
Order of the ITAT
Disposal of Appeal Rectification of Appellate Order
Faceless Proceedings before ITAT
1. Mandate of ITAT:
ITAT is mandated to adjudicate appeals filed against orders of:
1. CIT(A) (Commissioner of Income Tax – Appeals)
2. DRP (Dispute Resolution Panel)
3. CIT/PCIT (Commissioner of Income Tax/Principal Commissioner of Income Tax) under section 263 of the Act
4. CIT (Exemption) under section 12AA of the Act
5. PCIT (Principal Commissioner of Income Tax) under section 80G(5)(vi) of the Act
6. CCIT (Chief Commissioner of Income Tax) under section 10(23C)
7. Assessing Officer/PCIT disposing of stay petitions
8. Miscellaneous applications filed against ITAT orders
2. Departmental Appeals: Commissioner’s Authority and Tax threshold
If the Principal Commissioner of Income-Tax or Commissioner of Income-Tax disagrees with the order passed by the Joint Commissioner of Income-tax (Appeals) or the Commissioner of Income- Tax (Appeals) under section 154 or section 250, they may direct the Assessing Officer to file an appeal to the ITAT against these orders. This type of appeal is known as a departmental appeal, where the Income-Tax department challenges the order of the Joint Commissioner of Income-tax (Appeals) or the Commissioner of Income-Tax (Appeals) at the ITAT level.
For such departmental appeals to be allowed, the tax effect involved in the appeal must exceed Rs. 50,00,000. In other words, the Pr.Commissioner of Income-Tax can instruct the Assessing Officer to file an appeal to the ITAT against the order of the Commissioner of Income-Tax (Appeals) only in cases where the tax effect exceeds Rs. 50,00,000. Detailed guidelines and exceptions regarding this provision are provided in Circular No. 17/2019, dated 08-08-2019, and Circular No. 05/2024, dated 15.03.2024.
The term “tax effect” refers to the difference between the tax on the total income assessed and the tax that would have been chargeable if such total income were reduced by the amount related to the disputed issues (“disputed Issues”). However, the tax effect does not include interest, except when the chargeability of interest itself is in dispute. In such cases, the amount of interest becomes the tax effect. If a returned loss is reduced or assessed as income, the tax effect includes notional tax on disputed additions. For penalty orders, the tax effect refers to the quantum of penalty deleted or reduced in the order being appealed against.
The Assessing Officer calculates the tax effect for each assessment year concerning the disputed issues of every taxpayer separately. If the disputed issues arise in multiple assessment years for a taxpayer, an appeal can be filed for those assessment years where the tax effect exceeds the specified monetary limit. No appeal is filed by the department for assessment years where the tax effect is below the monetary limit.
In essence, appeals filed by the Commissioner of Income-tax are now based on the tax effect in the relevant assessment year. However, for composite orders involving multiple assessment years and common issues, appeals are filed only for assessment years where the tax effect exceeds the prescribed limits. If a composite order involves more than one taxpayer, each taxpayer is considered separately.
Adverse judgments related to the following issues should be contested on merits even if the tax effect involved is below the specified monetary limits or if there is no tax effect:
a. Constitutional Validity Challenge:
Cases challenging the constitutional validity of provisions in an Act or Rule.
b. Board’s Orders or Circulars:
Cases where Board’s orders, notifications, instructions, or circulars have been deemed illegal or ultra vires.
c. Revenue Audit Objections:
Cases where Revenue Audit objections have been accepted by the Department.
d. Writ Matters:
Matters subject to writ petitions.
e. Other Direct Taxes:
Matters concerning other direct taxes apart from Income Tax.
f. Non-Quantifiable Tax Effects:
Cases where the tax effect is not quantifiable or not involved, such as the registration of a trust or institution under section 12A.
g. Undisclosed Foreign Assets:
Cases involving additions related to undisclosed foreign assets or bank accounts.
3. Time- limit for presenting appeal –
An appeal to the ITAT must be filed within 60 days from the date on which the order sought to be appealed against is communicated to the taxpayer, Principal Commissioner of Income-Tax, or Commissioner of Income-Tax, depending on the case. However, the ITAT has the discretion to admit an appeal even after the 60-day period if it is satisfied that there was a valid and sufficient reason for not presenting the appeal within the prescribed time
4. Form and Signature Requirements:
The appeal to ITAT must be filed using Form No. 36. The form of appeal, grounds of appeal, and verification must be signed by the person authorized to sign the return of income under section 140. Specifically:
i. For individual taxpayers, the appeal must be signed by the individual taxpayer or by a person duly authorized with a valid power of attorney.
ii. For Hindu Undivided Families, the appeal must be signed by the Karta of the family. If the Karta is absent from India or unable to sign, any other adult member of the family may sign.
iii. For companies, the appeal must be signed by the Managing Director. If the Managing Director is unavailable, any director of the company may sign.
iv. For firms, the appeal must be signed by the Managing Partner. If the Managing Partner is unavailable, any partner (not a minor) may sign.
v. For Limited Liability Partnerships (LLPs), the appeal must be signed by the Designated Partner. If the Designated Partner is unavailable, any partner may sign.
vi. For Local Authorities, the appeal must be signed by the Principal Officer.
vii. For Political Parties, the appeal must be signed by the Chief Executive Officer of the party.
viii. For other associations or persons, the appeal must be signed by the Principal Officer or by any member or person competent to act on their behalf.
5. Memorandum of cross objections –
Upon filing an appeal to the ITAT by the taxpayer or the Assessing Officer, the opposing party will be notified about the appeal, and they have the option to file a memorandum of cross-objections with the ITAT.
The memorandum of cross-objections must be filed within 30 days of receiving the notice and should be submitted using Form No. 36A. There is no fee for filing the memorandum of cross-objections. The ITAT may consider accepting a memorandum of cross-objections even after the 30-day period if there is a valid reason for the delay.
The person authorized to sign Form 36 (the form of appeal) must also sign and verify the memorandum of cross-objections. The ITAT will handle and dispose of the memorandum of cross-objections similar to an appeal filed using Form 36.
6. Documents to be submitted with appeal –
i. Documents Required for the Appeal:
ii. Form No. 36 – to be submitted in triplicate.
iii. Order appealed against – 2 copies (including one certified copy).
iv. Order of Assessing Officer – 2 copies.
v. Grounds of appeal before the first appellate authority (i.e., Commissioner of Income Tax (Appeals)) – 2 copies.
vi. Statement of facts filed before the first appellate authority (i.e., Commissioner of Income-Tax (Appeals)) – 2 copies.
vii. For appeals against penalty orders – 2 copies of the relevant assessment order.
viii. For appeals against orders under section 143(3) read with section 144A – 2 copies of the directions of the Joint Commissioner under section 144A.
ix. For appeals against orders under section 143 read with section 147 – 2 copies of the original assessment order, if any.
x. Copy of the challan for payment of fees
7. Submission of paper book –
The Appellant or the Respondent, also known as the opposite party, may compile a paper book to support their claim. This paper book, submitted in duplicate, should contain documents, statements, or other papers referenced in the assessment or appellate order on which the Appellant/ Respondent intends to rely.
The paper book must be properly indexed, with pages numbered accordingly. It should be filed at least one day before the scheduled hearing of the appeal, accompanied by proof of service showing that a copy of the paper book was provided to the opposite party at least a week before the hearing date. Each document within the paper book must be certified as a true copy by the party submitting it.
In cases of genuine delay, the ITAT may condone the late filing of the paper book. Additionally, the ITAT has the authority to direct the preparation of the paper book in triplicate, to be borne at the cost of either the appellant or the respondent, as deemed necessary for the appeal’s resolution.
It’s important to note that any additional evidence should be filed separately and not included as part of the paper book.
8. Hearing of the appeal by the ITAT –
The ITAT will schedule the date and location for the appeal hearing and notify all parties involved. A copy of the memorandum of appeal must be sent to the Respondent either before or along with this notice. The ITAT will proceed to hear the appeal on the designated date, although it may be adjourned to subsequent dates as necessary.
If the appellant is summoned by the ITAT but fails to appear, whether in person or through an authorized representative, the ITAT may proceed to dispose of the appeal based on the merits after hearing from the Respondent.
Following an ex parte hearing, if the appellant later appears before the ITAT and demonstrates sufficient cause for their earlier non-appearance, the ITAT can set aside the ex parte order and reinstate the appeal. A similar procedure applies if the appeal is disposed of in the absence of the respondent.
9. Filing of additional evidence –
Parties to the appeal are not allowed to file additional evidence, whether oral or documentary, before the ITAT. This means that no new evidence can be introduced during the appeal process.
However, if the Tribunal deems it necessary to consider specific documents, examine witnesses, or receive affidavits to make informed decisions, it may permit the production of such documents, witness examinations, filing of affidavits, and the presentation of additional evidence as deemed necessary.
10. Order of the ITAT –
The Members of various benches of the ITAT hear the appeals assigned to them. Once the appeal is heard, the ITAT will deliver its order within a specified timeframe and communicate it to both the taxpayer and the Assessing Officer.
Appeals are typically heard by a Bench comprising one judicial member and one accountant member. However, appeals where the total income computed by the Assessing Officer does not exceed Rs. 50 lakh may be disposed of by a Single Member Bench.
In cases where the members of the Bench have differing opinions on any point, the decision is made based on the majority view. If the members are equally divided, each member states their points of difference, and the case is referred by the President of the ITAT for further deliberation by one or more other members of the ITAT. The final decision is then based on the majority opinion of all members who have heard the case.
Usually, the Bench announces its orders in court. However, if orders are not announced in court, a list of such orders showing the appeal results and signed by the members is displayed on the notice board of the Bench.
Where it is possible, the ITAT shall dispose off the appeal within a period of four years from the end of the financial year in which appeal is filed.
11. Stay application –
The ITAT may, on an application made by the taxpayer and after considering the merits of the application, pass an order of stay in any proceedings relating to an appeal filed under section 253(1). The stay order will be in operation for a period not exceeding 180 days from the date of such order. The ITAT shall dispose of the appeal within the said period of stay specified in that order.
However, the stay shall be granted by the ITAT only when the assessee has ‘deposited’ or ‘furnished security’ to the extent of 20% of his tax liabilities (i.e. tax, interest, fee, penalty or any other sum payable under the provisions of this Act). [Inserted by the Finance Act, 2020, Applicable w.e.f. Assessment Year 2020 -21].
If such appeal is not so disposed of within the period of stay specified in the order of stay, the ITAT may extend the stay period, on an application made in this behalf by the taxpayer on being satisfied that the delay in disposing of the said appeal is not attributable to the taxpayer. The extension of stay period can be for a further period or periods, as the ITAT thinks fit, but the aggregate of the period originally allowed and the period or periods so extended or allowed shall not, in any case, exceed 365 days and the Appellate Tribunal shall dispose of the said appeal within the period of stay so extended or allowed.
If the appeal is not disposed off within the period allowed or within the period or periods extended, which shall not in any case exceed 365 days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the taxpayer.
12. Rectification of Appellate Order u/s 254(2) of the IT Act-
The ITAT may, at any time within 6 months from the end of the month in which the order was passed, rectify any mistake apparent from record, amend any order passed by it if the mistake is brought to its notice by the taxpayer or Assessing Officer. However, where such amendment has the effect of enhancing an assessment or reducing a refund or otherwise increasing a liability of the taxpayer, it shall not be made unless the Appellate Tribunal has given a notice to the taxpayer of its intention to do so and has allowed the taxpayer a reasonable opportunity of being heard.
13. Faceless Proceedings before ITAT –
To impart greater efficiency, transparency and accountability for the purpose of disposal of appeals by the Appellate Tribunal, the Central Government may make a scheme by:
a. Eliminating the interface between the Appellate Tribunal and parties to the appeal in the course of appellate proceedings to the extent technologically feasible;
b. Optimizing utilization of the resources through economics of scale and functional specialization;
c. Introducing an appellate system with dynamic jurisdiction.
The Central Government may, for the purpose of giving effect to the scheme, issue notification in the Official Gazette, to direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification.
Chapter-III
E-FILING OF APPEAL IN ITAT & CHECKLIST
Note for e-filing
E-Filing Procedure
Note for E-Filing in the ITAT
Mandatory E-Filing:
- Appeals, Memorandum of Cross Objections, Stay Applications, and Miscellaneous Applications, previously submitted in physical form as per the Income Tax (Appellate Tribunal) Rules, 1963, must now be filed electronically. This should be done through the newly developed e-Filing Portal of the ITAT: https://itat.gov.in/efiling/register.
Key Identifiers:
- The Permanent Account Number (PAN) or Tax Deduction and Collection Account Number (TAN) of the Assessee, along with their mobile number and email ID, are essential identifiers in the e-Filing Portal.
Eligibility:
- Any person entitled to file an appeal before the Income Tax Appellate Tribunal under Section 253 of the Income Tax Act, 1961, or any other relevant enactment, may do so electronically through the e-Filing Portal.
Document Requirements:
- All documents requiring signatures must be physically signed before scanning and uploading to the e-Filing Portal.
- All filings, including prayers, petitions, grounds, affidavits, etc., should be typed in Arial font, size 12, on one side of A4 size paper with double spacing and justified horizontally before uploading.
1. E-filing Procedure
Step-I: Login in to ITAT Website ( https://itat.gov.in/efiling/register )
E-filing Registration –
E-Filing Registration Steps:
– Select User Type: Choose ‘J am an Assessee’ if you are an assessee, or ‘J am Department’ if you are an officer of the Income Tax Department.
– Agree to Terms of Use: Click ‘Click here to read and agree to the Terms of Use’ to view the Terms of Use of the e-Filing Portal.
– Review Terms and SOP: Carefully read the Terms of Use and the Standard Operating Procedure (SOP) for e-Filing. Ensure you have all important dates, appeal/order numbers, and addresses of the assessee and department ready.
– Prepare Documents: Have all documents duly signed, scanned, and ready for uploading. Review the List of Documents required for e-Filing of an appeal.
– Submit: click ‘Submit’ to proceed.
2. Important Checklist for e-filing: –
| Particulars | Yes/ No/ NA | ||
| 1 | Mandatory Enclosures | ||
| A | Appeals | ||
| 1 | Memorandum of Appeal | ||
| 2 | Certified copy of the order appealed against (CIT/CIT(A)/AO) | ||
| 3 | Form 35, Grounds of Appeal & Statement of facts filed before the CIT(A) | ||
| 4 | Relevant order(s) of Assessing Officer/Directions of DRP | ||
| 5 | Penalty order | ||
| 6 | Draft assessment order (wherever required) | ||
| 7 | Order of Transfer Pricing Officer | ||
| 8 | Tribunal Fee Challan (in case of an appeal by assessee) | ||
| 9 | Authorization of the CIT to file the appeal (in case of appeal by Revenue) | ||
| B | Cross Objections | ||
| 1 | Memorandum of Cross Objection | ||
| 2 | Authorization of the CIT to file the CO (in case of a C.O. by Revenue) | ||
| C | Stay Applications | ||
| 1 | Stay Application in prescribed format (Annexure-X) | ||
| 2 | Sworn affidavit in support of Stay Application | ||
| 3 | Demand Notice and relevant orders of lower authorities | ||
| 4 | Tribunal Fee Challan (Rs. 500/-) | ||
| D | Miscellaneous Applications | ||
| 1 | Miscellaneous Application | ||
| 2 | Relevant Tribunal Order appealed against which the M.A. is preferred | ||
| 3 | Tribunal Fee Challan (in case of an Miscellaneous Application by assessee) | ||
| 4 | Authorization of the CIT to file the MA (in case of a Miscellaneous Application by Revenue) | ||
| 2 | Optional Enclosures | ||
| 1 | Covering Letter | ||
| 2 | Vakalatnama/Power of Attorney (in case of an appeal by assessee) | ||
| 3 | Application for condonation of delay, wherever required. | ||
| 4 | Affidavit in support of application for condonation of delay | ||
| 3 | All the documents which require the signature of the parties are physically signed, scanned and filed/uploaded. | ||
| 4 | All prayers, petitions, Grounds, affidavits, etc. are typewritten on one side of A4 size 4 paper with double spacing, justified horizontal alignment in font Arial font and font size 12. | ||
| 5 | All documents/enclosures are fully and properly scanned in A4 size Black & White 150-200 DPI resolution, and no pages are missing. | ||
| 6 | Paper Books, if any, are properly paginated and indexed. | ||
| 7 | Tribunal Fee is paid under 300- Self Assessment Others Category’. | ||
| 8 | Legal Representative of the assessee is brought on record, wherever applicable. | ||
| 9 | All the affidavits are properly attested and identified. | ||
| 10 | Vakalatnama/Power of Attorney is properly executed by the party and accepted by the counsel. | ||
| 11 | Details of identical matters in the case of the assessee disposed off by/or pending before the Tribunal, if any. | ||
| 12 | Postal address with PIN code, mobile number and e-mail address are mentioned correctly. Mobile number and e-mail address are valid and in active use. | ||
| 13 | Grounds raised in the appeal, but not raised before the CIT(A), if any. Also furnish an application justifying admission of such Ground(s) by ITAT | ||
Appointment of Special Counsel to Represent the Income Tax
Department Before Tribunals
As per the guidelines for the appointment of Special Counsel, outlined in CBDT order No. F. No. 278/M 23/2021-ITJ dated 18-08-2021, Special Counsel is generally appointed only under exceptional circumstances. The proposal for such an appointment must be submitted using the prescribed proforma A and B, duly recommended by the respective CCIT/DGIT, and requires subsequent approval from the Pr.CCIT of the region. The CBDT order further stipulates that no case can be assigned to any Counsel other than the Standing Counsel, and cases may only be assigned to the Special Counsel after a sanction order is issued by the CBDT.
Additionally, the CBDT order No. F. No. 278/M 23/2021-ITJ dated 08-05-2024 highlights instances where proposals have been received requesting a Special Counsel to act as an “Assisting Counsel” in addition to the primary Special Counsel. The CBDT has stated that this practice should be avoided unless acutely warranted by the facts or circumstances involved. Instead, the services of the empanelled Standing Counsels should be utilized to assist the Special Counsel if necessary.
Further, the Senior Standing Counsel representing the Department in the High Court can be appointed as Special Counsel to represent cases before the Tribunal, as per the terms and conditions laid out in Instruction No. 7/2016 dated 07-09-2016, after obtaining the necessary approval from the Pr.CCIT Mumbai.
Chapter-I
FILING OF APPEAL IN THE HIGH COURT
Appeal to High Court
Procedure for Appeal
Stages for Hearing of Appeal
Cases before HC to be heard by not less than two judges
Meaning of Substantial Question of Law
Filing fee
No Abatement of Appeal
1. Appeal to High Court: –
The filing of appeals in the High Court against the orders of the Income Tax Appellate Tribunal (ITAT) is governed by section 260A and 260B of the Income Tax Act, 1961.
Section 260A states as under:
(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law.
(2) [The [Principal Chief Commissioner or] Chief Commissioner or the [Principal Commissioner or] Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this Sub-section shall be—]
a. filed within one hundred and twenty days from the date on which the order appealed against is [received by the assessee or the[ Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner];
b. [ **
c. in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.
[(2A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in clause (a) of Sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.]
(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.
(4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question:
Provided that nothing in this Sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.
(5) The High Court shall decide the question of law so formulated and deliver such judgement thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.
(6) The High Court may determine any issue which –
a. has not been determined by the Appellate Tribunal; or
b. has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section.
(7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.]
2. Procedure for appeals: –
Who can file appeal? –
Section 260A(1) provides that an appeal shall lie before the High Court from every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law. The section 260A(2) states that the Principal Chief Commissioner or Chief Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court.
2. Stages for Hearing of Appeals: –
The appeal is heard in two stages.
2.12.1 First-Admission to consider whether the issue involved in appeal is a substantial question of law or not. Where the High Court is satisfied that a substantial question of law is involved, it will formulate the same.
2.2 Second- The appeal is finally disposed of after hearing. After hearing the case, the high Court decides the question of law so formulated and delivers the judgment giving reasons. In addition, the High Court may determine any issue, which has not been determined by the Appellate Tribunal or an issue which has been wrongly determined. The High Court can also, award costs, as it deems fit.
Section 260(1) and Section 260(2) states as under:
Section 260. (1) The High Court or the Supreme Court upon hearing any such case shall decide the questions of law raised therein, and shall deliver its judgement 72 thereon containing the grounds on which such decision is founded, and a copy of the judgment shall be sent under the seal of the Court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgement.
[(1A) Where the High Court delivers a judgment in an appealfiled before it under Section 260A, effect shall be given to the order passed on the appeal by the Assessing Officer on the basis of a certified copy of the judgement.]
(2) The costs of any reference to the High Court or the Supreme Court which shall not include the fee for making the reference shall be in the discretion of the Court.]
4. Case before High Court to be heard by not less than two Judges: –
Section 260B. (1) When an appeal has been filed before the High Court under Section 260A, it shall be heard by a bench of not less than two Judges of the High Court, and shall be decided in accordance with the opinion of such Judges or of the majority, if any, of such Judges.
(2) Where there is no such majority, the Judges shall state the point of law upon which they differ and the case shall then be heard upon that point only by one or more of the other Judges of the High Court and such point shall be decided according to the opinion of the majority of the Judges who have heard the case including those who first heard it.]
5. Meaning of Substantial Question of Law: –
As per the Income Tax Act, 1961, the Tribunal is the last fact-finding authority and only questions of law and that too what is referred to as a “substantial question of law” is taken up in appeals filed before the High Court.
Section 100 of the Code of Civil Procedure, 1908, as amended in 1976, restricts the jurisdiction of the High Court to hear a Second Appeal only on a “substantial question of law involved in the case”.
Though the expression “substantial question of law” has not been defined in any Act or in any of the statutes where this expression appears, e.g., section 100 of the Code of Civil Procedure, the true meaning and connotation of this expression is now well settled by various judicial pronouncements. It was observed by the Supreme Court in Sir Chunilal V. Mehta & Sons Ltd. v. Century Spg. & Mfg. Co. Ltd. (1962 AIR 1314), that
“a question of law would be a substantial question of law if it directly or indirectly affects the rights of parties and/or there is some doubt or difference of opinion on the issue”.
But
“if the question is settled by the Apex Court or the general principles to be applied in determining the question are well-settled, mere application of it to a particular set of facts would not constitute a substantial question of law”
Section 100 of CPC deals with “Second Appeal” moreover it includes the Substantial Question of Law as well. The proviso reads as follows:
“Section 100 – Second Appeal:
Save as otherwise expressly provided in the body of this Code or by any other law for the time being in force, an appeal shall lie to the High Court from every decree passed in appeal by any Court subordinate to the High Court, If the High Court is satisfied that the case involves a substantial question of law.
An appeal may lie under this section from an appellate decree passed ex parte.
In an appeal under this Section, the memorandum of appeal shall precisely state the substantial question of law involved in the appeal.
Where the High Court is satisfied that a substantial question oflaw is involved in any case, it shall formulate that question.
The appeal shall be heard on the question so formulated and the respondent shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question:
Provided that nothing takes away or abridges the power of the question of law, not formulated by it, if it is satisfied that the case involves such question.”
I. Question of Law and Question of Fact: –
Here dissimilarity between question of law and substantial question of law is required to understood.
i.e. what can be the subject matter of an appeal under Section 100 can only be a substantial question of law. It should involve a matter of general public importance or affect the rights of the parties substantially. Where the determination of the issue depended upon the appreciation of evidence or materials resulting in ascertainment of basic facts without application of any principle of law, the issue merely raises a question of fact. Hon’ble Delhi High court observed in Mahavir Woollen Mills v. CIT (245 ITR 297).
A question of fact becomes a question of law, if the finding is either without any evidence or material, or if the finding is contrary to the evidence, or is perverse or there is no direct nexus between the conclusion of fact and the primary fact upon which that conclusion is based. But, it is not possible to turn a mere question of fact into a question of law by asking whether as a matter of law the authority came to a correct conclusion upon a matter of fact. In Sree Meenakshi Mills Ltd. v CIT (1967 SC 819) the Apex Court has held that where the determination of an issue depends upon the appreciation of evidence or materials resulting in ascertainment of basic facts without application of any principle of law, the issue raises a mere question of fact.
i. As the Tribunal is the ultimate fact-finding authority, if it has reached certain findings upon examination of all relevant evidence and materials before it, the existence or otherwise of certain facts at issue is a question of fact.
ii. Any inference from certain facts is also a question of fact. If a finding of fact is arrived at by the Tribunal after improperly rejecting evidence, a question of law can arise.
iii. While the Tribunal acts on materials partly relevant and partly irrelevant, it can give rise to a question of law if it is impossible to say to what extent the irrelevant material was used to arrive at the finding. Such a finding is vitiated because of the use of inadmissible material.
iv. Where any finding is based on no evidence or material, it involves a question of law.
6. Filing fee
Initially, according to section 260A(2) a fee of Rs. 10,000/- was fixed by the statute for every appeal filed. However, an amendment was made by the Finance Act, 1999 with effect from 1st June, 1999 whereby the provisions of Code of Civil Procedure, 1908 relating to appeals to the High Court were made applicable also to appeals under section 260A. As a result, the court fee as applicable for filing a Second Appeal under section 100 of the Code of Civil Procedure, 1908, has to be paid for filing an appeal under section 260A.
As far as the Bombay High Court is concerned, Article 16A was inserted in Schedule 1 to the Bombay Court Fees Act to provide that an appeal filed after 1.6.1999 and pending before the High Court against the order passed in appeal by the Appellate Tribunal, u/s. 260A(2), an ad valorem fee would be leviable on the amount in dispute; i.e. the difference between the amount of tax actually assessed and the amount of tax admitted by the assessee as payable by him, subject to a maximum fee of Rs. 10,000/-.
Thus, the filing fee is one as fixed by the State Governments under the relevant Court Fees Act.
7. NO ABATEMENT OF APPEAL: –
Section 159 of the Act makes it expressly clear that the liability to pay tax under the Act does not cease on account of the death of the assessee. Thus, in case of death of an assessee the appeal filed under section 260A does not abate. The proceedings under the Act could be proceeded with against the legal representatives. In case of death of the assessee a notice of motion / chamber summons can be taken out to get the legal heirs on record. – [CIT vs. Smt. Rukmini (331 IRE 102, Karn) and Arvind Kayan v. Union of India [403 ITR 36 (Calcutta)].
Chapter-II
MONETARY LIMITS FOR
FILING APPEAL IN HIGH COURT
1. Introduction
The CBDT, through Circular No. 3 of 2018 dated 11-7-2018 and its subsequent amendment dated 20th August 2018, has specified monetary limits for filing income tax appeals by the Department before the Income Tax Appellate Tribunal, High Courts, and SLPs/Appeals before the Supreme Court.
Additionally, the CBDT issued an amendment through Circular No. 17/2019 [F.NO. 279/ MISC.142/2007-ITJ(PT.)], dated 8-8-2019, wherein it further clarified or stated certain provisions related to this matter.
“As a step towards further management of litigation, it has been decided by the Board that monetary limits for filing of appeals in Income cases be enhanced further through amendment in Para 3 of the Circular mentioned above and accordingly, the table for monetary limits shall read as follows:
| Sl. No. | Appeals/SLPs in Income-tax matters | Monetary Limit (Rs.) |
| 1. | Before Appellate Tribunal | 50,00,000 |
| 2. | Before High Court | 1,00,00,000 |
| 3. | Before Supreme Court | 2,00,00,000 |
It has been clarified in the said circular that
“… The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If in the case of an assessee. The disputed issues arise in more than one assessment year; appeal can be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. Further, even in the case of composite order of any High Court or appellate authority which involves more than one assessment year and common issues in more than one assessment year, no appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In case where a composite order/judgement involves more than one assessee, each assessee shall be dealt with separately.”
2. Circular No. 5/2024 dated March 15, 2024
The Central Board of Direct Taxes (CBDT) has recently issued Circular No. 5/2024, F. No 279/M isc.143/2007/ITJ(PT), dated March 15, 2024. This circular revise the exceptions related to the filing of appeals across all judicial fora.
While the monetary limits set for filing appeals or Special Leave Petitions (SLPs) remain applicable to all cases, including those involving Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) under the Act, there are specific exceptions to this rule.
In instances that fall under these exceptions, the decision to file an appeal or an SLP is to be based solely on the merits of the case, disregarding the tax effect and the monetary limits. The categories exempt from monetary limits are as follows:
a. Where any provision of the Act or the Rules or notification issued thereunder has been held to be constitutionally invalid, or
b. Where any order, notification, instruction or circular of the Board or the Government has been held to be illegal or ultra vires the Act or otherwise constitutionally invalid, or
c. Where the assessment is based on information in respect of any offence alleged to have been committed under any other law received from any of the law enforcement or intelligence agencies such as CBI, ED, DRI, SFIO, NIA, NCB, DGGI, state law enforcement agencies such as State Police, State Vigilance Bureau, State Anti-Corruption Bureau, State Excise Department, State Sales/Commercial Taxes or GST Department, or
d. Where the case is one in which prosecution has been filed by the Department in the relevant case and the trial is pending in any Court or conviction order has been passed and the same has not been compounded, or
e. Where strictures/adverse comments have been passed and/or cost has been levied against the Department of Revenue, CBDT or their officers, or
f. Where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under sections 10(23C), 12A/ 12AA/12AB of the Act, order passed u/s 263 of the Act etc. The reference to cases involving sections referred here, where it is not possible to quantify tax effect or tax effect is not involved, is for the purpose of illustration only.
g. Where addition relates to undisclosed foreign income/undisclosed foreign assets (including financial assets)/undisclosed foreign bank account, or
h. Cases involving organized tax evasion including cases of bogus capital gain/loss through penny stocks and cases of accommodation entries, or
i. Where mandated by a Court’s directions, or Writ matters, or
j. Matters related to wealth tax, fringe benefit tax, equalization levy and any matter other than the Income Tax Act, or
k. In respect of litigation arising out of disputes related to TDS/TCS matters in both domestic and international taxation charges: –
l. Where dispute relates to the determination of the nature of transaction such that the liability to deduct TDS/TCS thereon or otherwise is under question, or
m. Appeals of International taxation charges where the dispute relates to the applicability of the provisions of a Double Taxation Avoidance Agreement or otherwise
n. Any other case or class of cases where in the opinion of the Board it is necessary to contest in the interest of justice or revenue and specified so by a circular issued by Board in this regard.
3. Scenarios on the applicability of monetary limits u/s 158AB: (Circular No.8/2023- No. 279Misc. IM-93/2018-ITJ(Pt.) DATED 31.05.2023.)
After insertion of Section 158AB of the Act, The Board has issued scenarios on the applicability of monetary limit in view of Section 158AB of the Act.
As per this Circular;
“In this respect the insertion of Section 158AB in the Income Tax Act, 1961 [hereinafter referred to as the Act] has led to queries on monetary limits and exceptions applicable in respect of cases falling within the purview of Section 158AB of the Act. In supersession ofthe letter dated 29.09.2022, referred to above, the following guidelines on the above subject are hereby issued: 3. At the outset it is clarified that references to collegiums constituted U/S l58AB of the Act for deciding qn the deferral of appeal(s)/grounds of appeal(s) would be made having regard to the extant monetary limits read along with the exceptions to the same, as mentioned in para 1 above and the exceptions provided in para 6 below. – If the following terminology is proposed in respect of para 5 below:
i. Yo:the current year in which appeal filing is under consideration, and
ii. Yf: the year in which the final decision on the question of law is received in favour of Revenue in the ‘other case’ (‘other case’ being as referred to in section 158AB of the Act).
3.1 Scenarios on the applicability of monetary limits. –
I. In cases where only one ground is contested and where the tax effect is greater than the monetary threshold as per the extant monetary limits for filing appeals at relevant judicial fora, set by CBDT, and section l58AB is applicable to it, appeal may be deferred in the current year (Yo) in view of the provisions of section 158AB. The appeal is to be filed in the year in which the final decision on the identical question of law is received in favour of Revenue in Yf.
II. In cases where multiple grounds are contested and where the total tax effect of all the disputed grounds (i.e., grounds to which Section 158AB is applicable and otherwise) is greater than the extant monetary limits for filing appeals at relevant judicial fora, set by CBDT, and Section 158AB is applicable only to certain grounds, the guidelines for filing appeal are as follows:
i. in the current year (Yo),
a. filing of appeal on the grounds to which section 158AB is applicable may be deferred in view of the provisions of that section, and
b. appeal may be filed on the residual grounds.
ii. in the year in which the final decision on the identical question of law is received in favour of Revenue in FY, appeal is to be filed on the grounds to which section 158AB is applicable, irrespective of the monetary limit at that point in time.
In respect of deferring appeals u/s 158AB of the Act, while adhering to the guidelines as laid down in the preceding paras, it is to be ensured that when judicial finality is achieved in favour of Revenue in the ‘other case’, appeal in the ‘relevant case’ should be contested on merits subsequent to the decision in the ‘other case’ irrespective of the extant monetary limits. Further, if the judicial outcome in the other case is not in favour of Revenue and is not accepted by the Department, appeal against the same may be contested on merits in the ‘other case’ irrespective of the extant monetary limits, to arrive at judicial finality.
CBDT Circular No. 09/2024- New Income Tax Monetary Appeal Limits
According to the above-mentioned circular, the CBDT has enhanced the monetary limits for the department for filing appeals before the Tribunal, High Courts, and Supreme Court vide Circular No. 09/2024-Income Tax Dated: 17/09/2024 w.e.f. 17.09.2024.
With effect from 17th September 2024 Circular No. 09/2024 has enhanced the monetary limits cited in Circular No. 5/2024 hereunder.
| Sl.No | Appeals/SLPs | Monetary Limits |
| 1 | Before Income Tax Appellate Tribunal | INR 60,00,000/- |
| 2 | Before High Court | INR 2,00,00,000/- |
| 3 | Before Supreme Court | INR 5,00,00,000/- |
Chapter-III
E – FILING OF APPEAL
Steps for filing E Appeal
1. Steps for filing of appeal u/s 260A of the Act in High Court by Counsel
1. The concerned Principal Commissioner of Income Tax (PCIT) or Commissioner of Income Tax (CIT) should inform the Junior/Senior counsel regarding the filing of the appeal under section 260A of the Income Tax Act. This communication should include relevant documents necessary for drafting the appeal memo and preparing the case.
2. The email sent to the counsel should include legible attachments such as:
– Assessment Order
– Form 35 (Appeal to the Commissioner of Income Tax (Appeals))
– CIT Appeal Order
– Form 36 (Appeal to the Income Tax Appellate Tribunal)
– ITAT Order (Order of the Income Tax Appellate Tribunal)
– Scrutiny Report
– Approval letters confirming the decision to file an appeal
– Questions of law involved
– Tax effect
– Last date of filing
– Docket details
3. The appointed counsel then prepares a draft of the Income Tax Appeal and sends it via emailto the concerned PCIT/CIT for review.
4. The income tax appeal draft is reviewed by the concerned PCIT/CIT, and the final draft, including the Appeal Memo and exhibits, is printed on A-4 size white bond paper. The draft is then signed and stamped by the Income Tax Officer (ITO) and PCIT/CIT. The appeal documents should prominently display the name, contact number, email ID of the JAO and the ITO(Judicial) concerned for effective coordination with the Standing Counsel.
5. Court Fee of Rs. 10.000/- is also annexed with the draft in the form of challan. The process of payment is through GRAS [Government Receipt Accounting System]. Court fee of Rs. 15/-is affixed to Vakalatnama. Give all the above documents to the appointed Counsel.
6. The draft is then notarized, OCR Scanned, digitally numbered and E-filed by the appointed Counsel.
7. Once the draft is e-filed, a CNR number and e-filing number is generated. Next day lodging number is received from the e-filing department on email of the counsel.
8. The registry in the High Court checks the draft and intimates the defect or Objection in theappeal filed and sends an email to the counsel who has filed the appeal.
9. In case of any defect/Objection pointed out by the registry, upon intimation from the Standing Counsel, the objection is to be removed within 15 days of such communication from the registry. The PCIT should have regular interaction to ensure that the objections are removed by the Counsel immediately.
10. While the appeal is on lodging number, copy of Income tax appeals needs to be served in the respondents within two weeks of earliest. The Affidavit of Service is then to be uploaded on the e-filing portal.
11. As soon as the objections are removed the Appeal gets registered and the registry gives an ITXA number to the appeal which should be intimated by the Standing Counsel to the office of the PCIT /CIT concerned.
IN CASE OF DELAY.
If there is a delay in filing income tax appeal or if the last date has already passed.
Then
1. Along with the draft Income Tax Appeal, draft Interim Application explaining the delay should also be prepared. There should be averment of delay in income tax appeal.
2. Both the documents should be filed one after the other.
3. Once Interim Application for condonation of delay is e- filed, lodging number will be received for both. ITXAL & IAL. Both the copies of Income tax appeal and Interim Application should be served on the respondents.
4. Once served Affidavit of Service should be filed.
5. A circulation should be taken for fixing the Interim Application for hearing on board by the Counsel.
6. Once the application is allowed, the order copy should be annexed with the main Income Tax Appeal i.e. on lodging number for removal of objections and registration of appeal.
Format of Docket & Vakalatnama
I am member of Advocates welfare fund hence stamp of Rs. 20/- is affixed.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION No.
M/s.————————————– .Petitioner
PAN No.————————-
Mumbai
V/s.
Income Tax Officer-
Mumbai & others ………………………………………………. Respondents A.Y.
To,
The Prothonotary& Senior Master,
High Court, O.S., Mumbai
Respected Sir/Madam,
I, ———————————– , Pr. Commissioner of Income Tax-__, Mumbai, the appellant above named, do hereby appoint Shri.______________ , Advocate, to act, appear and plead for me/ us in the above matter.
In witness thereof, I have set and subscribed my/our hand to this writing at Mumbai.
Dated this day of May 2023.
(—————————-)
Pr. Commissioner of Income Tax-___,
Mumbai
ACCEPTED Appellant
(Advocate for Respondents)
Advocate, High Court
O.S. No.________
Advocate, High Court
Advocate Code_________
Office:
Phone
IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION No. of 2023
M/s.—————————————————- .Petitioner
PAN No.—————————
Mumbai
V/s.
Income Tax Officer-
Mumbai…………………………. Respondents
A.Y.
VAKALATNAMA
Dated this day of May, 2022
Advocate, High Court
O.S. No.______
Advocate Code________
Office:
Phone
CIT/SI. No
HIGH COURT
O.O.C.J
| 1 | Panel Counsels are requested to ensure that the bills are submitted within three months of the date of Judgment/ order of | WRIT PETITION NO. SUIT / APPEAL NO.ARB. SUIT/ ARB. PETN. NO.CO. PETN./ CO. APPLN.CIVIL WRIT PETITION NO.——— of 20240 |
| 2 | After Admission/ final hearing, copy of the Petition etc. Along with Judgment / Order passed by the Court, must be returned to the concerned CIT’s office. | M/s
PAN No.—————— , Mumbai Petitioner |
| 3 | Whenever conferences are held, name of the officials, du- ration and dates must invariably be indicated. | Income Tax Officer-______ Mumbai A.Y. Respondent |
| 4 | As regards admissibility and quantum of fee, the decision of the concerned Officer incharge in the office of Mum- bai shall be final. | Coram:-
date :
|
| 5 | In the event of any doubt or difference regarding the fees, the fees determined, the decision of the Central Board of Direct Taxes shall be final and binding. It may be an or-der in writing, making suitable modification in any of the provisions contained in the Scheme containing terms and conditions for the engagement of the counsel. | APPEARANCE OF WRIT PETITION OF INCOME TAX ACT, 1961 Counsel Name :
Advocate for the Respondents |
| 6 | Bills shall be submitted in Triplicate and pre-receipted (Revenue Stamped) in the new format. | ITO (Judl) to Pr. CIT- , Mumbai |
Chapter-IV
REMOVAL OF OBJECTIONS IN FILING APPEAL
Removal of Objections
Common objections raised by the Registry
1. Removal of Objections: –
a. The process of filing of Appeal u/s 260A starts with filing of Appeal and reaches the point of finality only after the IT. Appeal No (ITXA in case of IT Appeal and WTXA in case of Wealth Tax Appeal) is allotted. In other words, mere filing of documents of Appeal does not mean that the Appeal is filed, since the same is liable to be dismissed for want of removal of objections raised by the Registry of the High Court. A cumulative time period of 30 days is given for removal of these objections after which it is treated as a fresh filing.
b. The Standing Counsel/ High Court Cell intimates the respective PCIT/CIT offices about the same for removing the concerned objections. But this aspect requires to be closely monitored at different levels and all objections removed within the limitation period from the date of its being raised.
c. In case the objection cannot be removed in the time allotted due to the departmental difficulties or the appeal papers not being available in the office of the Registry then the concerned Assessing Officer cannot get an extension but will have to file a regular appeal for condonation of delay in removal of objections with reason for the delay in the form of an affidavit.
d. In case the appeal has been filed u/s 260A of the IT Act beyond the stipulated period of filing of appeal, an appeal for condonation of delay with reason for the delay in filing is to be filed in the form of an affidavit. This notice of motion is listed for hearing before the High Court for condonation of delay. If the Court condones the delay, it would be necessary to remove the objection within seven days from the date of order pronounced in the Court. If the objections are not removed, then the appeal filed will automatically be rejected. After the removal of objections, the Assessing Officer / Ward Inspector should ensure that the appeal number by the Registry is allotted. For this purpose, he should be constantly in touch with the office of the Registrar of the concerned HC or the Standing Counsel.
e. It is reiterated that the process of filing of Appeal is complete only when the answer to the question “Has appeal number been allotted to particular case?” is “Yes”. If the answer is “No”, the process is still incomplete.
f. It is suggested that Standing Counsels having the necessary experience should take necessary steps to identify and remove the objections at the filing stage itself though it is rare that an appeal is accepted without any objections being raised by the Registry.
2. COMMON OBJECTIONS RAISED BY THE REGISTRY: –
- The exhibits are not legible, photocopy is faint.
- No underlining, marking of documents: The documents should be free from underlining and marking etc. The rationale is that the marking should be of the Hon’ble Judges only during hearing.
- Missing Exhibits
- Index is not properly prepared. Page Number/s are not given.
- Delay in filing of appeals.
- Margins and line spacing.
Chapter-V
HEARING OF APPEAL AND PASSING OF ORDER
Hearing of Appeal and Passing of Order by the High Court Procedure after disposal of the case
1. HEARING OF APEPAL AND PASSING OF ORDER BY THE HIGH COURT
1. After the appeal is filed, either by the Department or by the assessee, it is taken on the Board of the Tax Bench by the High Court Registry. The intimation that the case is listed for hearing is conveyed by the registry through two lists:
i. Daily Main Cause-List
ii. Daily Supplementary Cause -List
iii. Weekly Main Cause-List
iv. Weekly Supplementary Cause-List
The Cause-lists is put out on the website of the Bombay High Court i.e. bombayhighcourt.nic.in. This cause-list is for the next week and is usually put up in the evening of Saturday by 8.00 p.m. Further on the previous day at 8.00 p.m., a supplementary cause-list is also put up for additional cases to be taken on the board on the next day. The officers concerned are required to view the same and instruct the Counsel to represent the case in the High Court. The Cause lists can also be viewed in the IAMS portal.
These lists categorize the cases into different classes carrying the following abbreviations with their numbers.
i. W.P. – Writ Petition – [It appears in the list as WP/123 (No. given by the Writ Section of the High Court)/2023 (year of filing)]
Writ Petitions are generally filed by the assessee. Exceptionally, they can be filed by the Department against the order passed by the ITAT or Settlement Commission.
ii. NMA – Notice of Motion – [It appears in the list as NMA/123 (No. given by the Prothonotary’s office)/2023 (year of filing)].
When an appeal is filed in the High Court after the due date of filing of appeal as per the criteria laid down in clause (a) of sub-section (2) of section 260A, a notice of motion application is required to be filed. The notice of motion is a request to the Hon’ble Court to condone the delay stating in detail, the reasons for the delay. As this is to be decided before hearing the appeal on merits, it is treated as a separate category.
iii. ITXAL – Income Tax Appeal (Lodging) – It appears in the list as ITXAL/123 given by the Prothonotary’s office/2023 (Year of filing of appeal)].
ITXAL signifies Lodging number of the Income tax appeals. This number is given at the time of filing of an appeal u/s. 260A. This number will cease after the permanent appeal number (i.e. ITXA) is given after the removal of objections, if any, and remain till the disposal of appeal.
ITXA – Income Tax Appeal – It appears in the list as ITXA/123 (No. given by the Prothonotary’s office / 2024 the year in which the delay is condoned and objection is removed).
This is the final categorization of the Income Tax Appeal filed in the High Court u/s. 260A. It indicates that the appeal has been accepted by the Registry and is now ready for being included in the cause-list.
Accessing Cause Lists on Bombay High Court Website:
- Cause lists are available on the Bombay High Court website a day before the hearing, around 8:00 p.m.
- Click the “Cause List” icon and navigate to the “daily/weekly cause list” page, then
- Select ‘Original Side’ for tax bench listings.
- Various lists like case number-wise, lawyer-wise, party-wise, court-wise, and judge-wise are accessible.
- If the judge’s name is known, select it to access the cause list of that specific Tax bench.
Preparing for Court Representation:
- The PCIT/CIT issues a docket in the Standing Counsel’s name for court representation.
- Junior Standing Counsel who drafted the appeal can assist the Senior Standing Counsel.
- Assessing Officer should provide proper assistance and brief the Counsel on case details before the hearing.
- Standing Counsel should receive a copy of the scrutiny report to understand case basics, including tax effects and covered issues.
2. Procedure after disposal of the case: –
Once the order is pronounced in the High Court, the Assessing Officer should immediately download the digital copy of the same from the High Court website and start further process as deemed necessary. The digital copy is also forwarded by CIT(Judicial) to the CIT concerned.
The Assessing Officer should also keep in touch with the Standing Counsel for obtaining a certified copy of the order after disposal of the case and in case the department appeal is dismissed, he should take immediate steps to get it restored or to file an SLP in the Supreme Court. In case the appeal is decided in favour of the Department, he should take steps either himself or through the Tax Recovery Officer to recover the arrears.
The milestones of progress of the case should be recorded in the Appeal Control Register maintained in the PCIT’s office.
| Sr. No | Name of the assessee | PAN | Order No. | Order received in PCIT’s office | Order sent to AO date | Result of appeal | Limitation date for filing further appeal | Scrutiny report receipt date |
Chapter-VI
ENGAGEMENT OF COUNSELS AND ASG
Appointment/Renewal of Standing counsels of IT Department before various High Court
Contingencies arising during the pendency of appeals
1. Appointment /Renewal of Standing counsels of Income Tax Department before various High Court:-
The CBDT has issued several important guidelines regarding the engagement of legal representatives to represent the Income-Tax Department before various judicial forums:
1. Revision of Guidelines for Standing Counsels:
– CBDT revised the Guidelines for engagement of Standing Counsels through F. No. 279/ Misc/M-75/2011-ITJ(Part-II) dated 7th September 2016. This includes a revision of their schedule of fees and related matters.
2. Engagement of Additional Solicitor General (ASG):
– CBDT issued a letter for the engagement of Additional Solicitor General (ASG) through F. No. 278/M-23/2021-ITJ dated 9th June 2021. This letter specifies the revision of the schedule of fees and related matters for ASGs representing the Income-Tax Department before High Court and other judicial forums.
3. Revised Guidelines for Appointment of Special Counsels:
– CBDT issued revised guidelines for Appointment of Special Counsels through F. No. 278/ Misc/M-23/2021-ITJ dated 18th August 2021. These guidelines outline the appointment process for Special Counsels representing the Income Tax Department be- fore Courts and Tribunals.[ANNEXURE – B5]
In summary, the proposal for engagement of an ASG to defend matters within their jurisdiction on normal terms and conditions specified in the MOL notification dated 01-10-2015 does not require approval from the Board. However, if the ASG to be engaged belongs to a different region, the appointment will be treated as that of a Special Counsel, and the proposal must be sent to the Board for approval.
2. Contingencies arising during the pendency of appeals: –
Certain contingencies may arise during the pendency of appeals. These require bringing on record the names and addresses of the relevant persons. These contingencies are tabulated below:
| Sr. No | Contingency arising during the pendency of appeal | Name and address of persons to be brought on record |
| 1 | In the case of an individual, there may be death, insolvency, etc. | Legal heirs or representatives or executors of his will or administrators of his estate |
| 2 | In the case of an HUF, there may be complete partition amongst the members | Erstwhile members of the HUF and the Karta |
| 3 | In the case of a company, it may go into liquidation or be wound up | Liquidator of the company |
| 4 | In the case of a firm, AOP or BOI there may be | Erstwhile partners of the firm or members of the AOP or BOI |
| 5 | In the case of a trust, the trustees may change | New trustees |
The Department must bring on record the names of relevant persons as early as possible. It is also possible that during the pendency of the appeals, the addresses of the parties may change, case-papers are transferred or jurisdiction of CIT is changed. It is necessary to bring all these facts to the notice of the Judicial Section.
Chapter-VII
JAMS PORTAL
Key features of JAMS
Integrated Appeal Management System (IAMS) is an upgraded version of the AMS, launched on 01.03.2022 by Shri Anand Sharan Singh, Pr. Chief Commissioner, Income Tax, Mumbai. It is exclusively used by the Income Tax Department, Mumbai, with designation-based email IDs serving as user IDs for officers.
1. Key Features of IAMS :
i. Comprehensive Database:
Includes all Income Tax cases ever filed in the Hon’ble High Court.
ii. Automatic Case Sourcing:
JAMS automatically sources new income tax cases from the Bombay High Court and integrates them into the system.
iii. Regular Data Synchronization:
Data of all cases in the system is synchronized regularly with High Courts. Case data, status, and next dates are automatically updated, ensuring accuracy and timeliness.
iv. Scheduled Updates:
The cycle of updating the JAMS database runs twice a week to synchronize data efficiently.
IAMS streamlines appeal management processes, enhances data accuracy, and provides real-time updates for assessing officers within the jurisdiction. Apart from the core functionalities mentioned earlier, IAMS offers several additional features and benefits:
i. Data Export to Excel:
a. The database can be downloaded in Excel format for further processing as per specific requirements.
ii. Cause List Analysis:
a. Analyses cause lists and presents them in a usable format, aiding in efficient case management
iii. Alerts System:
a. Various alerts are issued based on updates in the database, ensuring timely actions and notifications.
iv. Document Management:
a. PDFs of all appeal documents filed are mapped to respective cases.
b. Automatic orders are integrated into the system for easy access and reference.
v. Online Repository:
a. Offers an online repository of Questions of Law, facilitating legal research and reference.
vi. Customization Options:
a. Manual fields allow for PAN number mapping, Assessment Year (AY) mapping, Tax Effect information, and more, providing flexibility and customization.
vii. Case Segregation and Tracking:
a. Cases are segregated under various heads such as Disposed/Pending, CIT- wise, Counsel-wise, Appeal Type, and Mumbai or out of Mumbai jurisdiction.
b. Displays total case pendency and CIT charge-wise case pendency, enabling tracking and monitoring of case status and workload distribution.
These features collectively enhance the functionality, usability, and efficiency of IAMS, making it a comprehensive and valuable tool for appeal management within the Income Tax Department, Mumbai
Key Features of System Life cycle
i. Main page displays the case statistics in the form of charts and graphs.
ii. PCIT/CIT wise case statistics is displayed. It also shows various action points
On ‘cases’ page various search criteria are given. Search can be executed by combining &/or omitting various criteria. Various criteria are disposed, non-disposed, Sections, Tax effect, PAN, CIT jurisdiction, Counsel, Case type, AY, Filing date etc.
Case Manager – filter for Active or Non-Disposed cases
Case Manager – filter for cases with PAN
Case Manager – filter for cases of various CITs
Case Manager – filter containing cases with the search string (petitioner/respondent)
Case Manager – filter containing cases with the search string (case number)
Case Manager – filter of particular counsel name
Case Manager – Upload Files(s) button for a case (ITXAL/244/2002)
Case Manager – Upload Files(s) page for a case (ITXAL/244/2002)
Case Manager – View button for a case (ITXAL/244/2002)
Case Manager – View page for a case (ITXAL/244/2002)
Case Manager – Dates for a case
Chapter-VIII
SECTION 158AA AND SECTION 158AB
Amendment of section 158AA
Explanation of the provisions of section 158AA and 158AB
The Government has recently taken steps to reduce the backlog of cases by raising the tax-effect thresholds for Revenue’s appeals. The Finance Bill, 2022 introduced Section 158AB in the Income Tax Act, 1961, which helps minimize litigation. Section 158AB allows the department to refrain from filing repeated appeals with the High Courts and Supreme Court on legal questions that are already pending before a jurisdictional High Court or the Supreme Court.
1. SECTION 158A, 158AA AND SECTION 158AB :-
Chapter XIV-A of the Income-tax Act, 1961
Chapter XIV-A, containing sections 158AA and 158AB, was introduced by the Taxation Laws (Amendment) Act, 1984, effective from October 1, 1984. Initially, this chapter consisted of only section 158A, which was included as a measure for managing litigation. The primary aim was to avoid repetitive appeals and reference applications.
Section 158A: Avoiding Repetitive Appeals
Section 158A allows an assessee, during ongoing proceedings for an assessment year, to claim that a question of law arising in the current case is identical to a question of law already pending in the assessee’s own case before the High Court or Supreme Court for another assessment year. If the Assessing Officer or appellate authority is satisfied with the claim, they may agree to apply the final decision on the question of law from the earlier year to the present year. Consequently, the assessee will not need to challenge the same question of law again in higher appellate authorities for the present year. This process significantly reduces repetitive litigation and ensures judicial efficiency.
Section 158AA: Deferment of Appeals Pending Supreme Court Decision
The Finance Act of 2015 introduced section 158AA. This section specifies that if a question of law in an assessee’s case for any assessment year is identical to a question of law pending before the Supreme Court in an appeal or special leave petition filed by the revenue against a High Court’s order in favor of the assessee for another assessment year, the Assessing Officer can make an application to the Appellate Tribunal. This application requests that the appeal on the relevant question of law in the present case be deferred until the Supreme Court’s decision on the question of law in the earlier case becomes final. This provision aims to prevent unnecessary appeals and streamline the resolution of legal questions pending the highest court’s judgment.
Section 158AB: Expanded Scope and Applicability
The Finance Bill of 2022 proposed to replace the existing section 158AA with a new and expanded section 158AB. This revamped section is broader in coverage and applicability compared to the previous section. The new section 158AB empowers the department to defer filing repeated appeals with the High Courts and the Supreme Court on questions of law that are already pending before a jurisdictional High Court or the Supreme Court. This measure is intended to further minimize litigation and optimize judicial resources. Chapter XIV-A of the Income-tax Act, 1961, which contains sections 158AA and 158AB, was introduced by the Taxation Laws (Amendment) Act, 1984, effective from 1st October 1984. Initially, this chapter consisted of only one section, namely, section 158A
2. Amendment of section 158AA-
i. In section 158AA of the Income-tax Act, in Sub-section (1), the following proviso shall be inserted, namely: –
“Provided that no such direction shall be given on or after the 1st day of April, 2022.”.
Insertion of new section 158AB.
ii. After section 158AA of the Income-tax Act, the following section shall be inserted, namely:–
Procedure where an identical question of law is pending before High Courts or Supreme Court.
158AB. (1) Notwithstanding anything contained in this Act, where the collegium is of the opinion that–
a. any question of law arising in the case of an assessee for any assessment year (such case being herein referred to as the relevant case) is identical with a question of law arising, –
i. in his case for any other assessment year; or
ii. in the case of any other assessee for any assessment year; and
b. such question is pending before the jurisdictional High Court under section 260A or the Supreme Court in an appeal under section 261 or in a special leave petition under article 136 of the Constitution, against the order of the Appellate Tribunal or the jurisdictional High Court, as the case may be, which is in favour of such assessee (such case being herein referred to as the other case), the collegium may, decide and inform the Principal Commissioner or Commissioner not to file any appeal, at this stage, to the Appellate Tribunal under sub-section (2) of section 253 or to the jurisdictional High Court under sub-section (2) ofsection 260A in the relevant case against the order of the Commissioner (Appeals) or the Appellate Tribunal, as the case may be.
(2) The Principal Commissioner or the Commissioner shall, on receipt of a communication from the collegium under sub-section (1), direct the Assessing Officer to make an application to the Appellate Tribunal or the jurisdictional High Court, as the case may be, in such form as may be prescribed within a period of sixty days from the date of receipt of the order of the Commissioner (Appeals) or within a period of one hundred and twenty days from the date of receipt of the order of the Appellate Tribunal, as the case may be, stating that an appeal on the question of law arising in the relevant case may be filed when the decision on such question of law becomes final in the other case.
(3) The Principal Commissioner or Commissioner shall direct the Assessing Officer to make an application under sub-section (2) only if an acceptance is received from the assessee to the effect that the question of law in the other case is identical to that arising in the relevant case; and in case no such acceptance is received, the Principal Commissioner or Commissioner shall proceed in accordance with the provisions contained in sub-section (2) of section 253 or in sub-section (2) of section 260A.
(4) Where the order of the Commissioner (Appeals) or the order of the Appellate Tribunal, as the case may be, referred to in sub-section (1) is not in conformity with the final decision on the question of law in the other case, as and when such order is received, the Principal Commissioner or Commissioner may direct the Assessing Officer to appeal to the Appellate Tribunal or the jurisdictional High Court, as the case may be, against such order and save as otherwise provided in this section all other provisions of Part B of Chapter XX shall apply accordingly.
(5) Every appeal under sub-section (4) shall be filed within a period of sixty days from the date on which the order of the jurisdictional High Court or the Supreme Court in the other case is communicated, in accordance with the procedure specified by the Board in this behalf, to the Principal Commissioner or Commissioner.
Explanation. – For the purposes ofthis section, “collegium” means a collegium comprising of two or more Chief Commissioners or Principal Commissioners or Commissioners, as may be specified by the Board in this behalf.’.
3. Explaining the provisions of section 158AA and section 158AB-
Section 158AA of the Act relating to procedure when in an appeal by revenue an identical question of law is pending before Supreme Court.
a. Sub-section (1) of the section stipulates that if a collegium of Chief Commissioners, Principal Commissioners, or Commissioners collectively agrees that a question of law arising in an assessee’s case for any assessment year (referred to as the “relevant case”) is identical to a question of law in the case of that assessee or another assessee for a different assessment year, which is currently pending before the jurisdictional High Court under section 260A or the Supreme Court in an appeal under section 261 or a special leave petition under article 136 of the Constitution, against the order of the Appellate Tribunal or the jurisdictional High Court, in favor of such assessee (referred to as the “other case”), they may decide and communicate to the Principal Commissioner or Commissioner not to file any appeal, at this stage, to the Appellate Tribunal under sub-section (2) of section 253 or to the jurisdictional High Court under Sub-section (2) of section 260A against the order of the Commissioner (Appeals) or the Appellate Tribunal, as applicable.
b. Sub-section (2) instructs the Principal Commissioner or Commissioner to direct the Assessing Officer to apply to the Appellate Tribunal or High Court within 60 days of receiving the order from the Commissioner (Appeals) or within 120 days of receiving the Appellate Tribunal’s order. This application states that an appeal on the legal question from the relevant case may be filed once the decision on the question of law becomes final in the other case.
c. Sub-section (3) states that the Principal Commissioner or Commissioner can only direct the Assessing Officer to make this application if the assessee agrees that the question of law in the other case is identical to that in the relevant case. If no such agreement is received, the Principal Commissioner or Commissioner will proceed as per the provisions in section 253(2) or section 260A(2).
d. Sub-section (4) allows the Principal Commissioner or Commissioner to direct the Assessing Officer to appeal against the order of the Commissioner (Appeals) or the Appellate Tribunal if it doesn’t align with the final decision on the question of law in the other case.
e. Sub-section (5) specifies that the appeal in the relevant case must be filed within 60 days of receiving the order from the jurisdictional High Court or Supreme Court in the other case, following the procedure set by the Board.
The expression “collegium” for the purposes of the section means a collegium comprising of two or more Chief Commissioners, Principal Commissioners or Commissioners as may be specified by the Board.
This amendment took effect from 1st April, 2022.
Chapter-I
WRIT PETITION
Importance of Writ Petition
Difference between a Writ, a Writ Petition, an appeal and a PIL
Writ in Mandamus
1. Introduction: –
A writ can be termed as a formal written order issued by a judicial authority who possesses the authority to do so. The meaning of the word “writs” means command in writing in the name of the Court. It is a legal document issued by the court that orders a person or entity to perform a specific act or to cease performing a specific action or deed, In India, writs are issued by the Supreme Court under Article 32 of the Constitution of India and the High court under Article 226 of the Constitution of India.
Meaning of Writ – Fundamentally, a writ is a formal written order issued by anybody, executive or judicial, authorised to do so. In modern times, this body is generally judicial.
Writs under Indian Constitution – Fundamental Rights are contained in part III of the Indian Constitution including the right to equality, right to life and liberty etc. Merely providing for Fundamental Rights is not sufficient. It is essential that these Fundamental Rights are protected and enforced as well. To protect Fundamental rights the Indian Constitution, under, Articles 32 and 226, provides the right to approach the Supreme or High court, respectively, to any person whose fundamental right has been violated. At the same time, the two Articles give the right to the highest courts of the country to issue writs on order to enforce Fundamental rights.
Kinds of writs –
i. Habeas corpus
ii. Mandamus
iii. Certiorari
iv. Prohibition
v. Quo-warranto
2. Importance of Writ Petition: –
Writs play a crucial role in ensuring the proper functioning of the legal system and protecting individual rights. They provide a mechanism for individuals to challenge government actions, seek relief from unlawful detention, and enforce fundamental rights.
“Anyone whose fundamental rights, as outlined in Part III of the Indian Constitution, are violated can file a Writ Petition. This is a safeguard against the infringement of these fundamental rights.”
Writ Petition can be filed in SC – Under Article 32, a writ petition can be filed in the Supreme court. The Supreme Court can issue a writ only if the petitioner can prove that his Fundamental Right has been infringed. It is important to note that the right to approach the Supreme Court in case of a violation of a Fundamental Right is in itself a Fundamental right since it is contained in Part III of the constitution.
Under Article 226, a writ petition can be filed before any High court within whose jurisdiction the cause of action arises, either wholly or in part. It is immaterial if the authority against whom the writ petition is filed is within the territory or not. The power of the High court to issue a writ is much wider than that of the Supreme court.
The High Court may grant a writ for the enforcement of fundamental rights or for any other purpose such as violation of any statutory duties by a statutory authority. Thus, a writ petition filed before a Supreme Court can be filed against a private person too. Where a fundamental right has been infringed, either the Supreme Court or the High Court can be approached.
It is not necessary to go to the High Court first and only thereafter approach the Supreme Court. However, if a writ petition is filed directly in the Supreme Court, the petitioner has to establish why the High Court was not approached first.
3. Difference between Writ and Writ Petition?
- A writ means an order that is issued under an authority. Therefore, a writ can be understood as a formal order issued by a Court.
- A writ Petition is an application filed before a Court, requesting to issue a specific writ.
4. Difference between a Writ Petition, an Appeal and a PIL
- Writ Petition is typically filed when someone’s fundamental rights have been violated or they have been the victim of injustice. It is for seeking justice for self and is normally filed to address grievances against a Statutory Authority.
- An Appeal is a Petition to a higher court by a party who seeks to overturn a lower court/ appellate authority’s ruling.
- Writs are filed by individuals or institutions for their own benefit and not for public interest, whereas PILs are litigations filed in a court of law, on any matter where any interest of the public at large is affected such as Pollution, Terrorism, Road safety, Constructional hazards etc.
5. Writ in Mandamus: –
It is the most common writ petition preferred by the assessee against the Department. Wherever a public officer or the Government has done some act which violates the fundamental right of a person, the Court would issue a writ of mandamus, restraining the public officer or government from enforcing that order or doing that act against the person whose fundamental right has been violated.
Chapter-II
FILING OF WRIT PETITION
Circumstances under which a Writ Petition can be filed
Provision of the law under which a writ is filed
Time limit for filing a Writ Petition
1. Circumstances under which a Writ Petition can be filed:-
A writ petition can be entertained in the following exceptional circumstances,
i. Breach of fundamental rights;
ii. Violation of the principles of natural justice;
iii. Excess of jurisdiction;
iv. Challenge to the vires of the statute or delegated legislation.
v. Appeals to the High Court can be made by the assesse or the Commissioner of Income Tax. There might be instances where the Act deprives the assesse or the Commissioner of the right to appeal. In such instances the concerned person is benefited with the option of a writ petition, which acts as a substitute for the appeal.
By the Department –
The orders of the ITSC are final and not appealable. The orders are only subject to judicial review in terms of Articles 136 and 226 of the Constitution. Therefore, the only remedy against an order of the Settlement Commission is that of filing a Writ Petition. In exceptional circumstances a Writ Petition can be filed against the order of ITAT by the Department.
2. Provisions of the law under which a Writ is filed:-
Article 226 & 227 of the Constitution of India
i. Article 226 provides the High Courts with the power to issue writs, to any person or authority, including the government.
ii. Article 227 determines that every High Court shall have superintendence over all courts and tribunals throughout the territories in relation to which it exercises jurisdiction.
3. Time limit for filing a Writ Petition: –
i. Article 226 of the Constitution of India lays down no time limit for filing a Writ Petition but the courts have mandated that there should be a reasonable time to file the writ petition for seeking redressal
Chapter-III
PROCEDURE FOR HANDLING WRIT PETITIONS
Importance
SOPs/Instructions regarding Writ Petitions
Common issues noticed in Handling of Writ Petitions
Steps to be taken when a Writ Petition is Received
2. Importance: –
Many Writ Petitions are being received in Hon’ble Bombay High Court currently, especially against the Assessment Orders passed under the Faceless Assessment Scheme (FAS). In many of such cases, the Hon’ble HC has expressed its displeasure over the nature and content of such orders, including issues like not giving enough time period to the assessee to file submissions, not considering the reply filed by the assessee in the orders passed etc. The High Court has even imposed cost upon officers, called them for personal attendance in Court (including senior officers like CIT (Judicial) and PCsIT), initiated perjury proceedings in one case, asked the order to be circulated to the Revenue Secretary and to everyone in the Finance Ministry and law ministry. Thus, the handling of Writ Petitions is very important.
2. Standard Operating Procedures (SOPs) and Instructions for Writ Petitions
In the realm of legal procedures concerning Writ Petitions, adherence to established protocols and meticulous attention to directives are paramount. Instruction No. 7/2011 [F.NO. 279/ MISC./M- 42/2011-ITJ], dated 24-05-2011, delineates precise guidelines to be followed in matters involving the Union of India, Ministry of Finance, Secretary (Revenue), Chairman CBDT, or their representatives as respondents before High Courts in cases pertaining to Direct Taxes.
Para 11: Defending Cases and Seeking Guidance
“All the cases before High Court, pertaining to Direct Taxes, wherein Union ofIndia, Ministry of Finance, Secretary (Revenue), Chairman CBDT, or any of these figure as respondents, should be defended by the CCIT/ DGIT concerned. Powers may be delegated to appropriate officers nominatedfor the purpose stated above. The Board may be approached immediatelyfor guidance/ Instructions in case any difficulty is experienced in exercising these powers. In Writ matters against orders under section 119(2) of the IT Act, 1961 etc, appropriate instructions may be obtainedfrom the concerned division of the Board under intimation to ITJ section.”
Para 14: Supporting Departmental Counsels
The CITshould ensure that whenever the Departmental Counsel seeks Instructions /clarifications in a case, the same are attended to by the officers concerned promptly. The counsel should be briefed properly to strengthen Revenue’s case. The CIT should personally involve himself in cases involving intricate issues offacts/law having wide ramifications or involving high revenue stake. A copy of the scrutiny report forfiling appeal to High Court should invariably be made available to the appearing counsel for his assistance in preparation of the case and arguments”.
Judgments of High Court containing strictures etc.
Judgments of the High Court containing strictures or which are contrary to Board’s orders, notifications, instructions, circulars etc. shall be brought to the notice of the Board (concerned division) immediately by the CCIT/DGIT under intimation to ITJ section of the Board.
2.1 Standard Operating Procedure (SOP) for handling writ petitions where assessment is made under the Faceless Assessment/Penalty Scheme where NaFAC/CBDT is one of the respondents (N.A.F.A.C-1/58/2021-22/333 Dt: 26-7-2021).
The Central Board of Direct Taxes (CBDT) has provided comprehensive guidelines for the implementation of the Faceless Assessment Scheme 2019 (FAS 2019) through F. No. 173/165/2020-ITA-I dated 14.08.2020. These guidelines specifically mandate that field formations of jurisdictional charges outside the National Faceless Assessment Centre (NaFAC)/Regional Faceless Assessment Centers (ReFACs) hierarchy are responsible for performing judicial functions, including defending writ petitions.
In light of these administrative directions and legislative changes, all judicial functions, including the defence of writ petitions, shall be carried out by the jurisdictional Income Tax Authorities. This direction is based on the fact that the original jurisdiction lies with the Jurisdictional Assessing Officer (JAO), with concurrent jurisdiction vested in the NaFAC under sub-section (5) of section 120 of the Act, specifically for the limited purpose of assessment
A. SOP for PCIT Jurisdictional Charge being Nodal Coordinating Authority for defending writ petitions arising from the assessment/penalty proceedings pending before NaFAC:
PCIT (JAO) is responsible for handling writ petition matters with the support of the Pr. CCIT’s office, CIT (Judicial) of the region, and the concerned PCIT (ReFAC) (AU). Since the case records during the proceedings before NaFAC won’t be visible to the PCIT (Jurisdictional), inputs and parawise comments will be provided by the PCIT (ReFAC) (AU).
In such cases, the following steps should be followed:
1. Immediate Notification:
– Information about the filing of a Writ Petition before the jurisdictional High Court should be forwarded by the CIT (Judicial) or PCIT (Jurisdictional) to CIT (NaFAC)-3, New Delhi without any delay. Upon identification, the Writ Petition will be referred to the concerned PCIT (ReFAC) (AU).
2. Identification of PCIT (ReFAC) (AU):
– On receiving information from the concerned Pr. CCIT (Jurisdictional), High Court Cell, the High Court’s website, or any other source, CIT (NaFAC)-3, New Delhi will request ITBA to identify the involved PCIT (ReFAC) (AU) immediately. Once identified, the Writ Petition will be referred to the concerned PCIT (ReFAC) (AU).
3. Examination of Writ Petition:
– The PCIT (ReFAC) (AU) will review the Writ Petition in the context of the case’s facts and applicable law. The PCIT (ReFAC) (AU) can access all case records, including case history notes, through the status monitor.
4. Recording Parawise Comments:
– The PCIT (ReFAC) (AU) will examine the petitioner’s claims and record parawise comments on the issues involved in the Writ Petition, cross-verifying with the information available on the ITBA records. For any technical issues or processes, the PCIT (ReFAC) (AU) may seek clarification from CIT ITBA.
5. Forwarding Comments:
– The parawise comments received from PCIT (ReFAC) (AU) will be forwarded to the PCIT (Jurisdictional) and the office of Pr. CCIT with a request to take necessary measures to defend the case before the High Court.
6. Seeking Specific Comments from NaFAC:
– The PCIT (ReFAC) (AU) will make a reference to NaFAC for specific comments in the following cases:
– If any provision related to FAS 2019 or section 144B of the Act is challenged in the writ or during arguments.
– If specific inputs on any policy issue are required.
– This reference should be made in the prescribed format (Annexure-A) and include parawise comments of the PCIT (Jurisdictional) or PCIT (ReFAC) (AU) supported with necessary documents like the Writ Petition, assessment order, and case history notes.
7. Reference to NaFAC for Policy Issues:
– Reference to NaFAC on specific policy issues or provisions of FAS 2019/section 144B should be made in exceptional circumstances requiring specific advice on policy matters, not on case-specific facts. This should ideally be done within 5 days of receiving the Writ Petition or immediately if the writ is scheduled earlier.
– General comments or directions from NaFAC should be avoided.
8. Authorization to Defend the Case:
– NaFAC will authorize the PCIT (Jurisdictional) to defend the case, give directions regarding the arguments, and decide the stand to be taken before the High Courts. Parawise comments, inputs, and instructions to counsel (if required) will be provided by PCIT (ReFAC) (AU) to PCIT (JAO) in such cases.
B. SOP for PCIT (Jurisdictional) Charge being Nodal Coordinating Authority for defending Writ Petitions arising from the assessment/penalty orders completed by NaFAC:
1. Initial Examination:
– Upon receiving a Writ Petition, the PCIT (Jurisdictional) must examine it in the context of the case facts and applicable law. Access all case records and history notes through the status monitor, providing comprehensive comments based on all relevant facts and legal issues.
2. Detailed Analysis:
– Review the taxpayer’s petition and record parawise comments related to the issues in the writ petition. Cross-verify these with the information available in ITBA. If technical issues arise, seek clarification from CIT ITBA.
3. Coordination with PCIT (ReFAC) (AU):
– If necessary, the PCIT (Jurisdictional) can seek comments from the PCIT (ReFAC) (AU) who issued the assessment order. Provide written reasons and request unmasking of the AU from NaFAC (email: <[email protected]>, cc: Addl.CIT-3(1) NaFAC <[email protected]> & DCIT 3(2)(2) NaFAC <delhi.dcit3 .2 .2neac@incometax. gov. in>). Post-unmasking, coordinate via email/ faceless ITBA communication.
4. Reference to NaFAC:
– Make references to NaFAC for:
– Challenges related to FAS 2019, section 144B of the Act, or FPS 2021.
– Policy-specific inputs.
– Follow the same protocol as in para (A)(6). These references should be exceptional, focused on policy advice, not case facts, ideally within 5 days of receiving the writ or sooner if necessary. Avoid general comment requests.
5. Handling Natural Justice Violations:
– If High Courts set aside cases due to natural justice violations, instruct the JAO to create set-aside proceedings in ITBA. Request ITBA to reallocate the case to FAO after creation.
6. Unfavourable High Court Orders:
– Decide on appeals or stay applications before a division bench for single bench orders, or filing SLPs, in line with guidelines from Pr. DGIT (L&R) and CBDT.
7. Further Action on Unfavorable Orders:
– If the High Court’s unfavorable order pertains to ongoing NaFAC proceedings, obtain inputs from Pr. CIT (ReFAC) (AU) to decide on the order’s acceptability.
3. Common issues noticed in Handling of Writ Petitions: –
Generally, the tendency of the JAO is to defend the Assessment order at any cost. While it’s a noble pursuit, it should not come at the cost of facts of the case.
- Some issues in assessment may be due to the Faceless AO’s actions-
- not granting enough time with the final notice.
- not taking submissions of the assessee into consideration while passing the draft/final order etc, even when it has come long back.
- Passing order u/s 144 when submissions are on record.
- Some issues in assessment maybe due to Technical issues-
- AO gave a certain time and date for compliance while system automatically set the time to 23:59 hrs of that day.
- The submissions were not reflected on the system on the date of passing of order, but it reflected later and with the date and time stamp of the assessee’s submission, not with when it reflected on AO’s screen.
4. STEPS TO BE TAKEN WHEN A WRIT PETITION IS RECEIVED: –
1. Immediate Actions upon Receiving the Writ Petition
i. Open a new file in the office of the Principal Chief Income Tax (PCIT).
ii. Assign a proper identification number (with the WP. NO. allocated by the Hon. High Court).
2. Jurisdictional Verification:
– Check jurisdiction to ascertain if the petitioner is assessed within the jurisdiction.
– If the answer is “NO”:
– Ascertain the correct jurisdiction.
– Transfer the writ petition to that jurisdiction.
– Update the records accordingly.
– If the answer is “YES”:
– Check and note all the respondents involved.
– Inform and forward a copy of the writ petition to all respondents.
– Gather inputs from all respondents.
– Send a proposal to the PCIT to engage Special Counsel (SSC)/Additional Solicitor General (ASG)/special Counsel.
– Send the Vakalatnama/Docket/copy of the writ petition to the SSC authorized by the Principal Commissioner of Income Tax (Pr.CIT).
– Take possession of the original records pertaining to the case.
– Update the pendency of the Writ Petition in the workflow of ITBA.
– Read and thoroughly understand the averments made in the petition.
I. Responses to a Writ Petition:
i. Filing of a Statement: If the assessee seeks directions from the court to ensure that the Departmental Officer disposes of a pending application within a specified time limit, a mere statement in reply would suffice.
ii. Cases not covered in (a) above:
– Prepare parawise comments after verifying the averments raised with the original records in possession, either accepting or rejecting the averments made.
– Ensure that parawise comments are based on facts on record.
– Rebut case laws with facts on record or differentiate the laws in the case.
– Concluding comments should clearly elucidate the stand taken by the Department.
II. Challenges to Principles of Law/Constitutional Validity or Writ against Order u/s 119(2) of the Act:
Seek inputs from the Board (ITJ) section and incorporate them into the Affidavit in reply [Instruction no 07 dated 25/04/2011].
III. Preparation and Filing of Affidavit in Reply:
Once parawise comments are prepared (after collating inputs from other respondents and the Board where inputs are sought), seek the approval of the Principal Commissioner of Income Tax (Pr. CIT) concerned.
Forward the said comments to the Standing Counsel (SC) for the preparation of the affidavit in reply.
Ensure that the affidavit in reply is filed before the next hearing date.
IV. Next Hearing Date Preparation:
Check the next date of hearing and brief the SSC/Additional Solicitor General (ASG)/Special Counsel.
V. Affidavit in Reply Filing:
Prepare and file an affidavit in reply against each writ received before the ensuing hearing date Points to be noted.
A. Factual inaccuracy in the Affidavit in reply can lead to the Court imposing cost or even lead to the Court starting a perjury proceeding against the Officer filing the Affidavit.
B. Keep track of the hearing dates and interim orders issued by the Hon. High Court and ensure that the interim directions issued by the Hon’ble High Court are duly compiled and timely instructions are issued to the counsels.
Chapter-IV
ACTION TAKEN AFTER DISPOSAL OF WRIT PETITION
1. Dismissal of Writ Petitions:
Upon receiving a favourable decision leading to the dismissal of the Writ Petitions, immediate steps should be taken to update ITBA and complete any pending processes that initially led to the filing of the writ.
2. Set Aside Directions by High Court:
When the High Court sets aside a case back to the file of the Assessing Officer, the PCIT (Jurisdictional) should instruct the Jurisdictional Assessing Officer (JAO) to create a set-aside proceeding in ITBA promptly. Furthermore, request ITBA to reallocate the case to the First Appellate Authority (FAO).
3. Petition Allowed by High Court:
In cases where the petition is allowed by the High Court, the Principal Commissioner of Income Tax (Pr. CIT) (Jurisdictional) should make a decision on filing further Special Leave Petition (SLP) or stay application before the division bench (if the order is from a single bench) or based on existing guidelines issued by Pr. DGIT (L&R) and CBDT
a. If an unfavourable order is received in a case pending before NaFAC, seek inputs and comments from Pr. CIT (ReFAC)(AU) for determining the acceptability of the order.
b. The timeline for forwarding the proposal for filing an SLP is 21 days from the passing of the order.
1. Use the IAMS Portal and also update the IAMS Portal as per the status of the Writ Petition.
Chapter-I
PROSECUTION
Launching of prosecution in relation to various offences under the Income-tax Act is intended to make enforcement of Direct tax laws more effective. Imposition of penalty has not been found to be adequate deterrent to check tax evasion and in enforcing tax laws. There may also be occasions to initiate prosecution proceedings under various sections of IPC independently or in addition to prosecution under the Income Tax Act, 1961.
1. OFFENCES LIABLE TO PROSECUTION.
I. Liable to be prosecuted-
i. Any individual who commits an offense is under various provisions of IT Act subject to prosecution, regardless of whether they are an assessee under the Income-tax Act. In cases involving offenses committed by entities such as companies, firms, associations of persons, or bodies of individuals, every person in charge or responsible for conducting the business of the entity, as well as the entity itself, is deemed to be guilty. Similarly, in the case of offenses by a Hindu Undivided Family, the Karta of the family is deemed to be guilty of the offense.
ii. If an offense under the Income-tax Act is committed by a company, and the prescribed punishment includes imprisonment and fines, the company shall be penalized with fines. Additionally, any person mentioned in subsection (1) of section 278B, or any director, manager, secretary, or officer of the company mentioned in subsection (2) of section 278B, may be subject to legal proceedings and penalties as per the provisions of the Act.
2. SECTIONS RELATING TO PROSECUTION: –
Sections 275A to 280 of the Income Tax Act, 1961 provide for various types of offences for which the Department can prosecute an assessee.
a. Section 275A – Contravention of order made u/s. 132(1) (Second Proviso) or section 132(3) in the case of search & seizure.
b. Section 275B – Failure to afford necessary facility to authorised officer to inspect books of account or other documents as required under section 132(1)(iib).
c. Section 276 – Removal, concealment, transfer or delivery of property to thwart tax recovery.
d. Section 276A – Failure to comply with provisions of section 178(1) and (3) – re: company in liquidation.
e. Section 276B – Failure to pay to credit of Central Government (i) deducted at source under Chapter XVII-B or (ii) tax payable u/s.115-O(2) or proviso to section 194B,194R(1),194S(1) or 194BA(2) of the Act.
f. 276BB- Failure to pay to the credit of the Central Government , the Tax collected at source as per Section 206C of the I.T Act.
g. Section 276C – Willful attempt to evade tax, penalty or interest chargeable or imposable for under-reporting of Income.
h. Section 276CC – Willful failure to furnish returns.
i. Section 276D – Willful failure to produce accounts and documents.
j. Section 277 – False statement in verification or delivery of false account, etc.
k. Section 277A – Falsification of books of account or document, etc., to enable any other person to evade any tax, penalty or interest chargeable/leviable under the Act.
l. Section 278 – Abetment of false return, account, statement or declaration relating to any income or fringe benefits chargeable to tax.
m. Section 278A – Second and subsequent offences under section 276B, 276C (1), 276CC, 277 or 278.
n. Section 278AA – No person shall be punished for any failure if he proves that there was reasonable cause for such failure.
o. Section 278B – Offences by companies.
p. Section 278C – Offences by HUF
q. Section 280(1) – Disclosure of particulars by public servants in contravention of section 138(2) {Prosecution to be institutes with previous sanction of Central Government under section 280(2)].
r. 276 BB- Failure to pay to the credit of the Central Government the Tax collected at source under section 206C of the IT Act.
Chapter-II
LAUNCHING PROSECUTION
1. GENERAL ISSUES RELEVANT TO PROCEDURE FOR LAUNCHING PROSECUTION:
The Central Board of Direct Taxes, through Circular No. 24/2019 dated 09.09.2019, has outlined guidelines for a streamlined process in identifying and evaluating cases for prosecution related to Direct Tax Laws.
Place of Prosecution:
As stated in paragraph 7(i) of the Standard Operating Procedure (SOP) from 27.06.2019, complaints are to be filed in the court with jurisdiction. Section 177 of the Criminal Procedure Code (Cr.P.C.) stipulates that offenses are generally tried by the Court within whose jurisdiction the offense occurred. This provision extends to offenses under Direct Tax laws as well.
Authority Competent to Launch Prosecution:
The field authorities responsible for identifying and initiating prosecution proceedings are outlined in paragraph 3.2 of the Standard Operating Procedure (SOP) dated 27.06.2019. Here are the key points regarding the competent authorities for launching prosecution:
i. Authority under Whose Jurisdiction Offence Was Committed:
The assessing officer, who has jurisdiction over the assessment, is the authorized person to initiate prosecution with the prior sanction of the Principal CIT/CIT having jurisdiction over the case. It is immaterial whether the assessing officer conducted the assessment personally or not. Similarly, in cases of TDS default, the assessing officer with jurisdiction over the TDS matter can initiate prosecution.
ii. Prosecution by Authority Presented with False Evidence:
An important aspect is that the authority presented with false evidence can also initiate prosecution. For instance, if a statement under oath recorded by an ADIT/DDIT/authorized officer is found to be false, then the concerned ADIT/DDIT/AO can initiate prosecution with the prior sanction of the Principal CIT/CIT/Principal DIT/DIT having jurisdiction over such individual.
iii. Prosecution under Sections 193 and 196 of IPC:
Prosecution under sections 193 and 196 of the Indian Penal Code (IPC) can only be initiated by the officer before whom the offense occurred. This officer could be a revisional authority, first appellate authority, or assessing officer/ADIT/DDIT. However, section 195(1)(a) of the Criminal Procedure Code (Cr.P.C.) allows a superior authority to the officer before whom the offense occurred to also initiate prosecution.
Authority Competent to Grant Sanction for Prosecution:
The procedure for granting sanction under section 279(1) is outlined in paragraph 5 of the Standard Operating Procedure (SOP) dated 27.06.2019. Here are the key points regarding the competent authority to grant sanction:
i. Authority for Sanction under Section 279(1):
The Principal Commissioner, Commissioner, Commissioner (Appeals), or the Appropriate Authority as defined in clause (C) of section 269UA is empowered to grant sanction under section 279(1) of the Income Tax Act for launching prosecution under various provisions of the IT Act.
ii. Direction from Higher Authorities:
Under the proviso to Section 279(1), the Principal Chief Commissioner, Chief Commissioner, Principal Director General, or Director General may also provide directions for initiating prosecution proceedings to the aforementioned Income Tax authorities.
iii. Sanction for Prosecution under IPC:
There is no statutory requirement to obtain previous sanction for prosecution under different sections of the Indian Penal Code (IPC). However, the authority competent to grant sanction for prosecution under the Income-tax Act shall also provide administrative sanction for prosecution under IPC.
iv. Role of Sanctioning Authority:
If the sanction is granted by the competent authority and includes the facts constituting the offense and the grounds of satisfaction, the sanctioning authority does not need to be a prosecution witness. However, if the prosecution sanction is challenged by the defense on grounds such as competence of the sanctioning authority or lack of application of mind, the trial court may summon the sanctioning authority under section 311 of the Criminal Procedure Code (Cr.P.C.).
v. Collegium System for Approval:
Circular No. 24/2019 dated 09.09.2019 prescribes a collegium system comprising two CCIT/ DGIT rank officers, including the CCIT/DGIT in whose jurisdiction the case lies, to provide prior administrative approval to the Sanctioning Authority before initiating prosecution in most cases. This system ensures that prosecution proceedings are initiated only in deserving cases. The Principal CCIT(CCA) concerned may issue directions for forming the collegium of CCsIT/DGIT for this purpose, and any disagreements are resolved as per the guidelines outlined in the circular.
I. No Limitation for Launching Prosecution under Income-tax Law:
While Section 468 of the Criminal Procedure Code sets a three-year limitation for launching prosecution, offences under the Income-tax Act and Wealth-tax Act are exempt from this limitation. However, it’s important to note that newly introduced provisions like Securities Transaction Tax and Banking Cash Transaction Tax are not exempt from this limitation. Although there’s no statutory time limit, the Hon’ble Bombay High Court has quashed prosecutions due to unreasonable delays, as seen in the case of KMA Ltd vs Sundararajan ITO (1996) Tax LR 248 (Bom).
II. Prosecution under Income-tax Law vis-a-vis IPC:
a. Prosecution under the Income-tax Act is distinct and more tailored to tax-related violations.
b. Section 278A mandates harsher penalties for repeat offences, even if they are under different sections.
c. Section 278AA shifts the burden of proving reasonable cause to the accused for specific offences.
d. Section 278E includes a presumption of a culpable mental state, which can be challenged by the accused.
e. Section 278B clarifies the liability of companies and individuals responsible for business conduct, setting standards for due diligence.
f. Section 279(2) allows for compounding of offences under the Income-tax Act, unlike IPC offences that cannot be compounded and may only be withdrawn with court approval.
2. PROCEDURE FOR LAUNCHING OF PROSECUTION:-
The detailed procedure for launching prosecution in case of offences related to TDS/TCS is governed by SOP dated 18.10.2016 and in case of all other offences the same shall be governed by SOP dated 27.06.2019. The brief procedure for launching prosecution is as discussed in these Paragraphs:
I. Steps for launching prosecution The process begins with the ADIT/DDIT/Authorized officer/ Assessing officer/TRO identifying the case as per prosecution guidelines or based on available evidence. A proposal containing case facts, identified offences, and case records are then sent to the Pr.CIT/CIT with jurisdiction for approval.
i. The Pr.CIT/CIT reviews the proposal’s feasibility for prosecution considering the case’s facts. If deemed fit, the Pr.CIT/CIT issues a notice under Section 279(1) of the IT Act (or otherwise for IPC offences) to the assessee, informing them of the proposed action and requesting their version within a stipulated time.
ii. After the notice period expires:
– If no response is received, the Pr.CIT/CIT proceeds based on available facts.
– If the assessee responds, further action is taken accordingly.
iii. If the assessee seeks compounding of the offence, they are advised to submit the compounding application within a specified time. Failure to do so prompts the sanctioning authority to proceed without delay. If the compounding application is received, it follows guidelines for compounding of offences.
iv. If the assessee’s reply does not request compounding and is not deemed fit for prosecution after review, prosecution may not be launched, with reasons recorded.
v. Upon satisfying the offence’s elements, the Commissioner may grant sanction under Section 279(1) of the Act. In certain cases, prior approval of a Collegium of two CCIT/ DGIT rank officers is required. The sanctioning order should reflect careful consideration of facts and adherence to Section 278AA provisions.
vi. If there’s doubt regarding the prosecutability of the offence after considering facts and replies, the Commissioner may seek the Special Public Prosecutor’s opinion. This opinion assists but isn’t binding for granting prosecution sanction.
II. Important aspects regarding preparation of the proposal for prosecution-
Para 4 of SOP dated 27.06.2019 deals with procedure to prepare proposal for Prosecution. The Proposal shall be prepared in Form A which is attached to SOP as Annexure-1.
In preparing such proposals following aspects may be kept in mind: –
i. The AO is required to study the entire records of a delinquent assessee with special reference to the following: –
a. Background of the case with particular attention to past lapses
b. Stages of the relevant proceedings from the issue of the notice requiring submission of return to the completion of assessment and finalisation of penalty proceedings.
c. Appellate Proceedings.
d. Identification of documentary evidence like notices, return, statement of accounts etc.
e. Identification of other documentary evidences
f. Identification of departmental witnesses
g. Identification of outside witnesses
h. Expert testimony, if any
i. Identification of corroborative evidence.
ii. After study of records a proposal in prescribed proforma shall be drafted incorporating all the required details as provided in the proforma enclosed as Annexure-1 of SOP, strictly following the instructions to fill the proforma.
III. Safeguards in granting sanction for prosecution u/s 279(1) of the IT Act-
The Standard Operating Procedure (SOP) dated 27.06.2019 outlines important aspects of mandatory sanction under section 279(1) of the Income Tax Act. Here are some safeguards to consider when granting such sanction:
1. Application of Mind:
– The sanction order under section 279(1) should clearly show that it was issued after careful consideration of the available materials. The authority granting sanction must have genuinely applied its mind to the facts of the case.
2. Purpose of Safeguard:
– The purpose of requiring sanction is to prevent frivolous prosecutions and to allow the authority to determine the necessity and appropriateness of prosecution based on the specific circumstances of each case. The sanctioning authority should demonstrate in the sanction order that they have indeed considered all the facts before granting sanction.
3. Precedents and Legal Validity:
– There have been cases where complaints were dismissed due to improper or insufficient sanction. The sanction order should be robust enough to withstand legal scrutiny and not be found defective or lacking in a court of law.
4. Separate Sanction for Each Offence:
– Each offence should have a separate sanction, even if the order is the same. For instance, if sanction is granted for an offence under section 276C but proceedings are initiated under section 277, the proceedings may be deemed invalid and could be quashed.
5. Year-wise Sanction:
– Similarly, under section 279(1) of the Income Tax Act, separate sanction should be given for each assessment year through distinct orders specifying each offence separately.
These safeguards ensure that the sanctioning process is thorough, legally sound, and aligned with the requirements of the law, reducing the risk of challenges or dismissals based on sanction-related issues.
Chapter-III
IMPORTANT ASPECTS IN THE PREPARATION OF COMPLAINT
1.1. Important aspects in the preparation of complaint: –
Important aspects in the preparation of a complaint are outlined in Para 6 of the SOP dated 27.06.2019. Since the complaint forms the basis of prosecution proceedings, it should be meticulously prepared with the following considerations:
a. Foundation of Prosecution:
The complaint serves as the foundation of a prosecution proceeding. It should be drafted in a manner that would convince a person of reasonable intelligence about the commission of the offence by the accused.
b. Charging Section Mention:
The complaint should clearly mention the appropriate charging section of the Income Tax Act as well as the Indian Penal Code (IPC). This aids the Magistrate during the framing of charges and ensures legal accuracy.
c. Signature by Competent Officer:
The complaint must be signed by the competent officer initiating the prosecution. This adds legitimacy and accountability to the document.
d. Crucial Legal Sections:
For drafting the complaint, Chapter XVII of the Criminal Procedure Code (Cr.PC) is relevant, specifically Sections 211 to 224. Familiarity with these sections ensures compliance with legal procedures.
e. Separate Charges and Trials:
Section 218 of Cr.PC mandates a separate charge for each distinct offence and a separate trial for each offence. However, Section 219 allows for multiple offences of the same kind, committed within 12 months, to be charged and tried together in one trial if they fall under the same section of the IPC or any special law, including the Income Tax Act.
1.2. Brief guidelines for proper drafting of complaints:
i. Before prosecution is launched, it is imperative that there must be a sanction for such prosecution and that it should be at the instance of the authority enumerated in section 279(1) of the Act. Otherwise, prosecution is likely to be quashed.
ii. The place of commission of the offence shall specifically be discussed with the Prosecution Counsel and accordingly the jurisdiction of the court should be mentioned.
iii. The correct names and complete addresses of the accused should be specifically mentioned. This prevents delay in service of summons etc., by the court.
iv. The following should be annexed to the complaint:
a. Sanction order for prosecution
b. List of important documents / exhibits
c. List of prosecution witnesses.
v. It may be however noted; that prosecution can also furnish additional list of witnesses during trial [section 204(2) of Cr.P.C]
vi. Chronological events leading to commission of offences should be spelt out. The evidence collected during the investigation should be set out precisely so that the Magistrate is able to appreciate the grounds to proceed with the case. Care, therefore, needs to be taken to establish clearly the ingredients of the offence in the complaint.
1.3. Selection of evidence as exhibits –
In most prosecution trials, evidence in the form of books of account and documents plays a crucial role. This evidence can be obtained during Income-tax proceedings, through submissions by the assessee, or from third parties. It can also be obtained through impounding under sections 131(3) or 133A, or through seizure under sections 132(1) or 132A of the I.T. Act. Such records and documents are considered admissible evidence in court. Key documents like the original and amended returns, statement of accounts, and any statements by the assessee admitting an offense or contradicting previous statements should be specifically listed as exhibits in the complaint. Ensuring the safekeeping of these documents is important, with a preference for relying on government, bank, or other authoritative documents.
Regarding digital or electronic evidence, the Supreme Court has relaxed the requirement of a certificate under section 65B(4) of the Evidence Act in certain cases, such as when a party does not have access to the device producing the document. In TDS cases under sections 276B/276BB, the default sheet generated by the CPC-TDS System can be submitted as admissible evidence.
1.4. Selection of witnesses:
– It’s crucial to carefully select prosecution witnesses during the preparation of the complaint. Instead of listing all possible witnesses for proving identical facts, prioritize those who can easily appear before the court.
– The complainant officer should always be included as a witness.
– Independent witnesses like bank officers, government employees, or business associates of the assessee should be preferred based on the circumstances of the case.
– Avoid relying on witnesses associated with the delinquent assessee or those relied upon for their defend
2. Custody of records and evidence relating to Prosecution:-
Safe custody of evidence is a critical aspect highlighted in Para 8 of SOP dated 27.06.2019. Many cases are lost due to the department’s failure to present evidence in court, emphasizing the need for careful identification and preservation of material evidence for prosecution proceedings.
I. Identification and Collection of Evidence:
– Any authority discovering fraud or serious tax evasion should proceed with further investigations, considering the potential for prosecution. These cases are termed “potential prosecution cases,” and evidence collection should be meticulous.
– Assessing Officers (AOs) must ensure that returns are filed correctly and signed by authorized personnel. Documents submitted by the assessee should be properly signed and verified.
II. Custody of Original Records:
– Once prosecution proceedings are initiated, the entire original records should be kept in personal custody, and further processing should be based on photocopies.
III. Handling of Certified Photocopies:
– Certified photocopies of relevant records should be given to the prosecution counsel at the time of launching the prosecution. The prosecution counsel is responsible for presenting these copies during each hearing.
– The original records remain in the personal custody of the complainant officer and their successor after filing the complaint. They can be produced in court as required.
IV. Retention of Seized Material:
– Seized or impounded material relevant to prosecution proceedings should not be released until the completion of those proceedings. Approval from the competent authority should be obtained for its retention.
V. Documentation and Record Keeping:
– Upon initiating prosecution proceedings, the case name should be entered into the prosecution register on ITBA by the AO/TRO/ADIT.
3. Publicity of Convicted cases:-
All cases, where prosecution proceedings launched by the Department have resulted in conviction of the assessee should be given appropriate publicity by the Pr.CIT/Pr. DIT concerned.
Chapter-IV
OFFENCES UNDER VARIOUS OTHER ACTS
Black Money and Imposition of Tax Act, 2015
Prohibition of Benami Property Transaction Act, 1988
Comparative chart of prosecution under I.T Act vis-à-vis
Black Money Act & Benami Act
1. Prosecution provisions under the Black Money (Undisclosed Foreign Income and Assets) And Imposition of Tax Act, 2015 (‘Black Money Act’) :-
Nature of offence: In absence of any non-obstante clause (like section 279A of the Income-tax Act) in the Black Money Act, the classification of offences under the Black Money Act shall be governed by the Code of Criminal Procedure, 1973.
Part II of the First Schedule of the Cr. P.C. as reproduced below, which classifies “Offences under other laws” (other than IPC), shall be applicable for offences under the Act.
| Offences | Cognizable or non- cognizable | Bailable or non-bail-able |
| If punishable with death, imprisonment for life, or imprisonment for more than 7 years | Cognizable | Non-bailable |
| If punishable with imprisonment for 3 years and upwards but not more than 7 years | Cognizable | Non-bailable |
| If punishable with imprisonment for less than 3 years or with fine only | Non-cognizable | Bailable |
The offences under sections 49 to 53 of the Black Money Act are punishable with a maximum imprisonment for a term of at least seven years. Thus, in accordance with the classification of Cognizable/Non-Cognizable and Bailable/Non-Bailable offences under the Cr.P.C., the offences under Sections 49 to 53 of the Act are Cognizable and Non-Bailable offences.
Compounding: As against the compounding provision under the Income-tax Act, the Act does not provide for compounding of offences. Thus, the offences under the Black Money Act are non-compoundable.
Prosecution provisions under the Black Money (Undisclosed Foreign Income and Assets) And Imposition of Tax Act 2015
| Section 49 | Punishment for failure to furnish return in relations to foreign income and asset | This section is identical to section 276CC of the Income-tax Act. The punishment for wilful failure to file the return of income u/s 139(1) before the expiry of the assessment year by a resident other than not ordinarily resident, having any asset or, financial interest in any entity, located outside India as a beneficial owner or as a beneficiary shall be rigorous imprisonment from six months to seven years and with fine. |
| Section 50 | Punishment for failure to furnish in return of income, any information about an asset (including financial interest in any entity) located outside India | This provision will apply if any person (resident), as a beneficial owner or as a beneficiary, willfully fails to furnish in return of income, any information about an asset (including financial interest in any entity) located outside India. Punishment is rigorous imprisonment for a term of six months to seven years and fine. |
| Section 51 | Punishment for wilful attempt to evade tax | This section is identical to section 276C of the Income-tax Act (except for the quantum of punishment) and is applicable only for Residents other than not ordinarily residents. As per the section 51(1), in case of willful attempt to evade any tax, penalty or interest chargeable or imposable under the Act, the person is punishable with rigorous imprisonment for a term from three years to ten years and with fine. |
| Section 52 | Punishment for false statement in verification | This section is identical to section 277 of the Income-tax Act except that there is no linkage with the quantum of evasion of tax. The punishment is rigorous imprisonment for six months to seven years and fine. Application of this section is not limited to “residents”. |
| Section 53 | Punishment for abetment | This section is identical to section 278 of the Income-tax Act except that there is no linkage with the quantum of evasion of tax. The punishment is rigorous imprisonment for six months to seven years and fine. Application of this section is not limited to “residents” |
| Section 54 | Presumption as to culpable mental state | This section is identical to section 278E of the Income-tax Act. |
| Section 55 | Prosecution to be at the in- stance of Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General or Principal Commissioner or Commissioner | This section is identical to section 279 of the Income-tax Act. Sanction of the Principal Commissioner or Commissioner or the Commissioner (Appeals) is required for filing prosecution u/s 49 to 53. |
| Section 56 | Offences by Companies | This section is identical to section 278B of the Income-tax Act. However, in the definition of Company, HUF has also been included (In the Income-tax Act for offences by HUF a separate Section 278C is provided |
| Section 57 | Proof of entries in records or documents | This section is identical to section 279B of the Income-tax Act. |
| Section 58 | Punishment for second and subsequent offences | This section is identical to section 278A of the Income-tax Act. However, punishment for second and subsequent offences u/s and 49 to 53 is three years to ten years with fine which shall not be less than
Rs. 5 lakhs but which may extend to Rs. 1 crore |
2. Prosecution provisions under the Prohibition of Benami Property Transactions Act, 1988 (“Benami Act”)
| Section 3 | Prohibition of benami transactions |
For offences prior to the amendment of the Benami Act w.e.f. 01.11.2016, entering into any benami transaction is punishable with imprisonment for a term which may extend to three years or with fine or with both. |
| Chapter VII – Offences and Prosecutions | ||
| Section 53 | Penalty for benami transaction |
Where any person enters into a benami transaction shall be punishable with rigorous imprisonment for a term from one year to seven years and shall also be liable to fine which may extend to twenty-five per cent of the fair market value of the property. |
| Section 54 | Penalty for false information | Any person who is required to furnish information under this Act knowingly gives false information shall be punishable with rigorous imprisonment for a term from six months to five years and shall also be liable to fine which may extend to ten percent of the fair market value of the property. |
| Section
55 |
Previous sanction | Sanction of the Board is required for filing prosecution |
| Chapter VIII – Miscellaneous | ||
| Section 60 | Application of other laws not barred | It clarifies that provisions of prosecution under the Benami Act are independent of and in addition to the provisions of prosecution under any other law |
| Section 62 | Offences by Companies | This section is identical to the Section 278B of the Income-tax Act and covers Company, Firm, BOI and AOP but does not cover HUF |
|
||
Chapter-V
IPMS PORTAL
Integrated Prosecution Management System (IPMS)
1. INTEGRATED PROSECUTION MANAGEMENT SYSTEM (IPMS):-
The Integrated Prosecution Management System (IPMS) is the website for information on prosecution complaints filed by the Department. The information on this portal is for the exclusive use of the Income Tax Department. IPMS provides the data of Mumbai Region as well as for all the PCIT charges separately. The IPMS website provides the information in respect of the case, the Advocate and the no. of hearings held in each case.
–
–
Chapter-I
NATIONAL COMPANY LAW TRIBUNAL AND NATIONAL COMPANY LAW APPELLATE TRIBUNAL
(NCLT & NCLAT)
1. Introduction
1.1 National Company Law Tribunal (NCLT):
The National Company Law Tribunal (NCLT) is a quasi-judicial authority constituted by Union Government of India on 1 June 2016 under Section 408 of the Companies Act, 2013. Its primary role is to handle corporate civil disputes arising under this Act. The NCLT possesses powers and procedures similar to those of a court of law or judge.
1.2 Key Functions and Powers:
– Fact-Finding and Decision-Making: The NCLT is tasked with objectively determining facts, deciding cases based on principles of natural justice, and issuing orders that can correct wrongs, remedy situations, or impose legal penalties and costs.
– Orders and Impact: The orders issued by the NCLT can affect the legal rights, duties, or privileges of the involved parties.
– Procedure: Unlike traditional courts, the NCLT is not bound by strict judicial rules of evidence and procedure. It operates on principles of natural justice, providing a more flexible approach to resolving disputes.
1.3 National Company Law Appellate Tribunal (NCLAT):
The National Company Law Appellate Tribunal (NCLAT) is designed to handle appeals against the decisions made by the NCLT. It serves as an appellate authority to review and possibly alter the decisions of the NCLT.
1.4 Key Functions and Powers:
– Appellate Review: The NCLAT reviews decisions taken by the NCLT on both factual and legal grounds.
– Powers: It has the authority to set aside, modify, or confirm the decisions of the NCLT.
– Intermediate Appellate Forum: The NCLAT acts as an intermediate appellate body, with further appeals from its decisions being directed to the Supreme Court of India.
1.5 New Enforcement Mechanism: Place of Tribunals
The Companies Act, 2013, envisions a comprehensive enforcement mechanism where the NCLT and NCLAT play crucial roles. The enforcement hierarchy is as follows:
1. NCLT: The primary tribunal for corporate civil disputes under the Companies Act, 2013.
2. NCLAT: The appellate body for reviewing NCLT decisions.
3. Supreme Court: The apex court where decisions of the NCLAT can be further appealed.
This structure ensures a systematic approach to dispute resolution and enforcement under the Companies Act, providing clear pathways for appeals and reviews, thereby enhancing the efficiency and effectiveness of corporate legal proceedings in India.
The chart below provides a holistic view about the enforcement mechanism contemplated under the Companies Act, 2013 and the place of Tribunals in this machinery.
1.6 Why NCLT & NCLAT required:-
The constitution of NCLT and NCLAT was a step towards to improving the ease of doing business by bringing all aspects of Company law matters under one roof. Some of most important advantages are as under:
a. Single Window: It is most important benefit that the tribunals will act as a single window for settlement of all Company law related disputes effectively. It shall avoid unnecessary multiplicity of proceedings before various authorities or courts.
b. Speedy Process: The NCLT and the NCLAT are under a mandate to dispose of the cases before them as expeditiously as possible. In this context a time limit of three (3) months has been provided to dispose of the cases with an extension of ninety (90) days for sufficient reasons to be recorded by the President or the Chairperson, as the case maybe. The speedy disposal of cases will save time, energy and money of the parties.
c. Reduction of work of High Court: The number of pending cases with High Court is too high and now the matters in respect to compromise, arrangement, amalgamations and winding-up transferred to NCLT. Accordingly, NCLT and the NCLAT will reduce the work of overburdened High Courts.
1.7 Role of NCLT
1. Territorial Jurisdiction of NCLT
| Sr. No | Title of the Bench | Location | Territorial Jurisdiction of the Bench |
| (1) | (2) | (3) | (4) |
| 1. | (a) NCLT, Principal Bench.
(b) NCLT, New Delhi Bench. |
New Delhi | (1) Union Territory of Delhi |
| 2. | NCLT Ahmedabad Bench. | Ahmedabad | (1) State of Gujarat(2) Union Territory of Dadra and Nagar Haveli(3) Union Territory of Daman and Diu |
| 3. | NCLT Allahabad Bench. | Allahabad | (1) State of Uttar Pradesh(2) State of Uttarakhand |
| 4. | NCLT Bengaluru Bench. | Bengaluru | (1) State of Karnataka |
| 5. | NCLT Chandigarh Bench. | Chandigarh | (1) State of Himachal Pradesh(2) State of Jammu and Kashmir(3) State of Punjab(4) Union Territory of Chandigarh(5) State of Haryana |
| 6. | NCLT Chennai Bench. | Chennai | (1) State of Tamil Nadu(2) Union Territory of Puducherry |
| 7. | NCLT Guwahati Bench. | Guwahati | (1) State of Arunchal Pradesh(2) State of Assam(3) State of Manipur(4) State of Mizoram(5) State of Meghalaya(6) State of Nagaland(7) State of Sikkim(8) State of Tripura |
| 8. | NCLT Hyderabad Bench. | Hyderabad | (1) State of Telangana |
| 9. | NCLT Kolkata Bench. | Kolkata | (1) State of Bihar(2) State of Jharkhand(3) State of West Bengal(4) Union Territory of Andaman and Nicobar Island |
| 10. | NCLT Mumbai Bench. | Mumbai | (1) State of Maharashtra(2) State of Goa |
| 11. | NCLT Jaipur Bench. | Jaipur | (1) State of Rajasthan. |
| 12. | NCLT Cuttack Bench. | Cuttack | (1) State of Chhattisgarh.(2) State of Odisha. |
| 13. | NCLT Kochi Bench. | Kochi | (1) State of Kerala(2) Union Territory of Lakshadweep |
| 14. | NCLT Indore Bench. | Indore | (1) State of Madhya Pradesh |
| 15. | NCLT Amravati Bench. | Amravati | (1) State of Andhra Pradesh |
2. Subject Matter Jurisdiction- NCLAT
| Act/Code | Powers | Description of Section |
| Section 410 of Companies Act, 2013
|
Hearing appeals against orders of NCLT
|
The Central Government shall, by notification, constitute, an Appellate Tribunal to be known as the National Company Law Appellate Tribunal for hearing appeals against, –
(a) the order of the Tribunal or of the National Financial Reporting Authority under this Act; and (b) any direction, decision or order referred to in section 53A of the Competition Act, 2002 in accordance with the provisions of that Act. |
| Section 132 of Companies Act, 2013 read with Section 410 Companies Act, 2013. | Hearing appeal against orders of National Financial Reporting Authority (NFRA) | (5) Any person aggrieved by any order of the Nation-al Financial Reporting Authority issued under clause
(c) of sub-section (4), may prefer an appeal before the Appellate Tribunal |
| Section 53A of Competition Act, 2002 read with Section 410 of Companies Act, 2013 | Hear and dispose of appeals against any direction issued or decision made or order by passed the Competition Commission of India (CCI) | (1) The Central Government shall, by any notification, establish an Appellate or Tribunal to be known as Competition Appellate Tribunal, – the to hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39, section 43, section 43A, section 44, section 45 or section 46 of this Act;to adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under subsection (2) of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act. |
| Section 61 of In- solvency Bankruptcy 2016 read with Section 32 of Insolvency and Bankruptcy Code. | Hearing appeal against orders passed under IBC by NCLT | 1) Notwithstanding anything to the contrary contained under the Companies Act 2013, any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal.
(2) An appeal against an order approving a resolution plan under section 31 may be filed on the following grounds, namely:- (i) the approved resolution plan is in contravention of the provisions of any law for the time being in force; (ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period; (iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board; (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (v) the resolution plan does not comply with any other criteria specified by the Board. |
| Section 202 of Insolvency and Bankruptcy Code, 2016 | Hearing appeals against the orders passed by Insolvency and Bankruptcy Board of India with respect to insolvency professional agencies. | Any insolvency professional agency which is aggrieved by the order of the Board made under section 201 may prefer an appeal to the National Company Law Appellate Tribunal |
| Section 211 of Insolvency Bankruptcy Code, 2016 | Hearing appeals against the orders passed by Insolvency and Bankruptcy Board of India with respect to information utilities. | Any information utility which is aggrieved by the order of the Board made under section 210 may prefer an appeal to the National Company Law Appellate Tribunal. |
Chapter-II
MERGER & ACQUISITION IN THE LIGHT OF INCOME TAX ACT, 1961
1. Introduction
Mergers and acquisitions (M&A) have emerged as significant tools for growth in Indian businesses, playing a critical role in corporate strategy. These strategies enable companies to gain market strength, expand their customer base, reduce competition, or enter new markets and product segments. Companies may pursue mergers and acquisitions to:
– Access markets through established brands.
– Gain market share.
– Eliminate competition.
– Reduce tax liabilities.
– Acquire new competencies.
– Offset accumulated losses of one entity against the profits of another.
M&A transactions can be implemented by various modes of restructuring, both internal and external, be it mergers, demergers, acquisition of shares, asset sale, buybacks, etc. Each mode of restructuring comes with its own set of tax considerations.
A snapshot of commonly adopted restructuring strategies is pictographically depicted below.
A brief comparative summary of various restructuring options from an Indian context is mentioned below:
By notification dated December 15, 2016, the Ministry of Corporate Affairs (“MCA”) notified Section 233 of the CA, 2013 which provides for Fast Track Mergers (“FTM”). FTM is a new concept which allows for mergers without the approval of the NCLT, in case of a merger between.
(i) two or more small companies,
(ii) holding company and its wholly-owned subsidiary, and (iii) such other class of companies as may be prescribed.
An FTM only requires approval of the shareholders, creditors, liquidator and the Registrar of Companies (“ROC”) which takes substantially lesser time than obtaining approval from the NCLT.
DEFINITIONS:
Merger: The term ‘merger’ has not been defined under the Act or the IT Act. Merger is the process of combining two or more distinct entities in such a manner that it amounts to the accumulation of the assets and liabilities of the said entities into one business entity.
Amalgamation: Section 2 (1B) of the IT Act defines ‘amalgamation’ as the merger of one or more companies into another company or the merger of two or more companies to form one company in such a manner that the assets and liabilities of the amalgamating companies vest in the amalgamated company.
The basic ingredients of amalgamation are as follows:-
1. all of the properties and liabilities of the amalgamating company or companies immediately before the amalgamation becomes the properties and liabilities of the amalgamated company by virtue of the amalgamation;
2. shareholders holding not less than 3/4 in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of the amalgamation,
Demerger: The concept of ‘demerger’ has been elucidated in Section 2 (19AA) of the IT Act. It means the transfer of a demerged undertaking by a demerged company to the resulting company as a going concern, pursuant to a Scheme of Arrangement sanctioned under Sections 230 to 232 of the Act.
The basic ingredients of demerger are as follows: –
1. All the properties and liabilities of the undertaking, being transferred by the demerged company, immediately before the demerger, become the properties and liabilities of the resulting company by virtue of the demerger. They are transferred at values appearing in its books of account immediately before the demerger;
2. In consideration of the demerger, the resulting company issues its shares to the shareholders of the demerged company on a proportionate basis;
3. The shareholders holding not less than 3/4th in value of the shares in the demerged company (other than shares already held therein immediately before the demerger, or by a nominee for, the resulting company or, its subsidiary) become shareholders of the resulting company or companies by virtue of the demerger;
The transfer of the undertaking is on a going concern basis.
Undertaking: Explanation 1 to Section 2(19AA) of the IT Act prescribes that any part of an undertaking/ unit/ division of a business activity taken as a whole without assigning values to the individual assets and liabilities of the said business activity constitutes an ‘undertaking’ for slump sale
Modes of Merger:
TRIBUNAL GOVERNED – SCHEME OF ARRANGEMENT
A Scheme of Arrangement (“Scheme”) is an NCLT governed procedure involving an agreement between two or more companies and its shareholders and creditors. The said Scheme, if sanctioned by the NCLT is binding on the said companies, its shareholders, creditors, and all of its stakeholders.
Earlier the forum for sanctioning of the Scheme was the Hon’ble High Courts. With effect from 01.06.2016, the Ministry of Corporate Affairs (“MCA”) notified the establishment of NCLT under Section 408 of the Act. The jurisdiction to sanction the Scheme was vested with the NCLT on 15.12.2016.
A Scheme may involve mergers and demergers and is prepared in accordance with the provisions of Sections 230-232 of the Act and accompanying rules thereto.
The tribunal governed procedure for sanctioning of Scheme between the transferor and transferee companies as per the provisions of the Act read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (“Rules”) is detailed hereunder
| STAGE I – First Motion | |
| S. No. | Particulars |
| 1. | A first motion petition is jointly filed before the NCLT by the transferor and the transferee companies along with the copy of the Scheme of Arrangement. |
| 2. | The NCLT may admit the first motion petition and direct or dispense with meetings of the creditors and shareholders of the transferor and transferee companies. |
| 3. | If a meeting is required, a notice along with the Scheme and Explanatory Statement is served to the Regional Director, Registrar of Companies, Income Tax Authorities, Official Liquidator, and other relevant regulators as directed by the NCLT.
These authorities have 30 days to submit representations to the NCLT. If no representation is made within this period, it is assumed they have no objections to the Scheme. |
| 4. | The companies must publish the meeting notice as an advertisement in two newspapers and send individual notices to the creditors/shareholders as directed by the NCLT. |
| 5. | The Chairperson must file an Affidavit of Service before the NCLT, confirming that all NCLT directions regarding the issuance of notices and publication of advertisements for convening the meeting have been complied with by the companies. |
| 6. | A meeting of shareholders/creditors is convened as directed by the NCLT. The Scheme must be approved by a special majority (75% in value of the members) as per Section 230(6) of the Act. |
| 7. | The meeting result is determined by voting. A report must state the number of creditors/shareholders present and voting, either in person, by proxy, or electronically, along with their individual values and voting choices. |
| 8. | The Scrutinizer and the Chairperson appointed by the NCLT are required to submit their Reports with respect to the meeting before the NCLT. |
| STAGE II – Section Motion | |
| 9. | Pursuant to the aforesaid compliances, a second motion petition is filed by the companies before the NCLT seeking approval of the Scheme. |
| 10. | The NCLT may issue Orders admitting the second motion petition and set a date for the final hearing. A Notice of the hearing date for the second motion petition must be advertised in the same newspaper as the meeting notice, unless otherwise directed by the NCLT. |
| 11. | Reports from regulatory/statutory authorities are submitted to the NCLT for approval of the Scheme. Queries raised by authorities must be addressed before NCLT approval.” |
| 12. | The NCLT may pass an order sanctioning and approving the Scheme, with its contents binding on creditors, shareholders, and stakeholders of both the transferor and transferee companies. |
Tax implications on a Scheme:
A transaction involving a merger and demerger is generally considered as tax neutral transaction as Section 47 of the IT Act exempts such transactions from the purview of ‘transfer’. Hence, such transactions are not amenable to capital gains tax. Further, carry forward and set off accumulated tax business losses as mentioned in Section 72A of the IT Act is available in the case of Schemes.
2. Different Cases of Corporate Restructuring and their Tax Issues.
Chapter-III
IMPORTANT POINTS TO CONSIDER IN MERGER/AMALGAMATION CASES
Possible issues in Merger:
1. Valuation Accuracy and Tax Implications: To ensure accurate tax assessments during mergers, it is imperative that proper valuation methods are employed. Incorrect valuations can lead to significant tax implications and tax avoidance schemes. A thorough scrutiny of valuation practices needs to be ensured so that they comply with tax laws and regulations and avoid any tax avoidance schemes.
2. Mergers Involving Foreign Shell Companies: Transactions involving shell companies established abroad and merging with Indian entities require careful examination to verify compliance with domestic tax regulations, foreign investment guidelines, and anti-avoidance provisions.
3. Tax Liability of Merging Entities: Assess mergers involving a company with substantial income tax dues and a loss-making entity to ensure transparency and adherence to tax obligations, preventing concerns about tax evasion or avoidance.
4. Legitimate Business Purpose of Mergers: Review the business rationale behind mergers to ascertain their legitimacy beyond tax benefits, ensuring they are not used solely for tax planning purposes, such as setting carry forward losses against future profits.
5. Payments to Promoters and Tax Compliance: Scrutinize any payments made to promoters as part of a merger to ensure they are not aimed at tax avoidance. Ensure transparent disclosure and documentation of such payments to uphold tax compliance standards.
6. Section 79 Benefits and Loss Carry Forward: Diligently evaluate mergers undertaken for the purpose of availing benefits under tax provisions like Section 79. Ensure proper valuation methods and business justifications to prevent abuse of tax benefits.
Possible issues in Demerger:
I. Demerger as a Tax Strategy: Investigate demergers as potential strategic tax planning tools used to manage or avoid capital gains tax liabilities on assets being hived off.
II. Potential for Slump Sale via Demergers: Examine the possibility of demergers being utilized as a means to conduct slump sales, especially when assets are transferred at lump sums without individual valuation.
III. Demergers for Ownership Restructuring: Review demergers undertaken for ownership restructuring purposes, particularly those aimed at facilitating the entry of new shareholders at a later date.
IV. Corporate Veil Lifting Consideration: Consider lifting the corporate veil in cases where there are suspicions of demergers being misused for tax evasion or illicit purposes.
V. Importance of Accurate Valuation: Ensure accurate valuation in demergers, both for the undertakings retained by the company and the assets hived off.
VI. Scrutiny for Genuine Undertakings: Scrutinize demergers to determine whether they involve genuine undertakings or if assets are being transferred under the guise of an undertaking to avoid taxes.
Reduction in Capital:
I. Selective Reduction and Valuation Impact: In cases of selective reduction where one set of shareholders is paid and their shares are cancelled, it is important to evaluate whether the valuation has been reduced to benefit the existing shareholders. This assessment is crucial to ensure fairness and transparency in the reduction process.
II. Utilization of Share Premium Account: Investigate instances where the share premium account is set off against capital during a reduction of share capital. Verify if there is sufficient capital to support such adjustments and ensure compliance with relevant tax regulations.
III. Reduction Route to Avoid Buy Back Tax: Examine whether the reduction route is being used as a strategy to avoid buyback tax liabilities. Assess the motive behind the reduction and ensure that it is not being misused to circumvent tax obligations.
IV. Selective Reduction and Benefit to Remaining Shareholders: Consider whether the selective reduction benefits the remaining shareholders in a fair and equitable manner. Evaluate the impact of the reduction on the overall ownership structure and shareholder rights.
1. Points to be Considered by the Assessing Officer When Reviewing a Merger Scheme Submitted for Approval
1. Abridged Scheme of Amalgamation:
– Ensure that a copy of the “abridged” scheme of amalgamation is furnished.
2. Commercial Rationale:
– Review the commercial rationale for the proposed amalgamation to understand its purpose and benefits.
3. Nature of Business:
– Assess the nature of business in respect of each company involved in the amalgamation.
4. Synergy Expected:
– Evaluate the synergy expected from the amalgamation, including potential benefits such as enhanced market share, improved efficiencies, and cost savings.
5. Appointed Date:
– Confirm the ‘appointed date’ of amalgamation and ensure it is justified, especially if it is ante-dated.
6. Financial Statements:
– Examine the standalone financial statements of each company before amalgamation and the consolidated financial statements of the company after amalgamation.
7. Tax Consequences:
– Analyze the tax consequences both before and after the amalgamation to ensure compliance and identify any potential tax liabilities or benefits.
8. Statement of Total Income:
– Verify the statement of total income with working notes for all companies for the latest assessment year for which the return has been filed.
9. Losses, Unabsorbed Depreciation, and MAT Credit:
– Check the details of all losses, unabsorbed depreciation, and MAT credit carried forward in respect of each company for previous Assessment Years
10. Compliance with Section 2(1B) of the Income Tax Act:
– Ensure the arrangement satisfies the definition of “Amalgamation” under section 2(1B) of the Income-tax Act, 1961.
11. Compliance with Section 72A(2) of the Income Tax Act:
– Confirm that the arrangement meets the conditions prescribed under section 72A(2) of the Income-tax Act, 1961.
12. Shareholding Structure:
– Review the shareholding structure in respect of each company before and after the amalgamation.
13. Outstanding Statutory Dues:
– Assess the details of outstanding statutory dues in respect of each company under the Income-tax Act, 1961.
14. Valuation Report:
– Verify the valuation report to ensure the fair valuation of assets and liabilities.
15. Treatment of Assets and Liabilities:
– Evaluate the treatment of assets and liabilities in the amalgamation process.
16. Treatment of Written-off Bad Liabilities:
– Consider the treatment of written-off bad liabilities to ensure proper accounting and compliance.
Proforma Points for filing report before The Hon’ble NCLT in Merger Cases
| Sl. Nos. | Components of the Proposal | Observation of the AO |
| 1 | Details of proposal | |
| 2 | Details of benefit as stipulated in the scheme | |
| 3 | Details of any Proceedings pending against applicant company under the income tax Art | |
| 4 | Details of tax demand pending for recovery (Year wise amount outstanding) | |
| 5 | Details of pendency of investigation / enquiry proceedings, if any | |
| 6 | Whether proposed scheme will impact allowability of carry, forward losses or unabsorbed depreciation or any benefits under the IT Act, if yes quantify the amount of tax effect in compliance of section 72A | |
| 7 | Whether the proposed scheme will have any im- pact of exemption of capital gain tax / dividend distribution tax | |
| 8 | Whether in view of the assessing officer prima facie GAAR provisions appear to be attached in the scheme of arrangement | |
| 9 | Comments on Valuation Report attached to the scheme | |
| 10 | In case of reverse merger where loss making company continues to exist and profit making company dissolves to reduce its tax. What is the specific reasons for continuation of loss making company? Need to examine applicability of provisions of GAAR | |
| 11 | Details of ITRs filed by the Company | |
| 12 | Whether scheme is opposite to public policy (need to examine the whether promoters are only getting benefit and also examine – if possible quantum of tax evaded which is proposed to be avoided through the scheme of arrangement |
2. Lodging of caveat before NCLT
2.1. Lodging of caveat: –
Any person may lodge a caveat in triplicate in any appeal or petition or application that may be instituted before this appellate tribunal by paying a fee of rupees thousand Rs. 1000/- only after forwarding a copy by registered post or serving the same on the expected petitioner or appellant.
Caveat shall be in the form given below and shall contain such details and particulars or orders or directions, details of authority against whose orders or directions the appeal or petition or application is being instituted by the expected appellant or petitioner or applicant which full address for service on other side, so that the appeal or petition or application could be served before the appeal or petition or interim application is taken up.
The caveat shall remain valid for a period of ninety days from the date of its filing under
Rule 25 of NCLT Rules, 2016
.NCLT may pass interim orders in case of urgency in case of lodging of caveat.
No provision for filing caveat before NCLAT – There is no specific provision in NCLAT Rules, 2016 for filing a caveat. However, it does not mean that Caveat cannot be filed.
2.2. Presentation of caveat: –
Every caveat shall be presented in triplicate by the appellant or applicant or respondent, as the case may be, in person or by his duly authorized representative or by an advocate duly appointed in this behalf in the form given below with stipulated fee at the filing counter and non-compliance of this may constitute a valid ground to refuse to entertain the same. (Format enclosed in Annexure).
Chapter-IV
INSOLVENCY AND BANKRUPTCY CODE, 2016
1. 1. Introduction to the Insolvency and Bankruptcy Code, 2016
In 2016, the Indian government implemented the Insolvency and Bankruptcy Code (IBC), a pivotal piece of legislation aimed at tackling insolvency issues within a structured framework. With the Presidential assent received in May of the same year, the IBC introduced a time-bound process to resolve claims involving insolvent companies. This revolutionary code grants creditors the authority to take control of a debtor’s assets upon default, setting forth a clear path for resolving insolvency. Notably, both debtors and creditors have the right to initiate ‘recovery’ proceedings under the IBC, signalling a balanced approach to addressing financial distress. The code mandates that companies must complete the entire insolvency exercise within a strict 180-day timeline, ensuring efficiency and expediency in the resolution process.
Key Functions of the Insolvency and Bankruptcy Code, 2016
1. Consolidation and Refinement of Insolvency Laws:
– The IBC consolidates and refines existing laws related to the reorganization and insolvency resolution for various entities, ensuring a cohesive legal framework.
2. Time-bound Framework for Processes:
– It establishes a time-bound process for resolving insolvency issues, promoting efficiency and timely resolutions.
3. Maximization of Asset Value:
– The IBC aims to maximize the value of the assets of insolvent entities, thereby fostering a supportive environment for entrepreneurship and business continuity.
4. Facilitation of Credit Availability:
– By providing a structured mechanism for resolving insolvency, the IBC facilitates the availability of credit, thereby encouraging financial stability and growth.
5. Harmonization of Stakeholder Interests:
– The IBC seeks to balance the interests of all stakeholders involved, including creditors, debtors, and the government. It revises the payment priority of governmental dues to ensure a fair and equitable distribution of assets.
6. Establishment of the Insolvency and Bankruptcy Board of India (IBBI):
– The IBC establishes the Insolvency and Bankruptcy Board of India (IBBI) to oversee and regulate insolvency proceedings, ensuring that they are conducted in a transparent and efficient manner.
Enforcement and Integration with Other Laws
The IBC is designed to create a streamlined and effective insolvency resolution process that maximizes asset value, encourages entrepreneurship, ensures the availability of credit, and protects the interests of all stakeholders. Under the IBC, its provisions supersede conflicting enactments, ensuring uniformity and clarity in insolvency resolution. Consequently, amendments have been integrated into various laws such as the Companies Act, Income Tax Act, The RDBFI Act, and SARFAESI Act to align with the principles and objectives of the IBC. This code stands as a definitive and exhaustive guide on matters of insolvency, precluding the application of decisions from other statutes in this domain.
The IBC represents a significant step forward in India’s insolvency regime, promoting a disciplined and fair process for resolving financial distress. By empowering creditors, allowing debtor-initiated proceedings, and enforcing a stringent timeline, the IBC aims to maximize asset value and ensure swift resolution of insolvency cases. The establishment of the IBBI further ensures the proper regulation and oversight of insolvency proceedings in India, contributing to a more robust and reliable economic environment.
NCLT will be ‘adjudicating authority’ for this purpose. NCLAT will be appellate authority.
The Debt Recovery Tribunal (DRT) serves as the Adjudicating Authority for non-corporate entities like individuals, firms, and Hindu Undivided Families (HUFs), while the Debt Recovery Appellate Tribunal (DRAT) acts as the Appellate Authority.
A recent addition to insolvency procedures is the Pre-Packaged Insolvency Resolution Process (PPIRP), implemented from April 4, 2021, specifically targeting Micro, Small, and Medium Enterprises (MSMEs). This innovative approach expedites the resolution of insolvency for MSMEs, fostering quick and efficient outcomes.
The Insolvency and Bankruptcy Board of India (IBBI) plays a crucial role, overseeing insolvency and bankruptcy proceedings for corporate entities, firms, and individuals. Insolvency Professionals (IPs), members of Insolvency Professional Agencies (IPAs), are instrumental in managing the intricacies of insolvency cases, ensuring they possess the necessary knowledge and expertise.
Under the Insolvency Code, control shifts to the Committee of Creditors (CoC) of financial creditors when an enterprise defaults on payments. IPs, supervised by the CoC, take charge of the insolvency process, adhering to specified timeframes for evaluating proposals aimed at revitalizing or liquidating the enterprise. This time-bound approach enhances the likelihood of salvaging the enterprise as a going concern, thereby optimizing the productive resources of the economy.
2. Applicability of the Insolvency and Bankruptcy Code, 2016
The Insolvency and Bankruptcy Code, 2016 (IBC), specifies its applicability to different entities for issues related to insolvency, liquidation, voluntary liquidation, or bankruptcy, as outlined in Section 2. Here’s a clear breakdown of what entities the IBC covers:
1. Companies Incorporated under the Companies Act:
– The IBC applies to all companies formed under the Companies Act.
2. Companies Governed by Special Acts:
– It also covers companies regulated by special Acts, but if there’s a conflict between the IBC and the special Act, the special Act takes precedence.
3. Limited Liability Partnerships (LLPs):
– LLPs are included under the IBC.
4. Other Body Corporates:
– The Central Government can notify other body corporates to be covered by the IBC.
5. Personal Guarantors to Corporate Debtors:
– Individuals who have given personal guarantees for corporate debtors fall under the IBC.
6. Partnership Firms and Proprietorship Firms:
– Partnership and proprietorship firms are also covered.
7. Individuals:
– The IBC applies to individuals, except those specified in clause (e).
Exclusions Under the Insolvency and Bankruptcy Code
The IBC does not apply to corporate entities in the finance sector. Section 3(7) of the IBC specifically excludes financial service providers from being considered “corporate persons.” However, there are notable exceptions:
1. Non-Banking Financial Companies (NBFCs):
– Certain NBFCs, including housing finance companies with assets of Rs. 500 crore or more, are included under the IBC. This was clarified in Notification No. S.O. 4139(E) dated November 18, 2019.
2. Role of the Reserve Bank of India (RBI):
– The RBI is the appropriate financial regulator for these NBFCs, ensuring they follow the IBC’s framework.
Regulatory Framework for Financial Service Providers
To manage insolvency and liquidation proceedings for financial service providers, the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019, have been established. These rules ensure that the processes for financial service providers are orderly and regulated.
Terms
Under the Insolvency and Bankruptcy Code (IBC), several terms hold significance, particularly
concerning creditors:
1. Creditors: – Refers to any person to whom owed a debt is owed, encompassing various categories such as financial creditors, operational creditors, secured creditors, unsecured creditors, and decree-holders.
2. Financial Creditor: – Defined in Section 5(7) of the IBC, a financial creditor is someone to whom a financial debt is owed , which includes loans and borrowings along with interest, disbursed against consideration for the time value of money. This category typically includes banks and financial institutions.
3. Financial Debt: – Section 5(8) of the IBC outlines financial debt as debt with interest, disbursed against consideration for time value of money, including specified borrowings. Essentially, it pertains to loans received.
4. Operational Creditor: – As per Section 5(20) of the IBC, an operational creditor is owed an operational debt, which covers claims related to goods or services, including employment, or dues under any law payable to government entities like the Central Government, State Government, or Local Authorities.
5. Operational Debt: – Section 5(21) of the IBC defines operational debt as claims regarding goods or services, including employment-related dues or payments under any law, owed to government bodies.
Importantly, the IBC prioritizes government dues under operational creditors, placing their repayment even after unsecured financial creditors in the hierarchy. This highlights the specific treatment of government dues within the insolvency and bankruptcy framework.
3. Insolvency Process under the IBC
1. Filing an Application: – Any creditor of the assessee, including operational creditors, can file an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) to initiate the corporate insolvency resolution process.
2. Admission and Initial Orders by NCLT: – The National Company Law Tribunal (NCLT) will admit the application. Upon admission, Section 13 of the IBC comes into play, leading to a moratorium and the appointment of an Interim Resolution Professional (IRP).
3. Constitution of Committee of Creditors: – A Committee of Creditors (CoC) will be formed from among the financial creditors of the assessee. Following this, a Resolution Professional (RP) will be appointed who will make a public announcement.
4. Resolution Process: – The RP will invite prospective resolution applicants to present their resolution plans for the assessee. After discussions with the CoC, a final resolution plan will be prepared.
5. Approval of Resolution Plan: – The resolution plan, once approved by the CoC, will be submitted to the NCLT for its approval. The rights of the Income Tax Department will be considered within the context of the IBC, and the department cannot exercise independent rights once the NCLT approves the resolution plan.
Implications for Income Tax Department
1. Extinguishment of Prior Dues: – Once the resolution plan is approved by the NCLT, all prior dues and proceedings against the corporate debtor are extinguished under Section 31 of the IBC and any notices proposing to initiate proceedings against the corporate debtor for periods prior to the NCLT’s order are abated.
2. Operational Creditor Status: – Under Sections 5(20) and 5(21) of the IBC, the Income Tax Department is considered an operational creditor, and tax dues are considered operational debts.
3. Binding Nature of Resolution Plan: – Once the resolution plan approved by the CoC is sanctioned by the adjudicating authority under Section 31(1) of the IBC, all authorities, including the Income Tax Department, are bound by the terms of the resolution plan.
4. IBC Prevailing over Other Acts: – Section 238 of the IBC clearly states that the provisions of the IBC prevail over any other laws.
5. Priority in Distribution of Assets: – According to Section 53(1) of the IBC, the priority for distribution of assets places amounts due to the Central Government and State Government for the two years period preceding the liquidation commencement date at the fifth position in the order of priority
Who can initiate insolvency resolution process?
Claim:
As defined in Section 3(6) of the Insolvency and Bankruptcy Code, 2016, “claim” means:
a. A right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured, or unsecured.
b. A right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured, or unsecured.
Who can initiate the process?
Under Section 6 of the IBC, the following entities can initiate the corporate insolvency resolution process when a corporate debtor commits a default:
– Financial creditors
– Operational creditors
– The corporate debtor itself Initiation by Operational Creditor
Procedure:
1. Demand Notice:
– Operational creditors can initiate the process by delivering a demand notice or a copy of an invoice demanding payment of the default amount to the corporate debtor (Section 8(1) of the IBC).
– The demand notice must be in the prescribed form (Form 3 or Form 4) and can be sent by post, hand delivery, or email (Rule 5(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016).
– A copy of the demand notice or invoice should be forwarded to an information utility.
2. Response from Corporate Debtor:
– The corporate debtor must reply within ten days of receiving the demand notice if there is a dispute regarding the debt, indicating the existence of the dispute or any pending suit or arbitration (Section 8(2)(a) of the IBC).
3. Action by Operational Creditor:
– If no reply is received within ten days, the operational creditor can file an application before the NCLT to initiate the corporate insolvency resolution process (Section 9(1) of the IBC).
– The application should be in the prescribed form and accompanied by the documents specified in Section 9(3) of the IBC.
Application and Admission Process
Application Filing:
– The operational creditor files the application against the corporate debtor in Form 5 before the NCLT. A copy of the application should be sent to the Insolvency and Bankruptcy Board of India (IBBI) (Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016).
Admission Criteria:
– The application will be admitted by the NCLT if:
– It is complete.
– There is no payment of the unpaid operational debt.
– The demand notice was delivered.
– No notice of dispute is received from the corporate debtor.
– No disciplinary proceedings are pending against the proposed resolution professional (Section 9(5)(i) of the IBC).
Rejection Criteria:
– The application will be rejected if any of the above requirements are not met (Section 9(5) (ii) of the IBC).
– Before rejecting, the operational creditor will be given notice to rectify defects within seven days of receipt of the notice (Proviso to Section 9(5) of the IBC).
Orders Post Admission
After admitting the application, the Adjudicating Authority (NCLT) will:
– Declare a moratorium for purposes referred to in Section 14 of the IBC.
– Cause a public announcement of the initiation of the corporate insolvency resolution process and call for the submission of claims (Section 15 of the IBC).
– Appoint an interim resolution professional in the manner laid down in Section 16 of the IBC (Section 13(1) of the IBC). Where any corporate debtor commits a default, a financial creditor, an operational creditor or the corporate debtor itself may initiate corporate insolvency resolution process in respect of such corporate debtor in the manner as provided under this Chapter (Chapter II of Part II) – Section 6 of Insolvency Code, 2016.
4. Moratorium under IBC and Tax Proceedings
Has the Supreme Court (SC) in Sundaresh Bhatt, Liquidator of ABG Shipyard Vs CBIC (Civil Appeal No. 7667/2021 dated 26/08/2022) legitimised tax proceedings during the period of moratorium set under the Insolvency & Bankruptcy Code?
Rendered in context of the custom law, in the aforesaid matter, SC has held that IBC would prevail over the Customs Act, to the extent that once moratorium is imposed in terms of sections 14 or 33(5) of the IBC, the respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act. The Court observed that issuance of demand notices to seek enforcement of custom dues during the moratorium period would clearly violate the provisions of Sections 14 or 33(5) of the IBC, as the demand notices are an initiation of legal proceedings against the Corporate Debtor (CD). Thus, the SC has fairly settled that recovery of tax dues cannot be made, otherwise than in the manner prescribed under IBC.
However, what is noteworthy is further examination of the powers which the tax authority can exercise during the moratorium period under the IBC. The court has importantly observed that authorities could however initiate assessment or re-assessment of the duties and other levies. The Resolution Professional has an obligation to ensure that assessment is legal, and he has sufficient power to question any assessment, if he finds the same to be excessive. The court relied on the ratio of the judgement in S.V. Kondaskar v. V.M. Deshpande, AIR 1972 SC 878, wherein the court had held that the authorities can only take steps to determine the tax, interest, fines or any penalty which is due. However, the authority cannot enforce a claim for recovery or levy of interest on the tax due during the period of moratorium.
There has been varying positions vis-à-vis initiating or continuing tax proceeding during the period of moratorium. For instance, the Calcutta HC in SREI Equipment Finance Ltd. vs. Additional/Joint/Deputy/Assistant Commissioner of Income Tax and others has held that tax proceeding cannot be continued during moratorium. However, given the ratio of the ruling, moratorium for prohibiting initiation or continuation of tax proceedings will now have limited bearing.
Since IBC is a relatively new law, judicial decisions are still developing. The flow chart below outlines different scenarios that may arise for the IT department. Assessing officers are advised to seek legal opinions from standing counsels regarding these intricate situations before proceeding with any actions during the Moratorium period.
Frequently Asked Questions
1. What is a claim? A claim is essentially a right to payment or a remedy for a breach of contract. Under Section 3(6), it is defined as:
- A right to payment, regardless of whether this right is confirmed by a judgment, fixed, disputed, undisputed, legal, equitable, secured, or unsecured.
- A right to a remedy for breach of contract under any prevailing law, if such a breach results in a right to payment, irrespective of whether this right is confirmed by a judgment, fixed, matured, unmatured, disputed, undisputed, secured, or unsecured.
This includes all payable amounts, including disputed income tax claims, interest, and penalties. After the CIRP process is completed, new assessments and claims cannot be made. Therefore, it is critical to compile all claims related to the assessee promptly.
2. When should claims be filed? Claims are commonly required during the CIRP and Liquidation stages but can also be filed in other proceedings such as voluntary liquidation, insolvency proceedings against personal guarantors, and under Section 271 of the Companies Act, 2013.
3. How can I find out if a company is in CIRP or Liquidation? Information on companies undergoing CIRP or Liquidation is available on the IBBI website (www.ibbi.gov.in). The site provides a quick link to Corporate Processes, where all public announcements issued by resolution professionals and liquidators can be found.
4. Who can submit a claim? Claims can be submitted by creditors, workmen, employees, home buyers, and any other creditors under the Code. The income tax department is considered an operational creditor. If income tax is secured by an attachment or any other security, it remains a secured operational creditor and should be filed as such.
5. Does a claim need to be matured when filed? Both matured and unmatured claims can be filed. Once a resolution plan is approved, no assessment proceedings can be initiated against the Corporate Debtor, and no claims for past dues can be made. Therefore, it is important to complete assessments for all years prior to the CIRP commencement date and file related claims accordingly. Pending proceedings, such as those in ITAT for prior period claims, should also be included.
6. In which form should claims be filed, and how should they be submitted? Claims must be filed using the appropriate forms as per the CIRP Regulations, with necessary proofs and documents. The following forms are used based on the specific insolvency process:
- CIRP: Form B as per CIRP Regulations 2016
- Fast Track IRP: Form B as per Fast Track IRP Regulations 2017
- Liquidation: Form C as per Liquidation Process Regulations 2016
- Voluntary Liquidation: Form B as per Voluntary Liquidation Regulations 2017
- Personal Guarantors: Form B as per IIRP Regulations 2019 Claims can be submitted in person, by post, or electronically.
7. What is the deadline for filing claims during CIRP? Claims should ideally be filed within 90 days of the commencement of CIRP or before the issuance of a Request for Resolution Plan, whichever is later. Late filings require permission from the NCLT. After the approval of the resolution plan by the CoC, late claims are unlikely to be admitted, as supported by numerous Supreme Court judgments.
8. What happens to claims pending assessment during CIRP? Claims pending assessment may be held in abeyance during CIRP due to the unavailability of information with the Resolution Professional (RP). Even if proceedings like appeals are ongoing, the disputed amount should still be included in the claim.
9. What rights do tax authorities have during CIRP? Tax authorities can attend Committee of Creditors (CoC) meetings if their claims constitute at least 10% of the total debt but do not have voting rights. However, if the Corporate Debtor lacks financial creditors and the income tax department is among the top 18 operational creditors, they are granted a seat in the CoC with voting rights.
10. Does failure to submit proof of claim lead to disqualification? No, a creditor who misses the initial deadline can still submit proof of claim to the IRP/RP until the resolution plan is approved by the CoC. The IRP/RP may request additional details or clarification.
11. What happens to claims pending assessment during Liquidation? During Liquidation, pending assessment claims are typically revived, and assessments are completed based on the available information.
12. Do tax authorities need to refile claims during Liquidation if already filed under CIRP? If the CIRP process fails and Liquidation proceedings begin, a new public announcement calling for claims is made. It is advisable to refile claims during Liquidation even if they were filed under CIRP, as the two processes and their requirements differ.
13. Can tax authorities file a claim during Liquidation if it wasn’t filed during CIRP? Is NCLT approval needed? Yes, claims can be filed during Liquidation even if not filed during CIRP. NCLT approval is not required for timely submissions, but late submissions will need NCLT approval.
14. In which form should tax authorities file their claim, and how should it be submitted to the Liquidator? Tax authorities should file their claims using Form C, along with an Affidavit and Verification as per Schedule II of the IBBI (Liquidation Process) Regulations, 2016. Claims can be submitted in person, by post, or electronically.
15. What rights do tax authorities have during Liquidation? During Liquidation, tax authorities can participate in the Stakeholders’ Consultation Committee.
16. What is the format of the Affidavit and Verification required with proof of claim? The format for the Affidavit and Verification is included with Form C, which is applicable for tax authorities.
17. What is the deadline for submitting a claim to the Liquidator? Claims must be submitted within thirty days from the commencement of Liquidation, as specified in the Public Announcement available on the IBBI website. Late submissions require NCLT approval, which is unlikely if assets have been sold or a Section 54 application for dissolution has been filed.
18. What if tax authorities miss the deadline for filing their claim? The only recourse for late submissions is to file an appeal under Section 42 of the IBC to the NCLT. Claims must be submitted before the distribution of assets, as post-distribution claims will not be entertained by the NCLT.
19. Is the Liquidator obligated to admit all filed claims? No, the Liquidator has the discretion to reject or partially admit claims.
20. How can I find out if my claim is admitted or rejected? Information on admitted and rejected claims is typically posted on the IBBI website. You can also contact the RP for this information. Creditors who have filed claims are entitled to receive a copy of the creditors’ list.
21. What can tax authorities do if their claim is rejected or partially rejected by the Liquidator? Tax authorities can appeal to the NCLT within 14 days of receiving the Liquidator’s decision. It is crucial to file promptly, as delays may render the appeal ineffective if the amount is distributed in the meantime.
22. Can tax authorities modify or withdraw a filed claim? Yes, claims can be modified or withdrawn within 14 days of submission as per Section 38(5) of the IBC. Even beyond 14 days, tax authorities may attempt to withdraw claims, arguing that the mentioned time limits are directory.
23. Can tax authorities update their claim? Yes, tax authorities can revise or update their claim. However, significant delays in filing updates may require approval from the resolution professional or liquidator, or may need to be addressed with the NCLT.
24. Can a contingent claim be filed? Yes, contingent claims can be filed but must be clearly identified as such. Under Regulation 14 of the CIRP Regulations, if a creditor’s claim amount is uncertain due to contingency, the IRP or RP will estimate the claim amount based on available information and adjust it when additional information is provided.
25. Should claims with secured assets be filed by tax authorities? Yes, claims involving secured assets must be filed, as the assets form part of the Corporate Debtor’s liquidation estate and are prioritized according to Section 53 of the IBC. It is crucial to detail the attached assets in the claim form to avoid indicating “Not applicable” inaccurately.
Form C
5. Action points for Assessing Officers during the Corporate Insolvency Resolution Process (CIRP) :
1. File Claims:
– File claims even for disputed amounts: It’s important to submit claims for all amounts, including those that are under dispute. This ensures that the department’s interests are protected during the resolution process.
– File claims for amounts that are not Crystalized: Claims should be filed even for amounts that are not yet fully determined or finalized. This ensures that the department is included in the distribution of assets in case of resolution.
– File claims for contingent claims: Assessing Officers should also file claims for contingent liabilities or claims that may arise in the future, ensuring that the department’s potential claims are recognized.
– File claims for amounts under dispute with any appellate tribunal: Claims should also be filed for amounts that are being disputed with any appellate tribunal. This ensures that the department’s position is represented in ongoing legal disputes.
2. Attend Committee of Creditors (CoC) Meetings:
– Participate if the debt owed to the department is significant: If the debt owed to the department constitutes at least 10% of the total debt, the Assessing Officer should actively participate in CoC meetings to ensure that the department’s voice is heard in decision-making.
3. Operational Creditors’ Representation:
– In absence of financial creditors, top 18 Operational Creditors form CoC: If the company undergoing resolution does not have financial creditors, the top 18 Operational Creditors are placed in the CoC. Assessing Officers should be aware of this arrangement and collaborate with operational creditors as necessary during the resolution process.
By following these action points, Assessing Officers can ensure that the department’s interests are adequately represented and protected during the Corporate Insolvency Resolution Process
Priority to amount due to operational creditors over financial creditors:
As per regulation 38(1) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the amount payable under a resolution plan – (a) to the operational creditors shall be paid in priority over financial creditors; and (b) to the financial creditors, who have a right to vote under section 21(2) of Insolvency Code and did not vote in favour of the resolution plan, shall be paid in priority over financial creditors who voted in favour of the plan.
Section 30(2)(b)(i) of Insolvency Code provides that provision for payment of debts to operational creditors should be such that amount to be paid to such creditors shall not be less than amount to be paid to such creditors in the event of liquidation of corporate debtor under section 53 of Insolvency Code. [section 53 of Insolvency Code provides for distribution of assets in liquidation]. This Provision applies to PPIRP also, as per section 54K (3) of Insolvency Code.
Chapter-I
SPECIAL LEAVE PETITION(SLP)
Scope of Article 136
Applicability of a SLP
Rules for filing SLP
Provision relating to SLP
Grounds for filing a SLP
Introduction
A Special Leave Petition (SLP) is a legal remedy available in the Indian legal system, primarily under the jurisdiction of the Supreme Court of India. It is a discretionary remedy that allows individuals or 0entities to appeal to the Supreme Court for challenging decisions made by lower courts or tribunals.
Special Leave Petitions serve as an essential instrument in the Indian legal system, allowing litigants to approach the Supreme Court when substantial questions of law, errors in legal interpretation, or miscarriages of justice are involved. However, the Supreme Court exercises its discretion carefully when granting special leave, as it aims to balance the need for justice with the principle of judicial restraint. Indian case laws provide guidance on the scope and limitations of SLPs, ensuring that this discretionary remedy is applied judiciously. Understanding the provisions and precedents related to Special Leave Petitions is crucial for both legal practitioners and individuals seeking justice in India’s complex legal landscape.
Scope of Article 136
The Supreme Court can grant Special Leave to appeal against any judgement, decree, determination, sentence, or order of any court or tribunal in the territory of India. It is not limited to any particular subject matter or court. The Supreme Court has the discretion to consider cases involving questions of fact, law, or both.
The text of Article 136 is as follows:
“136. Special leave to appeal by the Supreme Court.
(1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant Special Leave to appeal from any judgement, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India.
(2) Nothing in clause (1) shall apply to any judgement, determination, sentence or order passed or made by any court or tribunal constituted by or under any law relating to the Armed Forces.”
1. Applicability of a Special Leave Petition
A Special Leave Petition (SLP) can be filed in the Supreme Court of India against a final order passed by a High Court. Governed by the Civil Procedure Code, an SLP is considered by the Supreme Court if certain conditions are met. The Supreme Court typically entertains an SLP in the following cases:
Substantial Question of Law or Constitution
– Grave violation of constitutional provisions or human/fundamental rights.
– Error apparent on the face of the record.
– Misdirection by the High Court resulting in jurisdictional errors.
– Illegal or gross abuse of jurisdiction by the High Court.
– Decision contrary to well-settled legal principles.
– Decision contrary to established precedents.
The Supreme Court has the discretion to grant or deny an SLP, assessing the merits and potential success of the case.
2. Rules for Filing an SLP
The procedural rules for filing SLPs are governed by the Supreme Court Rules, 2013:
– Rule 6: Specifies the procedure for filing an SLP, including the required format and content of the petition.
– Rule 5: Requires obtaining a certificate from the concerned High Court, confirming that the case involves substantial questions of law.
Compliance with these rules is mandatory, and non-compliance can lead to rejection of the petition.
3. Time Frame for Filing an SLP
The time frame for filing an SLP in the Supreme Court of India varies:
– General Cases: 90 days from the date of the judgement or order being challenged.
– High Court Matters: 60 days when the SLP is filed against a High Court order refusing a certificate of fitness for appeal.
These time frames are mandated by the Supreme Court Rules, 2013. The Court may condone delays in exceptional circumstances if valid reasons are presented.
Chapter-II
FILING OF SLP
1. Requirements for Filing a Special Leave Petition (SLP)
– Contents of SLP: An SLP must include all relevant facts for the Supreme Court’s consideration, signed by the Advocate on Record (AoR).
– Declarations: The petitioner must declare no other petition is filed in the high court and that annexures are true copies of lower court pleadings.
– Judgement Attachment: The SLP must include the judgement being appealed against.
2. Pre-Requisites for Filing SLP
I. Jurisdiction: SLPs should fall within the Supreme Court’s jurisdiction, involving substantial legal questions or public interest issues.
II. Adverse Judgement: There must be an adverse decision by a lower court, tribunal, or authority.
III. Timing: File within 90 days of the judgement; 60 days for High Court certificate refusal cases.
IV. Certificate: Obtain a fitness for appeal certificate if required, especially for High Court judgements.
V. Format: Follow Supreme Court Rules, 2013 for drafting and content.
VI. Paper Books: Prepare copies of relevant documents and lower court judgements.
VII. Fees: Pay applicable court fees.
VIII. Service: Serve notice to the opposite party.
IX. Appearance: Attend Supreme Court hearings as required.
X. Grounds: Clearly state grounds of appeal.
XI. Formalities: Adhere to procedural requirements meticulously.
Chapter-III
IMPORTANT POINTS FOR
SLP PROPOSALS
Points to be Taken into Consideration for Special Leave Petition (SLP) Proposals
1. Material Facts of the Case:
– Highlight the material facts of the case, ensuring that all relevant orders are enclosed. 2. Tax Effect:
– Ensure the tax effect, including surcharge and cess but excluding interest, is more than Rs. 2 Crore on disputed issues for each Assessment Year.
2. Revenue Audit Objection:
– Provide the Revenue Audit Objection and its acceptance note.
– If the Audit Objection is not accepted, determine whether an SLP is still required.
3. Comments on Department’s Standing Counsel Assertions:
– Address the assertions made by the Department’s Standing Counsel as recorded in the High Court order, such as:
– One or more questions not pressed by the Counsel.
– Applicability of SQL of another appeal/order.
4. Timeline Compliance:
– Strictly follow the timeline of 20 days from the date of the order.
– If the SLP proposal is delayed beyond 30 days, obtain approval from the Pr.CCIT with valid reasons.
5. Downloading High Court Order:
– Promptly download the High Court order without waiting for a certified copy. 7. SLP Filing Under Article 136:
– File the SLP under Article 136 of the Constitution, not under Section 261, which requires a fitness certificate from the High Court.
6. Legal Opinion from Standing Counsel:
– There is no need to seek a legal opinion from the Standing Counsel unless required. 9. Proforma-B Submission:
– Use Proforma-B for submitting the SLP proposal with complete annexures through the Offline Utility.
7. Question of Law vs. Question of Fact:
– Propose the SLP only on a Question of Law, not on Questions of Fact.
– Understand the difference between a Question of Law and a Substantial Question of Law, which can be the subject matter of an appeal.
8. Judicial Analysis of Substantial Question of Law:
– Recognize that second appeals to High Courts can arise only on substantial questions of law certified by the courts.
– A question of law will be substantial if it directly and substantially affects the rights of the parties, involves some doubt or difference of opinion, or has room for difference of opinion.
– If the law is well-settled by the Supreme Court, merely applying it to particular facts does not constitute a substantial question of law.
9. History of the Issue at Hand:
– Provide the history of the issue for the assessee.
– If the High Court decided any appeal based on an earlier year’s decision, provide the status of that SLP or reasons why an SLP was not proposed in that year.
10. Prompt Removal of Defects and Vetting of Draft:
– Ensure prompt removal of any defects and proper vetting of the draft.
11. Orders/Notices Under Sections 147/148:
– If an order/notice under Sections 147/148 is quashed or set aside:
– Provide copies of the reasons recorded, the original assessment order, and the order disposing of objections.
– Provide the status of the order under Section 143(3) read with Section 147 (in case the notice is quashed), along with the status of any appeal.
12. Orders Under Section 263:
– If an order under Section 263 is set aside or quashed:
– Provide the status of the order under Section 143(3) read with Section 263 along with the status of any appeal against it.
16. Penalty Matters:
– Provide the fate of the quantum appeal in penalty matters.
17. Well-Framed Substantial Questions of Law (SQL):
– Ensure the SQLs are well-framed and necessarily relate to issues adjudicated by the High Court.
By considering these points, the assessing officer can ensure that the SLP proposal is thoroughly evaluated and justified before submission, adhering to the legal standards and procedural requirements.
Chapter-IV
CHECKLIST AND STEPS RELATING TO SLP
1. CHECKLIST:-
1. Assessment Order/Order under dispute
2. CIT(A) Order
3. ITAT Order
4. Copy of Appeal Memo under Section 260A/Writ Petition
5. High Court Order (downloaded from website, certified copy not required)
6. Proforma B (generated through the Utility developed by Directorate)
7. Substantial Question(s) of Law
8. Comments/Recommendation of Pr.CIT/CCIT
9. Opinion of Standing Counsel (if applicable)
10. Proforma B/Col. 11 – for relied-upon cases
11. Hyperlinked documents in e-office file
2. Steps for sending SLP Proposal through E-office: –
3. SLP- E-Office File Movement :-
4. Proforma B Utility:-
I. The offline utility developed by the L&R Directorate for generating PROFORMA B for SLP Proposals aims to reduce delays by addressing common queries. It offers the following features:
i. Field officers can input all necessary data and attachments.
ii. The utility includes built-in checks and validations to assist in filling out correct and complete information.
II. The standardized Proforma B and its annexures are generated in a single or multiple PDF files through this Utility, ensuring compatibility with E-Office. This process facilitates:
i. Efficient processing of SLP proposals at the Pr.CIT/CIT level.
ii. Validation during generation to ensure Proforma B is error-free.
iii. The utility serves as a repository for all SLP proposals recommended/pending at the Pr.CIT/CIT level for future reference.
iv. Field officers can search past proposals based on the assessee name, ensuring consistency in documentation.
Frequently Asked Questions
1. Time Limits for Appeals to Various Judicial Fora
Q: What are the time limits for filing appeals in different judicial forums?
A: – Appeal to ITAT: You have 60 days from the date of receiving the order from the Commissioner of Income Tax (Appeals) [CIT(A)] to file an appeal with the Income Tax Appellate Tribunal (ITAT).
– Appeal to High Court: After receiving the ITAT’s order, you have 120 days to file an appeal with the High Court.
– Special Leave Petition (SLP): If you want to file a Special Leave Petition in the Supreme Court, you must do so within 90 days of receiving the order from the High Court.
2. Tax Effect Determination in Combined ITAT Orders
Q: How is the tax effect decided when there’s a combined order from the ITAT?
A: – In cases where the ITAT issues a composite order involving multiple assessment years and common issues, you can file an appeal for those years where the tax effect from disputed issues exceeds the specified monetary limit.
– However, if the tax effect for a particular assessment year is below this monetary limit, no appeal can be filed by the department for that year.
3. Time Limit for Forwarding SLP Proposal to Board
Q: What is the timeframe for forwarding a Special Leave Petition (SLP) proposal to the Board?
A: The SLP proposal must be forwarded to the Board within 20 days through the E-Office system.
4. Appeal u/s 260A Against Dismissed ITAT Miscellaneous Application
Q: Can an appeal under section 260A be filed against an ITAT Miscellaneous Application (MA) that has been dismissed?
A: – According to a ruling by the Bombay High Court, an appeal under section 260A cannot be filed directly against an MA dismissed by the ITAT.
– Instead, a separate appeal process will have to be followed in such cases.
5. Engaging Standing Counsel Other Than PCIT Charge Counsel
Q: Can a Standing Counsel be engaged for representation other than the one assigned to the Principal Chief Commissioner of Income Tax (PCIT) charge?
A: – To engage any Standing Counsel other than the one allocated to the PCIT charge, permission must be obtained from the Principal Chief Commissioner of Income Tax (Pr CCIT).
6. Engaging ASG for Representation Before ITAT/High Court
Q: How can an Additional Solicitor General (ASG) be engaged for representation before the ITAT or High Court?
A:- The engagement of an ASG can be done with the approval of the concerned Chief Commissioner of Income Tax (CCIT).
– Subsequently, the consent of the ASG and approval from the Ministry of Law must be obtained.
7. Assignment of ASG from Different Region for ITAT/High Court
Q: Can an ASG from a different region be assigned to represent a case in the ITAT or High Court?
A:- If an ASG from a different region needs to represent a case, they must be appointed as a Special Counsel by the Board.
8. Appointment of Standing Counsel for ITAT Cases Q: Is it possible to appoint a Standing Counsel to argue cases before the ITAT?
A: – Depending on the complexity of the case, a Standing Counsel can be engaged to represent the case in the ITAT.
9. Advance for Standing Counsels for Expenses
Q: Can Standing Counsels receive advances for drafting and other expenses?
A:- Yes, Standing Counsels can be given advances for out-of-pocket expenses, subject to approval from the concerned CCIT.
10. Engagement of Counsel for NCLT/NCLAT Outside Mumbai
Q: How can a Counsel be engaged for representing cases before the NCLT/NCLAT benches outside Mumbai?
A: – The concerned Principal Chief Commissioner of Income Tax (PCCIT) can engage a Counsel empanelled for the specific region where the case is being heard, with prior intimation to the Office of the PCIT (Judicial).
11. Appeal Against ITAT Decision
Q: Where should an appeal against an ITAT decision be filed?
A: – The Supreme Court, in a decision regarding Pr. Commissioner of Income Tax-I, Chandigarh v. M/s. ABC Papers Limited, [2022] 141 taxmann.com 332 (SC) stated that appeals against ITAT decisions should be filed in the High Court whose jurisdiction includes the Assessing Officer (AO who issued the assessment order.
– Even if cases are transferred under Section 127 of the Income Tax Act, the High Court with jurisdiction over the AO who made the order retains appellate jurisdiction.
very good