Direct taxes -1 ( UNIT- 5 ) Appeal, Revision, penalty & procedures

                                 Appeals   and  Revisions  

‘appeal’ means ‘making a request’ and in legal parlance, it means ‘apply to a higher court for a reversal of the decision of a lower court’. 

                  In India, the taxpayer computes the tax payable on his total income and pays to the government. If the Income Tax department (the government) disagrees with the tax computed by the taxpayer, they can levy an additional tax. Under Income Tax Act, the liability is determined at the level of Assessing Officer (it can be Income Tax Officer (ITO) or Assistant/Deputy Commissioner of Income Tax)

                   A tax payer aggrieved by various actions of Assessing Officer (say higher tax demand) can appeal before Commissioner of Income Tax (Appeals). Further appeal can be preferred before the Income Tax Appellate Tribunal. On substantial question of law, further appeal can be filed before the High Court and even to the Supreme Court.

Appeal before commissioner (Appeals ) : 

                                    Aggrieved tax payer can file appeal before the Commissioner (Appeals) having, jurisdiction over the tax payer. Appeal can be filed when a taxpayer is adversely affected by the Orders passed by Tax authorities. Every appeal to the Commissioner (Appeals) is to be filed in Form No. 35, signed by the taxpayer/director or his authorized representative. Appeal Fees to be paid depending upon total income determined by the Assessing Officer, subject to a maximum of Rs.1000.

Appeal is to be filed within 30 days of the date of service of notice of demand relating to assessment or penalty order or the date of service of order sought to be appealed against, as the case may be. The commissioner may admit an appeal after the expiry of 30 days, if he is satisfied that there was sufficient cause of not presenting the appeal within the period of 30 days.

             On receipt of Form no. 35, Commissioner of Income-tax (Appeals) fixes date and place for hearing the appeal by issuing notice to the tax payer and the Assessing Officer, against whose order appeal is preferred. After the hearing is concluded, Commissioner (Appeals) passes order in writing, disposing of the appeal and stating the decision on each ground of appeal with reasons.

Appeal before I. T Appellate tribunal ( ITAT) :

            Appeal against an order of Commissioner (Appeals) lies with the Income Tax Appellate Tribunal (ITAT). Both tax payer and the Assessing Officer can file appeal before ITAT.

        Appeal is to be filed (in Form 36) before the Appellate 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. Appeal fee to be paid based on the taxable income subject to a maximum of Rs.10000. The Appellate Tribunal may admit an appeal after the period of 60 days if it is satisfied that there was sufficient cause for not presenting it within the prescribed time.

       Normally appeals are heard by a Bench comprising of one judicial member and one accountant member.

Appeal before High Court :    Appeal against Appellate Tribunal’s order lies with the High Court, where the High Court is satisfied that the case involves a substantial question of law.  Appeal to the High Court against Appellate Tribunal’s order can be filed by the tax payer or the Chief Commissioner/Commissioner within 120 days of receipt of the order and in the form of memorandum of appeal, precisely stating the substantial question of law involved.

           Appeal filed before High Court is heard by bench of not less than two Judges and decision is by majority.

Appeal to the supreme  court :  An appeal shall lie to the supreme court from a judgement of high court in any case which the high court certifies to be a fit one for appeal to the supreme court.
Decision of supreme court :   
 The supreme court upon hearing any case shall decide the question of law raised therein. It shall deliver the judgement containing the grounds on which such decision is founded. A copy of judgement shall be sent under the seal of the court and signature of the registrar to the assessing officer(A.O). The A.O shall give effect to the order passed on the basis of certified copy of the judgement.

                   
                                                    Revisions

Revision of Income Tax Order

A Principal Commissioner or Commissioner of the Income Tax Department is empowered with the rights to enhance, annul or modify an income tax order if he/she feels that the interests of the revenue are at stake due to the erroneous passing of orders by the Assessing Officer. This article provides an in-depth analysis of the roles of a Principal Commissioner/Commissioner pertaining to revision of income tax orders.

Income Tax Order Revision

The Principal Commissioner/Commissioner has the powers to revise the following income tax orders:

• An order of assessment made by the Assessment Commissioner or Deputy Commissioner or Income Tax Officer based on the directions issued by the Joint Commissioner.
• An order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of Assessing Officer conferred on him under the orders or directions issued by CBDT/Principal Chief Commissioner/Chief Commissioner/Principal Director/Commissioner authorized by CBDT under Section 120.

  Section 263(1) of Income Tax Act

  Explanation 2 of Section 263(1) of the Income-tax Act highlights the circumstances where the Assessing Officer has erred in passing of orders and can be revised. The circumstances, as explained under this provision, could be any of the following:
  • Orders passed without making necessary inquiries or verification.
  • Orders passed allowing any relief without investigating the claim.
  • The order is not in par with any order, direction or instruction issued by the Board under Section 119.
  • The order hasn’t been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court in the case of the assessee or any other person.

  Time Limit for Revision of Income Tax Order

  Orders of the Assessment Officer must be revised within a period of two years from the date of the original order. The following periods are to be excluded while computing the period of limitation:
  • The time taken in giving an opportunity to the assessee to be re-heard.
  • Any period during which any proceeding under this section is stayed by an order or injunction of any court.
  Note:- Revisionary orders can be passed even after the expiry of two years under certain extraordinary circumstances.

  Procedure for Revision of Income Tax Order

  The following are some of the major powers enjoyed and aspects considered by the Principal Commissioner or Commissioner while considering revision of an Income Tax order:

  Examination of Records

  The Principal Commissioner or Commissioner may call for and examine the records of any proceedings under the Income Tax Act while revising an Income Tax order. He/she need not provide any reason for the same.

  Entitled to Revise Parts of Other Order

  The Principal Commissioner or Commissioner is entitled to revise other parts of the order which was ignored or taken up by the Assessing Officer.

  Errors of Fact/Errors of Law

  The Principal Commissioner/Commissioner is by no means restricted in revising the errors. The errors can be revised, be it errors of fact/errors of law.

  Opportunity to be Heard

  As is the case with many provisions of the Income Tax Act or for that matter the entire realms of taxation, the assessee must be given an opportunity to be heard before the Principal Commissioner or Commissioner goes on to pass the revised order.

  Opinion of Sub-Ordinates Valued

  The order or part of it can be taken for review even if the point of error is pointed out by a sub-ordinate, provided the Principal Commissioner/Commissioner is satisfied with the cause of review.

  Approval from an Authority of a Higher Rank

  The Principal Commissioner/Commissioner may undertake the review of any order or part of it on the discretion of a higher authority.

  When Income Tax Order Cannot Be Revised

  The Principal Commissioner or Commissioner cannot revise an income tax order which is subject to appeal. Also, the Principal Commissioner or Commissioner is restricted from reviewing any orders passed by the High Court, even if the said authority considers it erroneous.