Appeal before Commissioner (Appeals) [CIT(A)]

Introduction

Joint CIT(A) and CIT(A) are the first appellate authorities under the Income-tax Act. The taxpayer aggrieved by an assessment order, or order imposing penalty or any other order, can file an appeal before the Joint CIT(A) or CIT(A) having jurisdiction over him. The appeal before the Joint CIT(A) can be filed against the order of the Assessing Officer (below the rank of Joint Commissioner). Whereas, the appeal before the CIT(A) can be filed against the order of any assessing officer, irrespective of his rank. The appeal has to be filed electronically in Form No. 99. However, if the aggrieved party is not required to file a return of income electronically, the appeal can be filed either electronically or in paper format.

1. Orders against which an appeal can be filed before CIT(A)

A person aggrieved by the orders passed by various Income tax authorities can prefer an appeal against such an order before the Joint CIT(A) [‘JCIT(A)’] or CIT(A). An appeal before the JCIT(A) can be filed against the order of the Assessing Officer who is below the rank of Joint Commissioner. On the other hand, an appeal before the CIT(A) can be filed against the order of any assessing officer, regardless of his rank. The orders that can be challenged before the CIT(A) are as follows.

1.1. Relating to assessment orders

An assessee can prefer an appeal with the CIT(A) against the following orders relating to the assessment:

(a) An Intimation issued under Section 270(1) where the assessee objects to the making of an adjustment;

(b) Assessment orders under the following provisions:

• Assessment under Section 270(10) where the assessee objects to the income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed;

• Reassessment or recomputation under Section 279 or Section 283.

However, the appeal cannot be preferred against an order passed in pursuance of directions of the Dispute Resolution Panel or an assessment order passed on the invocation of GAAR.

(c) Best Judgment Assessment Order passed under Section 271, where the assessee objects to the amount of income assessed, the amount of tax determined, or the amount of loss computed, or the status under which he is assessed.

(d) An order made for modifying the total income determined under assessment or reassessment in accordance with an advance pricing agreement as referred to in Section 169;

(e) An order of rectification of mistake under Section 287 or Section 288 having the effect of enhancing the assessment or reducing the refund, or an order refusing to allow a claim made by the assessee under these sections. However, the appeal cannot be preferred against an assessment order passed on the invocation of GAAR; and

(f) An order under Section 294 determining undisclosed income of the block period where search was initiated or where books of accounts, other documents or any assets were requisitioned.

1.2. Relating to liability to get assessed

An assessee can prefer an appeal with the CIT(A) against the following orders to assess him under the Income-tax Act:

(a) An order passed against the assessee, where the assessee denies his liability to be assessed under the Income Tax Act;

(b) An order passed under Section 306 for the purpose of treating the assessee as the agent of a non-resident;

(c) An order passed under Section 313(2) or Section 313(4) to recover tax of predecessor from successor, other than on death; and

(d) An order passed under Section 315 regarding assessment after the partition of the Hindu Undivided Family.

1.3. Relating to TDS/TCS matters

The aggrieved person can prefer an appeal with the CIT(A) against the following orders relating to TDS/TCS matters:

(a) Adjustments made at the time of processing of the TDS Statement under Section 399, and the deductor objects to such adjustments;

(b) Adjustments made at the time of processing of the TCS Statement under Section 399, and the collector objects to such adjustments; and

(c) An order passed under Section 398 treating an assessee in default.

(d) An order passed by the AO under Section 434 rejecting the application for refund of tax deducted under Section 393 (Table: Sl. No. 17) on the grounds that the deductor has no liability to deduct tax.

1.3-1. Appeal by a person denying liability to deduct tax

An assessee can file an application under Section 434 before the Assessing Officer to claim the refund of tax deducted under Section 393 (Table: Sl. No. 17) on the grounds that no tax was required to be deducted on such income. If the assessee is not satisfied with the order passed by the Assessing Officer, he may go into appeal against such order by filing an appeal before the CIT(A) within 30 days from the date on which the order under Section 434 is served.

1.4. Relating to penalty orders

The aggrieved person can prefer an appeal with the CIT(A) against the following penalty orders:

(a) Penalty under Section 412 as assessee is or deemed to be in default in making payment of tax;

(b) An order imposing or enhancing a penalty under Chapter XXI(Sections 439 to 472);

(c) Penalty under Section 298(2) in case of block assessment.

1.5. Relating to other orders

The aggrieved person can prefer an appeal with the CIT(A) against the following orders of the assessing officer:

(a) An order passed by the Joint Commissioner under Section 231 refusing to approve the option for the tonnage tax scheme;

(b) An order passed under Section 431 in respect of a refund; and

(c) An order passed by an assessing officer under the provisions of the Income-tax Act in case of a person or class of persons, having regard to the nature of the case or complexities involved, and other relevant considerations as may be directed by the board.

As an alternative remedy, the assessee can prefer an application to the Commissioner or Principal Commissioner under Section 378 for seeking revision or modification.

2. Orders against which an appeal cannot be filed before the CIT(A)

The aggrieved person, even if affected by the order of an Income-tax authority, cannot file an appeal against such an order before the CIT(A) if it is related to the following matters.

2.1. Assessment order pursuant to GAAR or DRP directions

The appeal cannot be preferred before the CIT(A) against an order passed in pursuance of directions of the Dispute Resolution Panel or an assessment order passed on the invocation of GAAR.

2.2. Relating to the levy of interest under Section 411

There is no provision to allow an appeal against the order to levy interest under Section 411(3) on failure to pay the amount specified in the notice of demand within the specified time limit. The order under Section 411(3) does not form part of the assessment order under Section 270(10). In fact, while calculating the interest under Section 411(3), the Assessing Officer has no discretion or option but to simply calculate the interest at a particular rate on the outstanding tax payable by the assessee. Interest under Section 411(3) is not part of the assessment. Thus, the order of calculation of interest under Section 411(3) while giving effect to the appellate order is not appealable

3. Transfer of pending appeal from CIT(A) to JCIT(A)

A pending appeal can be transferred from CIT(A) to JCIT(A), if:

(a) The appeal has been filed before the CIT(Appeals) against an order that is also appealable before the JCIT(A).

(b) Such appeal before the CIT(A) should be pending.

(c) The Board (or an income-tax authority so authorised) transfers such an appeal to JCIT(A). The Board (or an income-tax authority so authorised) can also transfer any other matter arising out of or connected with such pending appeal.

(d) Before transferring the pending appeals from CIT(A) to JCIT(A), the appellant shall be given an opportunity of being reheard.

(e) On transfer of appeal, the JCIT(A) may proceed with such an appeal or matter from the stage it was before such transfer.

4. Transfer of pending appeal from JCIT(A) to CIT(A)

The pending appeals can be transferred from JCIT(A) to CIT(A) if:

(a) The appeal is pending before JCIT(A) on an appealable order;

(b) The Board (or an income-tax authority so authorised) may transfer such an appeal to CIT(A). The Board can also transfer any other matter arising out of or connected with such pending appeal, and the CIT(A) may proceed with such an appeal or matter from the stage it was before such transfer.

(c) It should be noted that before transferring the pending appeals from JCIT(A) to CIT(A), the appellant will be given an opportunity of being reheard.

5. Process in disposal of an appeal before CIT(A)

5.1. Form and time limit for filing an appeal before JCIT(A)?

Main article: Manner of filing of appeal to CIT(A)

The assessee can prefer the first appeal before CIT(A) in Form No. 99 within 30 days. The appeal shall be filed electronically through the e-filing portal.

5.2. How to file appeal?

See also: Facesless Appeal Scheme 2021

Section 532 empowers the Central government to make a scheme for any purpose of the Act so as to impart greater efficiency, transparency and accountability by:

(a) Eliminating the interface with the assessee or any other person to the extent technologically feasible.

(b) Optimising utilisation of the resources through economies of scale and functional specialisation.

This provision also provides that where a scheme has been notified under the Income-tax Act 1961, the Central Government may amend or modify the said scheme. This indicates that the schemes notified under the ITA 1961 will continue to apply, which is also in line with the repeal and saving provision of Section 536(2)(j) that provides that any scheme issued under any provision of the repealed Income-tax Act shall, so far as it is not inconsistent with the corresponding provisions of this Act, be deemed to have been issued under the corresponding provision of this Act and shall continue in force accordingly.

Under the ITA 1961, the CBDT has notified

All Income-tax appeals before the CIT(A) shall be finalised in a faceless manner, except for the appeal relating to the following:

(a) Serious frauds;

(b) Major tax evasion;

(c) Sensitive & search matters; and

(d) International Tax and Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

5.3. Procedure to be followed by CIT(A)

5.3-1. Issue of notice

The CIT(A) shall fix a day and place for the hearing of the appeal and shall issue a notice mentioning the same to the assessee or to the assessing officer, against whose order the appeal has been filed.

5.3-2. Adjournment of hearing

The CIT(A) have power to adjourn the appeal from time to time.

5.3-3. Conduct of enquiry

Before disposing of any appeal, CIT(A) may conduct such an enquiry as he thinks fit. He may also direct the assessing officer to make further enquiries and report the results of such enquiries to the CIT(A).

5.3-4. Additional grounds of appeal

The CIT(A) may admit the additional grounds of appeal which were not included in the grounds of appeal filed at the time of filing the appeal, if he is satisfied that the omission of such a ground from the grounds of appeal was not willful or unreasonable.

5.3-5. Order of Appeal

The CIT(A) is required to pass the order of appeal in writing specifying the point of determination, the decision made based on these and the reasons behind such a decision.

5.3-6. Time Limit for passing of the order

The CIT(A) may, if it is possible, hear and decide the appeal within 1 year from the end of the financial year in which the appeal was filed. Further, the appellate order shall be issued within 15 days of the last hearing.

5.3-7. Disposal of appeals on priority

The CBDT has issued guidelines

(a) Cases having demand above Rs. 1 Crore; or

(b) Cases where a VIP/PMO reference is received for expeditious disposal; or

(c) Cases where directions to this effect have been issued by the Court; or

(d) Cases where the request is made by senior citizens and/or super senior citizens; or

(e) Any other case of genuine hardship.

The request for such disposal appeal can be raised by the appellant or referred to by the Assessing Officer. The process for handling these requests involves recommendations from the jurisdictional Principal CIT, Principal CIT (Central), or CIT(IT), with the final decision that rests with the Principal CCITs or CCITs or DGITs.

It is to be noted that in respect of appeals within the jurisdiction of a faceless CIT(Appeal Unit), such a request shall be referred to the Principal CCIT(NFAC) for onward communication to the respective CIT(Appeal Unit).

5.3-8. Communication of Order

The order of the CIT(A) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision. On the disposal of the appeal, the CIT(A) shall communicate the order passed by him to the assessee and to the Chief Commissioner or Commissioner.

5.3-9. Stay of demand

Where an appeal is filed before the CIT(A), the assessing officer can grant a stay of demand till the disposal of the appeal by CIT(A) if the assessee makes a payment of 20% of the disputed demand

5.4. Right to be heard

The assessee and assessing officer shall have the right to be heard at the time of hearing of appeal before CIT(A) either in person or through an authorised representative.

5.5. Filing of additional evidence

The appellant shall not be entitled to produce before the CIT(A) any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer. However, in the following circumstances, the assessee can submit additional evidence before the CIT(A):

(a) Where the assessing officer has refused to admit the evidence, which ought to have been admitted;

(b) Where the assessing officer called the assessee to produce the evidence, but the assessee was prevented by sufficient cause from producing such evidence;

(c) Where the assessee was prevented by sufficient cause from producing evidence which was relevant to any ground of the appeal; or

(d) Where the assessing officer has passed the order without providing the assessee sufficient opportunity to produce evidence relevant to any ground of appeal.

The CIT(A) is required to record the reasons in writing for admitting any additional evidence. Further, before admitting any additional evidence, the CIT(A) is required to provide an opportunity to the assessing officer:

(a) To examine the evidence or document produced by the assessee or to cross-examine the witness produced by the assessee; or

(b) To produce any evidence, document or witness in reply to the evidence produced by the assessee.

5.6. Appeal against the order of CIT(A)

An appeal to the Income-tax Appellate Tribunal (ITAT) can be filed both by the assessee and the Commissioner (and the Principal Commissioner). The Commissioner may, if he objects to any order passed by the CIT(A), direct the assessing Officer to file an appeal to Appellate Tribunal against such order. However, such direction shall be given only in those cases where the tax effect exceeds the specified amount.

6. Powers of CIT(A)

The CIT(A) can exercise the following powers while disposing of an appeal filed before him. However, he is required to provide an opportunity of show cause to the assessee before enhancing an assessment, imposing a penalty, or reducing the amount of refund.

6.1. Relating to the assessment order

The CIT(A) may confirm, reduce, enhance or annul the assessment in the following cases:

(a) Where an appeal has been filed against an assessment order;

(b) Where an appeal has been filed against an assessment order in respect of which the proceedings before the Settlement Commission abate under the repealed ITA 1961.

The power in the circumstance referred to in point (b) above can be exercised by the CIT(A) after considering the following:

(a) All the materials and other information produced by the assessee before the Settlement Commission;

(b) Results of the enquiries held by the Settlement Commission during the course of proceedings before it;

(c) Evidence recorded by the Settlement Commission during the course of proceedings before it; and

(d) Other materials that were brought on his records.

In an appeal filed before the CIT(A) against an order of assessment, the CIT(A) cannot set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment except where an appeal is filed against an order of best judgment assessment made under Section 271.

6.2. Relating to the penalty order

Where an appeal has been filed against an order imposing a penalty, the CIT(A) may confirm or cancel such order or change it either to increase or reduce the penalty.

6.3. Relating to other matters

Where an appeal has been filed in any other case, the CIT(A) may pass such an order as he thinks fit.

6.4. Power to levy penalty

The CIT(A) can levy a penalty under the following provisions:

(a) Penalty under Section 439 for under-reporting and misreporting of income;

(b) Penalty under Section 441 on failure to keep, maintain or retain books of account;

(c) Penalty under Section 442 on failure to keep information in respect of an international transaction;

(d) Penalty under Section 443 in case of undisclosed income;

(e) Penalty under Section 444 for false entry or omission of entry;

(f) Penalty under Section 457 for failure to furnish information or document relating to international transactions;

(g) Penalty under Section 463 for furnishing incorrect information in reports or certificates.

6.5. Power to consider additional matters

While disposing of the appeal, the CIT(A) has the power to consider and decide any matter arising out of the proceedings in which the order appealed against was passed, irrespective of the fact that such matter was not raised by the appellant before him.

6.6. Power to admit additional evidences

The CIT(A) can allow the appellant to submit additional evidence in the circumstances mentioned above. In such a situation, the following power of the CIT(A) shall remain unaffected due to the provision regarding submission of additional evidence:

(a) To direct the production of any document or examination of any witness for enabling him to dispose of the appeal; or

(b) To enhance, confirm, reduce or annul the assessment or penalty order either on its own or on request of the assessing officer.

6.7. Power to reject books of account

CIT(A) has the power to reject the assessee’s books of account, which have been accepted by the Assessing Officer

7. Alternative to Appeals

Instead of approaching the JCIT(A), the assessee can also approach the Dispute Resolution Committee (DRC). However, the assessee cannot approach them simultaneously. If he approaches the DRC and his application is admitted, he has to submit proof of withdrawal of the appeal filed before JCIT(A) or convey that no proceedings are pending in his case. Similarly, the assessee shall not be eligible to file an appeal before JCIT (A) against the modified order passed by the AO to give effect to the order of resolution of the DRC.

A comparison of all provisions relating to these dispute resolutions has been enumerated in the table below:

References

ANZ Grindlays Bank PLC v. CIT [2000] 108 Taxman 328 (Calcutta)

Notification S.O. 5429(E), dated 28-12-2021.

Office Letter F.No. 279/Misc./M-102/2021-ITJ, dated 07-03-2024

Office Memorandum No. 404/72/93-ITCC dated 29-2-2016

CIT v. McMillan & Co. [1958] 33 ITR 182 (SC)

This article is general information and not tax advice. Provisions change. Confirm your position with a qualified professional before acting.