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An Overview

Appellate Proceedings. An Overview. Presenter:. Rachna Gurnani Rachnagurnani@gmail.com. Convener:. Yogesh Mittal Yogesh_Mittal2@yahoo.co.in. Insight. Common Concerns: How does the Tax Return gets processed post submission

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An Overview

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  1. Appellate Proceedings An Overview Presenter: Rachna Gurnani Rachnagurnani@gmail.com Convener: Yogesh Mittal Yogesh_Mittal2@yahoo.co.in

  2. Insight Common Concerns: How does the Tax Return gets processed post submission What powers do Tax Authorities have for their conduct What are the remedies available for me – the “Aggrieved Assessee” How to initiate the remedial action in the sphere of legal machinery How to prepare for hearing & disposal of appeals before Judiciary The Barrister Explains…..

  3. Compliance Process Scrutiny Assessment u/s.143(3) Return of Income (original or revised) Summary Assessment Intimation u/s.143(1) Notice u/s.142(1) r.w.s.143(2) Rectification Petition u/s 154 Appeal before Courts Settlement Commission (Circumstantial) Settlement Commission (Circumstantial) Order giving effect of ITAT’s order by A.O. Grievance : Revision / Appeal Hearing & Disposal Payment of assessed tax / Stay Petition ITAT Appeal Order giving effect of CIT(A)’s order by A.O. Hearing & disposal of appeal Hearing u/s.250 CIT(A) Appeal CIT(A)’s Order New Window: Advance Ruling / Advance Price Agreements

  4. Assessment • Self assessment of own tax by the tax payer & its onward verification by Tax Authorities • Assessment : the process of verification & arrival of final income & tax figure by Revenue Legal Machinery: • Summary Assessment u/s 143(1): - On the basis of Return of Income filed - Completion of assessment proceedings without calling the assessee - Intimation is served upon completion of assessment - Time Limit : 1 year from the Financial Year end in which Return is submitted, deemed approval if not completed • Scrutiny Assessment u/s 143(3): - After verification of additional information & evidence called from assessee in enquiry before assessment - Notice calling for additional information served u/s 143(2) within 12 months of furnishing Return - Right of tax officials to call information of past 3 years invoking section 142 - Completion of Assessment within 21 months from the end of relevant Assessment Year • Best Judgment Assessment u/s 144: - Wherein assessee fails to furnish suffice information to Tax Officials - Assessment completion based on agreed parameters - Should be completed within 21 months from the end of relevant A.Y. - Cannot be based on fictitious or prejudiced parameters - Opportunity of being heard must be provided to assessee

  5. Assessment… • Assessment while Search or Requisition u/s 153A: - In a situation wherein search is initiated u/s 132 or books, documents, assets etc. called u/s 132A - Information up to past 6 years can be called for - Return of Income in respect of all such A.Ys to be resubmitted - Should be completed in 21 months of the year end of search & requisition - For assessment carried under this section, tax shall be chargeable at the rates applicable to such year • Assessment of Income of any other person in case of Search or Requisition u/s 153C: - Based on A.O’s belief of interconnections between 2 or more persons - Completed within 21 Months from end of relevant A.Y. - Upon the seized accounts or documents are handed over, assessment to be completed in its 9 months - Computation mechanism as provided u/s 153A to be followed for the purpose • Reassessment u/s 147: - Once again assessment of income that allegedly has escaped assessment - Tax officials can initiate proceedings only in respect of past 4 years - 6 years if the income escaping assessment exceeds Rs. 1 Lakh - To be completed in 9 months from the financial year end of serving notice • Assessment Order: - Passed as the final outcome of proceedings initiated under respective section - Favorable Order : Acceptance of Assessee’s contentions - Unfavorable Order: can disallow expenses/ claim for losses, make addition to the declared income - Additional Interest, penal proceedings can be initiated - Notice of Demand served u/s 156 in case of additional tax liability

  6. Remedial Action Aggrieved assessee to bring the contentious matters before Appropriate Authority for hearing & remedy A.O’s Order Revision Application Appellate Proceedings Writ Petition in Courts Filed before High Court exercising Article 14 of Constitution Redundant due to other measures Once invoked, has to be in favor of appellant Can also be filed by Tax authorities CIT(A) can suo moto initiate Has to waive the right of appellate remedy Appeal before CIT(A) Appeal before Tribunal - Assessee or Revenue Appeal to High Court / Supreme Court Rectification Petition to A.O.: for apparent mistakes

  7. Revision Application • Preferred before Commissioner of Income Tax u/s 264 by the Assessee • Subject to the acceptance of the concerned CIT • Revision of Orders by any authority subordinate to concerned Commissioner • CIT can suo moto revise any of the orders • Has to be discharged in favor of Assessee • Once filed, no other appellate rights can be exercised • Usually preferred for less litigious matters • Should not be argumentative • Application has to be filed within 1 year of Original Order • CIT can revise the Order within 1 year of filing such petition • Merely an application, hence no compulsory representation by Counsel etc. • CIT can call for additional information & discharge the matter appropriately • Filing fees for such application is Rs. 500 The Other Route : Appeal before CIT(A)

  8. Appeal before Commissioner

  9. Appealable Orders • Intimation / Order made by DCIT u/s 120 • Assessment Order u/s 143(3) or 144 • Reassessment Order u/s 147 • Rectification Order u/s 154 • Assessment / Reassessment Order u/s 153A • Assessment Order in respect of fringe benefits u/s 115WE(3) or 115WF • Order made u/s 201(1) & section 201(1A) levying interest for delay in remitting TDS or failure to deduct TDS • Block Assessment Order in case of search or requisition u/s 158BC • Order imposing penalty u/s 221 for default in payment of tax • Order imposing penalty under Chapter XXI (Section 270 to 275) • Order of assessment made by AO under section 158BC • Order imposing penalty u/s 158BFA(2) for concealment of income in case of block assessment

  10. Preparing for the Appeal • Appeal has to be filed in 2 sets before CIT(A) of own range • Assessed tax must be paid before filing appeal – Stay petition can be sought • Grounds of appeal should be precise & non-argumentative • Statement of facts can be concise keeping the bare minimum content. While hearing, a detailed paper book can be filed • Additional grounds of appeal can be filed if omission not willful or unreasonable • Use of clear & easy language should be preferred while drafting • Orderly arrangement of case laws & notifications relied upon • Appeal has to be filed within 30 days of the date of service of Order / intimation – delay condoned only for sufficient cause • Appeal can be represented by assessee or his designated attorney • Must be signed by the authorized signatory specified u/s 140 • Filing fees of Rs. 1,000 /- for assessed income exceeding Rs. 2 Lakhs

  11. Documentation

  12. Hearing & Disposal • CIT(A) endeavor to hear & dispose off the appeal within 1 year from financial year end of filing the appeal • Can have any number of hearings before final order • Can ask for additional documents, details as deems fit • Additional evidence can be placed at the time of hearing if the assessee did not have opportunity to present before lower authorities • Adjournment for hearing can be plead in extreme situations • CIT(A) has wide & plenary powers, wider than those of Tribunal • CIT(A) may confirm, reduce, enhance or annul the A.O’s order • Has to pass a speaking order • Verification of CIT(A) Order & Order Giving Effect (‘OGL’) to CIT(A)’s order • After the order is obtained, further course of action decided For any grievance : Appeal before ITAT

  13. Appeal before I-tax Tribunal

  14. Preparing for Appeal • Appealable Orders – Order of CIT(A), Order of Chief Commissioner u/s 272A • Compliance with CIT(A)’s order before ITAT appeal is filed • Appeal to be preferred in 60 days of the service of order appealed against – delay condoned only for reasonable cause • Appeal set has to be filed in 3 copies • Must be signed by the authorized signatory mentioned u/s 140 • Representation by Assessee, Counsel or a Chartered Accountant • Submission of detailed paper book at time of hearing • Additional grounds can be admitted if omission is not willful or unreasonable • Segregation of legal notifications & factual details pertaining to case • Additional submissions can be placed at every hearing • Material produced before earlier authorities also presented • Memorandum of cross objections filed against Tax Department’s Appeal • Filing fees : for income exceeding Rs. 2 lakhs, least of 1% or Rs. 10,000

  15. ITAT Appeal Set

  16. Court Room – the real test • ITAT: highest fact finding body • With a judicial & accountant member, special bench constituted in situations • Endeavor to hear & dispose off appeals in 4 years of filing the appeal • If stay is granted over proceedings, has to conclude in 180 days • Hearing can be adjourned in extreme situations • Tax Department represented by “Departmental Representative” • No informal arguments can be placed • Submissions in summary format should be preferred • Appellant to observe the code of formal dressing & conduct

  17. ITAT – Miscellaneous matters • Stay petition: - Plea before authorities seeking relief against undue hardship - application to be filed in duplicate before AO & TRO - basic details: short facts, reasons for seeking stay, amount of demand, application etc. to be furnished • Rectification petition u/s 254(2): - for rectification of any mistake apparent from records of CIT(A)’s order or ITAT’s order - application can be made by the assessee or A.O. - should be within 4 years from the date of order • Consolidation of Appeals: - hearing of 2 or more different appeals of the same assessee at the same time - for common issues involved in any of the appeals - can be of different Assessment Years also • Practical Difficulties with proceedings: - long duration involved in hearing & disposal of appeals - no adjournment possible for covered matters - excess formalities to be complied with - voluminous paper books - open for general public : secrets can be leaked - unreasonable behavior of members

  18. Appeal Petition before Courts

  19. Courts – Original Judiciary • Appeal before High Court: - right exercisable u/s 260A - preferred against ITAT’s order - only for a case involving a ‘Substantial Question of Law - should be filed within 120 days of receipt of ITAT’s order - can also be filed by the Tax Department if revenue effect exceeds 4 lakhs - rules framed for court proceedings & conduct has to be observed • Appeal before Supreme Court: - right exercisable u/s 261 - against a matter decided upon by High Court - High Court to certify the case as fit for appeal before Supreme Court - should be filed within 90 days of service of High Court Judgment - decision : Law of Land - decisions are binding on non-appellants as well - separate code of conduct for appeal & representation matters

  20. Finances at Stake • For every disallowance – additional tax burden 30% on domestic & 40% on foreign assessees • Penalty proceedings initiated under Chapter XXI poses additional burden • Assessed tax becomes payable before the appeal is preferred – bear the burden before remedy • For any delay in payment of assessed tax – penal interest charged u/s 220 after 30 days of notice • Till the time matter is heard & concluded, money remains blocked up – stay petition can be preferred stating financial problems • A.O. can keep the demand in abeyance till the disposal of appeal before CIT(A) u/s 220(6) – Circular no. 530 dated 06.03.1989 • On favorable conclusion of appeal – interest u/s 244A at 0.5% p.m. payable by the Income tax department • No tax shield available to payer – Tax is non-deductible item • Opportunity loss of earnings for every payment made to the tax office Worth the Risk??..

  21. Way Forward • National Tax Tribunal: - A new judicial body in the making to replace High Courts – still in abeyance - All governing provisions framed under “National Tax Tribunal Act, 2005” • Advance rulings: - A judicial body already in operation - Tax authority’s views on particular matters can be sought before the transaction is entered into - Only in respect of transactions with foreign parties - An effective way to examine the revenue’s stand before initiating the transaction • Advance Pricing Agreements: - Still not operative - To obtain revenue’s stand in respect of “Transfer Pricing Agreements” - Obtained before the agreement is entered into • Settlement Commission: - A judicial body to hear & decide the matters pending before other authorities - For cases involving a mutual settlement by assessee & the tax department - An appreciated practical solution for litigious matters

  22. THANK YOU.

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