Rationalisation of Appeals to the Appellate Tribunal – Budget 2023
Section 253 of the Act contains provisions relating to filing of appeals to the Appellate Tribunal. Sub-section (1) of the said section details the types of orders passed under various sections of the Act, against which an aggrieved assessee may appeal to the Appellate Tribunal. The said sub-section provides that any assessee aggrieved by any order passed by a Commissioner (Appeals) under section 154, section 250, section 270A, section 271, section 271A, section 271J or section 272A may appeal to the Appellate Tribunal. Therefore, the Appellate Tribunal is the first level of appeal for such orders of the Commissioner (Appeals).
2. Sections 271AAB, 271AAC and 271AAD are penalty provisions under Chapter XXI of the Act for imposition of penalty. Section 271AAB of the Act provides for imposition of penalty by the Assessing Officer in a case where search has been initiated under section 132 of the Act. Section 271AAC of the Act provides for imposition of penalty by the Assessing Officer in a case where income determined includes any income referred to in section 68, 69, 69A, 69B, 69C or 69D of the Act for any previous year. Section 271AAD of the Act contains provisions for imposition of penalty by the Assessing Officer if during any proceedings under the Act it is found that in the books of account maintained by any person there is a false entry or an omission of any entry which is relevant for computation of total income of such person to evade tax liability.
3. Vide Finance Act, 2022, sections 271AAB, 271AAC and 271AAD were amended to enable Commissioner (Appeals) also to pass an order imposing penalty under the said sections. However, as the reference to the same has not been inserted in sub-section (1) of section 253 of the Act, an aggrieved assessee cannot appeal against such penalty orders passed by Commissioner (Appeals) which may lead to taxpayer grievance. Therefore, it has been proposed to amend the provisions of section 253 of the Act to provide that appeal against penalty orders passed by Commissioner (Appeals) under the sections 271AAB, 271AAC and 271AAD shall be made to the Appellate Tribunal.
4. Further, vide Finance Act, 2021, section 263 of the Act was amended to enable Principal Chief Commissioner and Chief Commissioner to also pass an order of revision under the said section. However, in the absence of any reference to such orders passed under section 263 of the Act in sub-section (1) of the section 253 of the Act, an assessee aggrieved by any order under section 263 of the Act by a Principal Chief Commissioner and Chief Commissioner or an order under section 154 of the Act rectifying such order under section 263 of the Act cannot appeal against such orders to the Appellate Tribunal. Therefore, it has been proposed that section 253 of the Act may be amended so that appeal against an order passed under section 263 of the Act by Principal Chief Commissioner or Chief Commissioner or an order passed under section 154 of the Act in respect of any such order shall be made to the Appellate Tribunal.
5. Sub-section (4) of the section 253 of the Act allows the respondent in an appeal, against an order of Commissioner (Appeals), to file a memorandum of cross-objections before the Appellate Tribunal. However, it is pertinent to note here that appeal can be made to the Appellate Tribunal against orders of authorities other than Commissioner (Appeals) also, like Principal Commissioner or Commissioner or Principal Director or Director etc. As a result, the respondent, whether it is Revenue or the assessee, cannot file memorandum of cross-objections against an appeal before the Appellate Tribunal by virtue of the provisions of sub-section (4) of section 253 of the Act. This creates grievances as well as reduces the fair and equitable dispensation of judgement in such cases. Therefore, it is proposed that an amendment may be made in sub-section (4) of section 253 to enable filing of memorandum of cross-objections in all classes of cases against which appeal can be made to the Appellate Tribunal. For example, where the assessee files an appeal to the appellate tribunal against an order passed by the Assessing Officer in consequence of an order of the Dispute Resolution Panel the Assessing Officer would be able to file a cross objection to such appeal which cannot be filed presently.
Budget 2023 enables filing of memorandum of cross-objections in all classes cases appellable before ITAT
6. These amendments will take effect from the 1st day of April, 2023.
[Clause 102]
Extract of relevant clause of Finance Bill 2023
Clause 102 of the Bill seeks to amend section 253 of the Income-tax Act relating to appeals to the Appellate Tribunal.
Sub-section (1) of the said section details the types of orders passed under various sections of the Income-tax Act against which an aggrieved assessee may appeal to the Appellate Tribunal. It is proposed to amend clause (a) of the said sub-section to provide that penalty orders passed by Commissioner (Appeals) under the sections 271AAB, 271AAC and 271AAD shall also be appealable to the Appellate Tribunal.
It is proposed to amend sub-section (1) of the said section by inserting a new sub-clause (aa) so as to provide that an order passed by a Joint Commissioner (Appeals) under section 154, section 250, section 270A, section 271, section 271A, section 271AAC, section 271AAD or section 271J shall be appealable before the Appellate Tribunal.
It is further proposed to amend clause (c) of the said sub-section to provide that an order passed under section 263 by a Principal Chief Commissioner or Chief Commissioner or an order passed under section 154 amending any such order shall also be appealable to the Appellate Tribunal.
It is also proposed to amend sub-section (2) of the said section to make the provisions therein applicable to the Joint Commissioner (Appeals) by substituting “Commissioner (Appeals)” with “Joint Commissioner (Appeals) or Commissioner (Appeals)”.
It is also proposed to amend sub-section (4) of the said section to enable filing of memorandum of cross-objections in all classes of cases against which appeal can be made to the Appellate Tribunal.
These amendments will take effect from 1st April, 2023.
Extract of Relevant Amendment Proposed by Finance Bill, 2023
102. Amendment of section 253.
In section 253 of the Income-tax Act,–
(a) in sub-section (1),–
(A) in clause (a), after the word, figures and letter “section 271A,”, the words, figures and letters “section 271AAB, section 271AAC, section 271AAD,” shall be inserted;
(B) after clause (a), the following clause shall be inserted, namely:–
“(aa) an order passed by a Joint Commissioner (Appeals) under section 154, section 250, section 270A, section 271, section 271A, section 271AAC, section 271AAD or section 271J; or”;
(C) for clause (c), the following clause shall be substituted, namely:–
“(c) an order passed by,–
(i) a Principal Commissioner or Commissioner under section 12AA or section 12AB or under clause (vi) of sub-section (5) of section 80G or under section 263 or under section 270A or under section 271 or under section 272A or an order passed by him under section 154 amending any such order; or
(iv) a Principal Chief Commissioner or Chief Commissioner or a Principal Director General or Director General or a Principal Director or Director under section 263 or under section 272A or an order passed by him under section 154 amending any such order; or”;
(b) in sub-section (2), for the words and brackets “Commissioner (Appeals)”, the words and brackets “the Joint Commissioner (Appeals) or the Commissioner (Appeals)” shall be substituted;
(c) in sub-section (4),–
(i) for the words and brackets “against the order of the Commissioner (Appeals)”, the words “against an order” shall be substituted;
(ii) for the words and brackets “any part of the order of the Commissioner (Appeals)”, the words “any part of such order” shall be substituted.
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