Income Tax Appellate Tribunal – An Introduction

Income Tax is the subject for Central Government to legislate under Schedule VI of the Constitution of India. No tax can be levied under the Article 265 of without authority of law. Income -Tax Act is that law under which income tax is levied.

To determine tax properly and accurately, an appeal is necessary and the Central Government is given the power and duty to constitute the Income Tax Appellate Tribunal.

It has thus constituted the Income Tax Appellate Tribunal in 1941 as a second appellate forum, initially with 6 members (presently 126 members) with equal number of judicial and accountant members.

Though it is constituted by the Central Government, it operates independently as per its own procedure as stated in Section 255 with the powers to regulate its own procedure.

The Tribunal is under the administrative supervision of Ministry of law and Justice. Tribunal is a quasi-judicial body independent into its working and in its decisions.

By virtue of Article 227 of the Constitution, the Tribunal is under the superintendence of the High Court and thus subordinating to the High Court and is bound to follow the judgment of the High Court in the State in which it functions and of the Supreme Court under Article 141.

The Tribunal is a second appellate forum under the Act, the first appeal being to the Commissioner of Income Tax (Appeals) – CIT (A). The Disputes before it come mainly by way of second appeal from orders of the Commissioners of Income Tax (Appeals) – CIT (A).

Direct first appeals before the Tribunal are against orders of Commissioner under Section 263 and orders of Assessing Officer (AO) pursuant to directions of Dispute Resolution Panel (DRP) under section 144C of the Act.

The litigation before the Tribunal also includes miscellaneous applications for recall or rectification of orders, stay petitions etc.

Appeals to Tribunal mainly relate to cases of

  1. Excessive assessments,
  2. Search and seizure,
  3. Disallowances and additions,
  4. Interests and
  5. Levying of penalties under Chapter VIA of the Income Tax Act.

Its excellence lies in the fact out of about 50,000 cases decided annually by it, about 45,000 become final then and there. Only about 5,000 cases go to the High Court for further adjudication.

The Tribunal in its 76th year [1941 – 2017] of existence has earned ample price for the independence of its decisions.

Representing the Appeal

An appeal before the Tribunal, when is fixed for hearing has to be attended to and argued. The assessee himself can represent or he can put in appearance through an authorised Representative.

Relevant Provision under Income – Tax (Appellate Tribunal) Rules, 1963:

Rule 16 of the Income Tax Appellate Tribunal Rules, 1963, provides for authorizing a representative to appear.

It says ‘In any appeal by any assessee, where the memorandum of appeal is signed by his authorised representative, the assessee shall append to the memorandum a document authorising the representative to appear for him and if the representative is a relative of the assessee, the document shall state what is his relationship with the assessee, or if he is a person regularly employed by the assessee, the document shall state the capacity in which he is at the time of employed.

Rule 17 provides for Authorization to be filed and says

‘An authorised representative appearing for the assessee at the hearing of an appeal shall, unless the document referred to in rule 16 has been appended, file such a document before the commencement of the hearing.

Authorised Representative

1. In relation to an assessee, a person duly authorised by the assessee;

2. In relation to the Department, a person duly appointed by the Central Government by notification in the official Gazette as authorised representative to appear, plead and act.

Section 288 of the Income Tax Act, 1961 prescribes for person qualified and disqualified as an authorised representative.

Section 288 permits an assessee to be represented before the Tribunal or any income-tax authority in the connection with any proceeding under the Act, by an authorised representative.

However, the right to appear through an authorised representative does not extend to cases where the assessee is required U/s. 131 to attend personally for examination on oath or affirmation.

The position and obligation of accountants representing assessees in proceedings under this Act are similar to those of advocates representing parties before a court of law.

Time limit for filing Appeal before The Tribunal

Appeal is to be filed before the Tribunal within 60 days of the date on which order appealed against is communicated to the taxpayer or the Commissioner, as the case may be.

Condonation of Delay in filing Appeal

The Tribunal may admit an appeal of memorandum of cross objections after the period of 60 days or 30 days as the case may be, if it is satisfied that there was sufficient cause for not presenting it within the prescribed time.

Miscellaneous Petitions or Applications

The Tribunal, at any time within four years from the date of order passed by it, can rectify any mistake apparent from record, if the same is brought to its notice by the tax payer or the Assessing Officer. A fee of Rs. 50 is to be paid for filing miscellaneous application.

Petition to stay

On application by the tax payer, the Tribunal can pass an order of stay in any proceedings relating to an appeal filed before the Tribunal. The stay can be for a period up to 180 days, and the Appellate Tribunal is expected to dispose of the appeal within the period of stay.

Where the appeal is not disposed of within the period of stay, the Appellate Tribunal may grant further stay, however, the total stay period cannot be exceed 365 days.

Fees to be paid by the Tax payer for filing Appeal before the Tribunal

The fees on appeal before the Tribunal has to be levied on the basis of income as computed by the Assessing Officer and not on income as computed after effect to appellate order of Commissioner of Income Tax(Appeals).

 

Sl. No.

 

Total Income as computed by Assessing Officer

 

Fees in `

 

1. Less than Rs. 1 Lakh 500

 

2. More than Rs. 1 Lakh but less than Rs. 2 Lakh 1,500

 

3. More than Rs. 2 Lakh 1% of assessed income, subject to maximum of Rs. 10,000

Where the subject matter of appeal relates to any other matter, fee of Rs. 500 is to be paid. An application for stay of demand is to be accompanied by fee of Rs. 500.

E-filing of Appeal

In line with the e-Governance policy of the Government of India, the Tribunal will be launching E-Filing of Appeals for providing efficient taxpayer services. With this facility, the appellants before the Tribunal can electronically file their appeals and get acknowledgement for the same. Later on, they may submit the physical documents in the Tribunal Office (within the permitted time).

The Tribunal will be launching the said e-Filing portal for the benefit of tax payers and the income tax department, shortly. 

Composition of the Tribunal 

President 

The Central Government shall appoint –

  1. a person who is sitting or retired judge of a High Court and who has completed not less than 07 years of service as a judge in a High Court; or
  2. The Senior Vice President or one of the Vice Presidents of the Appellate Tribunal to be the President thereof. (The post of Senior Vice President is omitted with effect from 01.06.2016)

Vice President of the Tribunal

The Central Government may appoint one or more members of the Appellate Tribunal to be the Vice-President or, as the case may be, vice Presidents thereof. Any member, be he a judicial member or accountant member.

Members

As a rule, the Benches will consist of two members – a Judicial Member and an Accountant Member, exceptions of being of Single Member Bench (SMB) or a Special Bench.

The combine of two experts is supplementing each other to deal with the complicated issues of law and accounts arising in tax matters.

Section 252(2): A Judicial Member

A judicial Member shall be a person –

  1. Who has for at least 10 years held in judicial office in the territory of India; or
  2. Who has been a member of the Indian Legal Service (ILS) and has held a post in Grade II of that Service; or any equivalent or higher post for at least three years; or
  3. Who has been an advocate for at least 10 years

Generally members will be appointed on a tenure basis of five years.

Section 253(2A):  An Accountant Member

An accountant member shall be a person –

  1. who has for at least 10 years been in the practice of accountancy as a Chartered Accountant; or
  2. Who has been a member of the Indian Income-Tax Service, Group A and has held the post of Additional Commissioner of Income Tax  or any equivalent or higher post for at least 03 years.

Orders of the Appellate Tribunal

Normally, appeals are heard by a Bench comprising one judicial member and one accountant member.  Appeals where total income computed by the Assessing Officer does not exceed Rs. 50 lakhs may be disposed of by Single Member Bench (SMB).

The President of the Tribunal empowered to constitute Special Bench consisting of three or more than three members for disposal of any particular case, one of whom would necessarily be a judicial member and an accountant member.

If the members of the Bench differ in on any point, decision is by majority. If members are equally divided in their opinion, the points of difference are stated by each member and case is referred by the President of the Tribunal for hearing such points by one or more of the other members of Tribunal.

The Bench normally pronounces its orders in open court. Where orders are not pronounced in the court, list of such orders showing results of appeal and signed by members is put on the notice board of the Bench.

Procedure

The Appellant or the respondent, as the case may be, may submit a paper book in duplicate containing documents or statements or other papers referred to in the assessment appellate order, which it wish reply upon.

The paper book duly indexed and page numbered is to be filed at least a day before (but it is advisable at least a week before) the hearing of the appeal along with proof of service of copy of the same on the other side at least a week before.

The Bench may in appropriate cases condone the delay and admit the paper book. Each paper in the paper book is to be certified as true copy by the party filing the same.

The Tribunal fixes the date for the hearing the appeal and notifies the parties specifying date and place of hearing of the Appeal.  A copy of memorandum of appeal is sent to the respondent either before or along with such notice.

The appeal is heard on the date fixed and on other dates to which it may be adjourned.

If the appellant does not appear in person or through an authorised representative when appeal is called on for hearing, the Tribunal may dispose of the appeal on merits hearing the respondent.

However, where after disposal of appeal ex-parte, the appellant appears afterwards and satisfies the Tribunal that there was a sufficient cause for non-appearance, the Tribunal can set aside the ex-parte order and restore the appeal.

Monetary Limit for filing Appeal

Section 268A – Filing of appeal or application for reference by Income-Tax Authority – is inserted by the Finance Act, 2008 with retrospective effect from 01.04.1999. By sub-section (1) the Board is authorised to issue orders, instructions or directions to other income-tax authorities, fixing monetary limits for the purpose of regulating filing of appeal or application for reference by any income-tax authority to the Tribunal, the High Court and the Supreme Court.

A Board’s circular or instruction No. 5/2015, dated 10.12.2015 wherein monetary limits and other conditions for filing departmental appeals (income -tax matters) before Appellate Tribunal, High Courts and Special Leave Petition (SLPs) before the Supreme Court keeping in view the monetary limits and conditions specified below.

 

Sl. No

 

Appeals in Income-Tax Matters

 

Monetary Limit

(in ` .)

1. Before Appellate Tribunal 10,00,000
2. Before High Court 20,00,000
3. Before Supreme Court 25,00,000

It is clarified that an appeal should not be filed merely because the “tax effect” in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case.

For this purpose, ‘tax effect’ means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount to income in respect of the issues against which appeal is intended to be filed.

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 field in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified above.

ORDERS AGAINST WHICH APPEAL CAN BE FILED BEFORE APPELLATE TRIBUNAL

Tax payer can file appeal before the Income Tax Appellate Tribunal against the following Orders:

1. Order by Commissioner of Income Tax – (Appeals) under section:

  • 154 – Rectification of Mistake.
  • 271 – Failure to furnish returns, comply with notices, concealment of income, etc.
  • 271A – Failure to keep and maintain or retain books of account, documents, etc.
  • 272A – Penalty for failure to answer questions, sign statements, allow inspections, etc.

2. Order by Assessing Officer under section 158BC(c) – Procedure for Block Assessment – in respect of search action initiated during 1995 to 1997.

3. Order by Assessing Officer under section 115VZC excluding the tax payer from tonnage tax scheme.

4. Order by the Commissioner under section 12AA on registration application by a charitable or religious trust.

5. Order by the Commissioner under section 80G (5) (VI) regarding approval of a charitable trust for donations made after 31.03.1992.

6. Order by Commissioner under section 263 revising Assessing Officer’s order considered prejudicial to the interest of revenue.

7. Order by Commissioner under section 154 to verify an Order under section 263.

8. Penalty Order passed by Commissioner under section 271 or 272A

9. Penalty Order passed by Chief Commissioner or Director General or Director of Income Tax under Section 272A.

10. Order passed by Assessing Officer under Section 143(3) or Under Section 147 in pursuance of direction of Dispute.

The Commissioner can also direct the Assessing Officer to file appeal against order of Commissioner of Income Tax – (Appeals) before the Appellate Tribunal.

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One response to “Income Tax Appellate Tribunal – An Introduction”

  1. Jaivik Patel says:

    I am very thankful for the providing details information about tribunal and its proceding….

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