- Introduction
The Appellate Tribunal is the next
Appellate Forum available under the Income tax Act, 1961, after the
Commissioner of Income Tax (Appeals) decides the appeal filed by the
assessee. The Appellate Tribunal provides an opportunity to both the
assessee and the assessing authority to come in appeal against the orders
passed by the first appellate authority. On the recommendations of the
Enquiry Committee in 1936 section 5-A was introduced in the Income-tax
Act, 1922 to constitute Income Tax Appellate Tribunal (hereafter referred
to as "Appellate Tribunal") which came into force with effect from 25-1-1941.
Thus, the Appellate Tribunal has been consistently pursuing its motto
` Sulabh Nyyay Satwar Nyyay’ for the last 62 years. The efficient dispensation
of justice by the Appellate Tribunal has made it a model judicial forum.
The legislature constituted Tribunals under various fiscal and civil
laws, for efficient dispensation of justice and to fight the menace
of ever increasing pendency. In 1941 the Central Government sanctioned
3 Benches which were constituted at Bombay, Delhi and Calcutta. Initially
the head office was at Delhi and the same was shifted to Bombay in the
year 1942. The total sanctioned strength of Benches as on today is 53
benches stationed at 24 different places. The maximum number of benches
are; i.e., 10 benches, are in Mumbai itself. All the sanctioned Benches
are operational.
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Constitution
of Appellate Tribunal
The Income Tax Appellate Tribunal is constituted by the Central
Government under section 252(1) of the Act. The sub-section (1) to
section 252 further vests the Central Government with the power to
appoint Members of the Appellate Tribunal as Judicial Members and
Accountant Members. As per sub-section (2) to section 252 the Members
of the Appellate Tribunal can be selected from the profession as well
as from the Department. A person with 10 years experience as advocate
or a judicial officer within the territory of India or a member of
the Indian Legal Service and has held a post in Grade II of that service
or any equivalent or higher post for at least three years is eligible
to be appointed as a judicial member. Similarly, an accountant member
shall be a person who has for at least ten years been in the practice
of accountancy as a Chartered Accountant under the Chartered Accountants
Act, 1949 or as a registered accountant under any law formerly in
force or partly as a registered accountant and partly as a chartered
accountant, or 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 three years. Sub-section
(3) to section 252 authorises the Central Government to appoint either
the Senior Vice President or one of the vice-Presidents as the President
of the Appellate Tribunal. The provisions of sub-section (4) and (4A)
of section 252 deal with the appointment of Senior Vice President
and Vice-Presidents. Sub-section (5) of the section 252 authorizes
the President to delegate the powers of the President to the Senior
Vice President or a Vice President.
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Sittings
of Bench & Territorial Jurisdiction
Rule 3 of the Income-tax Appellate Tribunal Rules provides that
a bench shall hold its sitting at its headquarters or at such other
place or places as may be authorised by the president. The standing
order under Income Tax (Appellate Tribunals) Rules, 1963 dated 16-9-1997
provides that for the place of sitting of the benches and their territorial
jurisdiction. The notification mentions that the ordinary jurisdiction
of the Bench will be determined not by the place of business or residence
of the assessee but by the location of the office of the Assessing
Officer.
The President is vested with the
powers to constitute the Benches under the provisions of sub-section
(1) of section 255. The Benches constituted from among the Members
by the President shall exercise the powers vested with the Appellate
Tribunal.
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Benches
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Division
Bench
As per the provisions of sub-section (2) to section 255 a
Bench of the Appellate Tribunal shall consist of two Members,
one shall be a Judicial Member and another shall be accountant
member. A division Bench consists of more than one Member. Sub-section
(3) provides exemption to usual practice of a Bench consisting
of two Members by laying down the pecuniary jurisdiction. Here,
it may be relevant to refer to the provision provided under section
24 of the Wealth Tax Act, 1957, which deals with the provisions
pertaining to the Appellate Tribunal. Sub-section (11) to section
24 of the Wealth Tax Act provides that the provisions of sub-sections
(1), (4) and (5) to section 255 of the Act shall apply to the
Appellate Tribunal in the discharge of its functions. Thus, the
provisions of sub-section (2) of section 255 of the Act, which
lays down the condition that the Bench should consist of one Judicial
Member and one Accountant Member is not applicable to the bench
constituted under the Wealth Tax Act, 1957. Therefore, the Wealth
Tax Bench of the Appellate Tribunal may consist of two judicial
Members or two accountant Members. As per the provisions of sub-section
(3) to section 255 an appeal, irrespective of the quantum of disputed
issue, has to be heard by a division Bench where the assessed
income as determined by the Assessing Officer is more than Rs.
5 lakhs. The maximum penalty leviable u/s. 271B is Rs. 1 lakh.
An appeal against the levy of the penalty u/s. 271B can be heard
by a division Bench only if the assessed income is more than Rs.
5 lakhs. In a case where the assessed loss is more than Rs. 5
lakhs, the pecuniary jurisdiction requires that any appeal pertaining
to that assessment year shall have to be heard by the Division
Bench only. The Apex Court, though in a different context, has
held that the word income includes positive as well as negative
profits in the case of CIT vs. Golta 156 ITR 323 (SC).
The ratio of this decision is applied for allocating an appeal
to a division Bench.
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Single
Member Court (SMC)
Sub-section 3 to section 255 provides that where the assessed
income is less than Rs. 5 lakhs the appeal can be heard and disposed
of by the president or any other Member of the Appellate Tribunal,
authorised by the Central Government, sitting singly. Here it
is important to note that only the Members who have been authorised
by the Central Government can constitute Single Member Court (SMC).
The provisions of sub-section 3 to section 255 lays down the pecuniary
jurisdiction on the basis of assessed income and not on the basis
of the quantum of the issue or issues raised before the Appellate
Tribunal. Therefore, in a case where the disallowance of Rs. 10
lakhs results into an income of Rs. 2,00,000/- only, the Appeal
can be heard by a Single Member Court.
There is no provision for SMC
Bench under the Wealth Tax Act , 1957, Gift Tax Act, 1958 or Interest
Tax Act, 1972.
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Third
Member Bench
As mentioned earlier usually a bench of the Appellate Tribunal
shall consist of one judicial member and one accountant member.
If the members of a Bench differ in opinion on any point, then
as per the provisions of sub-section (4) to section 255, the case
shall be referred by the president of the Appellate Tribunal for
hearing on such point or points by one or more of the other members
of the Appellate Tribunal. The point or points referred to the
Third Member shall be decided according to the opinion of the
majority of the members of the Appellate Tribunal who have heard
the case, including those who first heard it (JCIT vs. Jindal
Tractbel Power Co. Ltd. (1999) 240 ITR 189 (Kar). While assigning
an appeal to the third Member, the president of the Appellate
Tribunal must identify and frame points of difference which arose
between the members of the Division Bench (ACIT vs. Nageshwar
Prasad (late) (2000) 244 ITR 38 (Patna). Section 255 (4) contemplates
difference of opinion among the members of the Bench of the Appellate
Tribunal with respect to the conclusion. Where the members agree
on the conclusion on a point but differ in the reasoning or reasons
for arriving at the conclusion there is no need for any reference
to the Third Member. (A.N. Seth vs. CIT (1969) 74 ITR 852 (Del.)
The Third Member has to confine himself to the point or points
of difference referred to him. (ITO vs. ITAT (1985) 155 ITR
310 (Mad.) Once specific differences are referred to the third
member and referral order does not express any difference at all,
in identifying difference between members the third member cannot
alter questions referred to him or cannot modify question and/or
reframe questions and decide reframed questions instead of original
questions. [Niraj Petrochemicals Ltd. vs. ITO (2000) 73 ITD
1 (Hyd.) (T M).] Regarding the scope of the powers of the
Third Member the Hon’ble Allahabad High Court in the matter Jan
Mohammed vs. CIT (1953) 23 ITR 15 (All.) has observed that
the third member can give his opinion only on the issue on which
there was difference of opinion and cannot decide any other issue.
The Jurisdiction of Third Member is not confined to the language
of question(s) framed in reference but it extends to the entire
sum and substance of opinion on specified point(s). The Third
Member has power to consider the entire material, reasoning and
conclusions recorded by learned members as well as contentions
advanced on behalf of the parties and record his findings in such
a manner that difference of opinion amongst members can be decided
by a majority view — 74 ITD 25 (Pune) (TM) Khopade Kisanrao
Manikrao vs. ACIT).
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Special
Bench
Section 255(3) also provides for Constitution of Special Bench
consisting of three or more members. The President, for disposal
of particular case or cases, may constitute such Special Bench.
At least one of the members of such Special Bench must necessarily
be a judicial member and one accountant member. Such Bench may
dispose of cases allotted by the President to it for disposal.
In M/s. M.V. Visvesvaraya Industrial Research & Development
Centre vs. Dy. CIT ITA Nos: 695 & 696/M/98, Asst. Years 1991-92
& 1991-92, order dated 20-6-2000, the Special Bench has
held that the President has the power to constitute a Special
Bench for the disposal of an appeal for any year even though the
reference is pending before the High Court on the same issue for
any other assessment year. The Supreme Court in ITAT vs. DCIT
(Assts) 218 ITR 275 (SC) has held that ‘The High Court in
the exercise of its power under Article 226 of the Constitution
cannot sit in appeal or judgement against the administrative decision
of the President of the Appellate Tribunal who might have felt
that the case was of all India importance and was required to
be decided by a larger Bench of the Tribunal of three members.
Such an administrative order is not open to scrutiny under Article
226 of the Constitution of India except in extraordinary cases
wherein the order is shown to be a mala fide one’.
- Appealable orders
As per section 253 any assessee who is aggrieved by an order passed
by Commissioner (Appeals) or an order passed by a Commissioner u/s.
263 or u/s. 12AA or u/s. 272A or u/s. 154 amending the order passed
u/s. 263 or an order passed by the Chief Commissioner or a Director
General or a Director u/s. 272A, may prefer an appeal to the Appellate
Tribunal. Sub-section (2) to section 253 specifies that the Department
can also prefer appeal against the orders passed under section 250 and
section 154. The appeal against the assessment order passed under chapter
XIV B of the Act where search action is initiated after 30-6-1995 but
before 1-1-1997, lies directly before the Appellate Tribunal and the
period prescribed for filing of appeal to Tribunal is 30 days. Where
the search is conducted on or after 1-1-1997, the appeal against such
orders can be made before the Commissioner (A).
However, certain issues arise where
the search action is conducted after 30-6-1995 but before 1-1-1997
and the Tribunal has set aside the assessment order for the block
period. Now, against the fresh order passed by the Assessing Officer,
whether the appeal lies to the Commissioner (A) or to the Appellate
Tribunal is a matter of debate. However, in our opinion, the appeal
to such fresh orders should be filed directly before the Appellate
Tribunal, due to the reason that for filing appeal relating to the
block assessment, the legislature has provided the forum of appeal
on the basis of the date of search rather than on the basis of the
date of passing of the order. Thus, for filing appeal against the
fresh orders or the order giving effect to the higher authority’s
orders, the date of search action conducted is important and not the
date of passing the order.
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Who can
file appeal
As per the provisions section 253(1) and (2) the assessee or Commissioner
can prefer an appeal. Thus, apparently it seems that an appeal can
be preferred by a direct party. However, it has been held by several
High Courts that even a third party has a right of appeal if, as a
result of an order passed in an appeal by the first appellate authority
before whom he is not a party, he is saddled with a liability for
any tax or other sum. 32 ITR 762 (Bom) Kikabhai Abdulali vs. ITAT;
234 ITR 617 (Ker) Benoy Kurian vs. Agrl. ITO; 144 ITR 557 (Cal) CIT
vs. N. Ch. R. Row & Co.
The Commissioner of Income-tax authorizes
the Assessing Officer to file appeals as per sub-section (2) to section
253 CBDT has been issuing notifications laying down the monetary limit
with respect to tax effect for preferring an appeal by the Commissioner.
Bombay High Court took notice of such circulars/notifications in the
case of CWT vs. Executors of Late D.T. Udeshi (1991) 189 ITR 319
(Bom.) and again in the case of CIT vs. Camco Colour Co. (2002)
254 ITR 565 (Bom) observed that considering the instructions issued
by CBDT, the Board has taken a policy decision not to file appeal
in this type of case. The same is binding on the Revenue. The Madras
High Court in the case of CWT vs. S. Annamalai (2002) 258 ITR 675
(Mad.) has followed the abovementioned decision of the Bombay
High Court.
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Fees payable
in an appeal
The appeal should be in conformity with the provisions of section
253(6). This section provides that the appeal shall be in the prescribed
form and verified in prescribed manner. It further provides that appropriate
fees should be paid. The appeal fees has to be paid as per the scale
provided under the section and the proof should be furnished along
with the appeal itself. This topic has been dealt with in detail else
where in this issue.
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Grounds of
appeal
The grounds of appeal to be agitated before the Appellate Tribunal
should be in conformity with the Rule 8 of Income Tax (Appellate Tribunal)
Rules, 1963. The grounds of appeal are the various grounds on which
the Appellant challenges the impugned order. The grounds of appeal
should be precise and unambiguous. The grounds of appeal should not
include arguments. It should be limited to grounds of challenge. But
it is very important to bear in the mind that the Grounds of Appeal
should be exhaustive and should include all the issues which the Appellant
wants to agitate before the Appellate Tribunal. Any grounds of Appeal
which is not arising out of the order impugned before the Appellate
Tribunal and is being raised for the first time before the Appellate
Tribunal should be separately mentioned. The provisions pertaining
to the appeal under the Income Tax (Appellate Tribunal) Rules, 1963
are similar to the provisions under section 541 (2) of CPC. This section
provides that the memorandum shall set forth, concisely and under
distinct heads, the grounds of objection to the decree appealed from
without any argument or narrative, and such grounds shall be numbered
consecutively. The grounds of objection must arise from the pleading
and evidence, and are necessary for the decision of the case.
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Additional
grounds of appeal
Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, provides
that the appellant, shall not, except by leave of Tribunal, urge to
be heard in support of ground not set forth in the memorandum of appeal.
However, the Tribunal is competent to allow the appellant to raise
at the time of hearing of the appeal, additional grounds of appeal
even without a formal amendment of the memorandum of appeal (CIT
vs. Nelliappan 66 ITR 722 (SC).
New India Life Ass. Co. Ltd. vs.
CIT 31 ITR 844, 846 (Bom.)
In Ahmedabad Electricity Co. Ltd.
vs. CIT 199 ITR 413 (Bom) (FB), the Court held that Rules 11 and
29 of the Appellate Tribunal Rules indicate that the scope of enquiry
before the Tribunal can be wider than the points which are raised
before the Tribunal. The Tribunal, therefore, would ordinarily have
the power to allow additional points to be raised before it so long
as they arise from the subject matter of the proceedings and not necessarily
only the subject matter raised in the memorandum of appeal.
The Tribunal has jurisdiction to
permit additional grounds to be raised before it, even though they
may not arise from the order impugned before it as long as these grounds
are in respect of the subject matter of the entire tax proceedings.
The Apex Court in the case National Thermal Power Corporation vs.
CIT (1998) 229 ITR 383 (SC) observed that Tribunal is confined
only to issues arising out of the appeal before the CIT(A) takes too
narrow a view of the powers of the Appellate Tribunal. Undoubtedly,
the Tribunal will have the discretion to allow or not to allow a new
ground to be raised. But where the Tribunal is only required to consider
a question of law arising from the facts which are on record in the
assessment proceeding we fail to see why such a question should not
be allowed to be raised when it is necessary to consider that question
in order to correctly assess the tax liability of an assessee.
The Rajasthan High Court in the case
of Shilpa Associates vs. ITO (2003) 181 CTR (Raj.) 92 has held
that the additional grounds of Appeal cannot be rejected on the ground
that the same have been filed beyond the time limit provided u/s.
253(3).
Leave to urge additional grounds
may be sought either in writing or by oral prayer. Rule 11 of the
Appellate Tribunal Rules speaks only of leave and the leave may be
sought for either in writing or by an oral prayer — Amines Plasticizers
Ltd. vs. CIT, 223 ITR 173 (Gauhati).
Grounds of appeal can be amended
by taking leave of the Tribunal orally — Assam Carbon Products
Ltd. vs. CIT 224 ITR 57 (Gauhati).
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Cross objections
If the assessee or the Assessing Officer prefers an appeal to
the Tribunal u/s. 253(1) or (2) as the case may be, and the appeal
is not rejected under rule 12 of the Income Tax (Appellate Tribunal)
Rules, 1963, a notice is to be given by the Appellate Tribunal to
the respondent informing him of the fact of such filing, also enclosing
the memorandum and grounds of appeal. The respondent can file, u/s.
253(4), a memorandum of cross objections in Form No. 36A, within 30
days from the date of receipt of such notice, against any part of
the order of the first appellate authority deciding any issue against
him. These provisions are similar to the provisions of section 561
of the CPC. Under CPC the nature of the right to take a cross objection
in an appeal is recognized as nothing but the exercise of the same
right of appeal which is given to an aggrieved party. Rule 22 of the
Income Tax (Appellate Tribunal) Rules, 1963 provides that a cross
objection shall be registered and numbered as on appeal and all the
rules shall apply to such appeal. In a cross objection the respondent
can raise issues which are independent of the grounds of appeal raised
by the Appellant. The cross objections need not be confined to the
points taken by the opposite party in the main appeal. (CIT vs.
Purbanchal Paribahian Gosthi , (1998) 234 ITR 663 (Gauhati). The
right to file a memorandum of cross objection is an independent right
given to the opposite party in an appeal. The cross-objection of the
respondent cannot be rejected on the ground that it had already filed
an appeal. (CIT vs. New India Assurance Co. Ltd. (1983) 141 ITR
367 (Bom). The respondent is not required to pay any filing fees
and the Tribunal shall dispose of such memorandum of cross objections
as if it were an appeal.
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Rule 27
Rule 27 of the ITAT Rules, 1963, empowers the respondent to defend
the order appealed against on any of the grounds decided against him,
though he may not have appealed or filed a cross objection. Vahivatdars
of Ambaji Temple vs. CIT 58 ITR 675, 684 (Guj.). The Madras High
Court in the case of CIT vs. Smt. S. Vijayalakshmi (2000) 242 ITR
46 (Mad.) has held that the absence of appeal by the assessee
of cross objection would not prevent the Tribunal from admitting new
contention by an assessee when the necessary facts are before the
Tribunal.
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Payment of
Tax mandatory on returned income before filing appeal
Section 249(4) provides that no appeal shall be entertained under
this chapter unless at the time of filing the appeal the assessee
has paid the taxes due on the returned income or where no return is
filed, an amount equal to the amount of advance tax which was payable
by him. Filing of appeal before Tribunal also falls under this chapter,
hence provisions of section 249(4) is applicable. The Chennai Bench
of the Appellate Tribunal in the case of V. Bhaskaran vs. ACIT
(1998) 62 TTJ 698 held that provisions of section 249(4) are mandatory
in nature and do apply and operate for admission of appeals before
Tribunal in accordance with section 253. However, the Indore Bench
of the Appellate Tribunal has dissented from the above in the case
of Pawan Kumar Ladha vs. ACIT (2003) 78 TTJ (Ind.) 983 and
held that the condition of prepayment of tax does not apply to appeals
filed before the Tribunal. Word ‘chapter’ in section 249 (4) (a) does
not cover both chapters; viz., XXA and XXB.
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Duties of
Tribunal
The Appellate Tribunal enjoys special status under Income-tax
jurisprudence. It is a creation of the Act, which is enforced by the
Finance Ministry of the Central Government. But the Appellate Tribunal
is under the administrative supervision of Ministry of Law, Justice
and Company Affairs. The role of the Central Government is also limited
to the appointment of President, Sr. Vice President, Vice President
and the Members. Sub-section (5) to section 255 vests the appellate
Tribunal with the power to regulate its own procedure and the procedure
of the Benches. Thus, the unique status enjoyed by the Appellate Tribunal
makes it a judicial body whose duties and functions are very vital
in the enforcement of the Direct tax laws. In my personal view the
analysis of the duties and functions of the Appellate Tribunal takes
precedence over the power vested with it to perform them.
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Primary
duties
Opportunity of being heard:
One of the primary duties of the Appellate Tribunal is to settle
the lis between the assessee and the Department in terms of the
provisions of section 254 (1). The Appellate Tribunal is duty
bound to dispose of the appeals filed before it after affording
an opportunity of being heard to both the parties. This is a vital
requirement of the sub-section (1) to section 254. This duty assumes
further importance due to the fact that the order passed under
sub-section (1) shall be final subject to the orders of the High
Court in a reference u/s. 256 or appeal u/s. 260A. Therefore,
it is duty of the Appellate Tribunal to provide an opportunity
of being heard which is very vital and the same cannot be whittled
down by the provisions of Rule 24 of the Income Tax (Appellate
Tribunal) Rules, 1963 which provides that on an appointed date
of hearing, the Appellant does not appear in person or through
an authorised representative when the appeal is called on for
hearing, the Tribunal may dispose of the appeal on merits after
hearing the respondents.
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Speaking
order should be passed
The Appellate Tribunal being the final authority as far as
facts are concerned, it is necessary and it is the requisite of
the law that in disposing the appeal it clearly sets out the facts.
(E.A. Venkataramien & Sons vs. CIT 65 ITR 416 (Mad.).The
Bombay High Court in the case of Anusayaben A. Doshi vs. Jt.
CIT (2002) 256 ITR 685 (Bom) emphasized that the conclusion
of the Tribunal should be substantiated with reasons.
The Tribunal in deciding a case
should not be unduly influenced by trivial procedural technicalities.
The memo of appeal should be liberally seen and entertained. No
specific formula is necessary for seeking relief at the hands
of a court or Tribunal, if the necessary grounds have been taken
in the appeal memo. CIT vs. Calcutta Discount Co. Ltd. 91 ITR
811 (SC).
- Powers of the Appellate Tribunal
As discussed earlier, there are many features which make the Appellate
Tribunal a unique judicial forum. The Appellate Tribunal is vested with
all the powers the income tax authorities referred to in section 131
by virtue of section 255 (6). The same section further clarifies that
any proceeding before the Appellate Tribunal shall be deemed to be judicial
proceedings within the meaning of sections 193 and 228 and for the purpose
of section 196 of the Indian Penal Code. The Appellate Tribunal shall
be deemed to be a Civil Court for all the purposes of section 195 and
Chapter XXXV of the Code of Criminal Procedure, 1898.
Thus, Appellate Tribunal is a judicial
body exercising judicial powers under the statute. It is not empowered
to employ its jurisdiction arbitrarily. Whatever it does must be done
in consonance with sound judicial principles and in accordance with
well-accepted doctrines applicable to judicial bodies. The words "pass
such orders thereon as it thinks fit" of section 254(1) were subject
matter of judicial scrutiny by various courts and the Apex Court had
to define and determine the scope of the powers of the Appellate Tribunal.
The powers conferred on the Tribunal to pass "such orders thereon
as it thinks fit" in respect of an appeal before it, must be exercised
within the limits which can be discovered with reference to the jurisdiction
of the authority whose order has given rise to the appeal (CIT
vs. Ram Murti 87 ITR 577 (All).) Hon'ble Andhra Pradesh High Court
in the case of Thakur Hari Prasad vs. CIT 167 ITR 603 (AP) had
observed that the power and jurisdiction of the Tribunal are of wide
amplitude and depending upon the exigencies in a given case it has
the power to make such appropriate orders thereon as justice of the
case demands. The powers of the Tribunal are expressed in the widest
possible terms similar to the power of the Appellate Court under section
96 of the Code of Civil Procedure. The words "as it thinks fit" are
of wide amplitude to give directions to authorities below to afford
an opportunity to the assessee and to the Revenue to adduce evidence
afresh and consider the same and to submit a report. However, the
Mysore High Court opined that the expression "thereon" clearly and
undoubtedly points to the conclusion that the powers of the Appellate
Tribunal are limited to the subject matter of the appeal. [Pathikonda
Balasubba Setty vs. CIT 65 ITR 252 (Mys)]
As per the observations of the Calcutta
High Court in the case of CIT vs. Amaredranath Mukherjee &
Bros. 1973 TLR 119 (Cal) the Appellate Tribunal has wide powers
in respect of subject matter of an appeal before it, it can decide
any question which is material to the subject matter before it even
though it was not specifically raised.
The Bombay High Court in the case
of CWT vs. N.A. Narielwalla 126 ITR 344 (Bom) observed that
before the Appellate Tribunal the point of jurisdiction can be challenged
for the first time and it has got all the powers to entertain the
same.
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Power to
call for documents
Under section 255(6), read with section 131, the Tribunal
has the power to call for documents relevant for deciding the
appeal. In Union of India vs. Shree Shankar Sitaram 95 ITR
523 (All) at the request of assessee the Tribunal directed
the department to produce certain records, which pertained to
the assessment and penalty proceedings and the department’s claim
of privilege under section 124 of the Evidence Act, was negated
by the court.
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Power to remand
There are no provisions u/s. 254 which are coterminous with
the provisions of sub-section (4) to section 250 which gives the
first appellate authority the power to direct the Assessing Officer
to make further inquiry and report the result of it. However,
if the Appellate Tribunal finds in a particular case before it
that substantial justice requires the claim of the assessee to
be raised before the first appellate authority for the first time
should have been investigated by that authority, it is competent
to direct it to hear parties and give a finding on the contention.
The Gujarat High Court in the case of Saurashtra Salt Mfg.
Co. vs. CIT 66 ITR 404 (Guj.) observed that the power to set
aside an assessment and to direct the Assessing Officer to make
a fresh assessment is clearly comprehended in the words "pass
such orders as it thinks fit.: The Madras High Court in the case
of V. Ramaswamy Iyengar vs. CIT 40 ITR 377 (Mad.) observed
that under Rule 28 the power of remand is only incidental to its
power to hear and dispose of the appeal. But the power of remand
cannot exceed the jurisdiction under section 254(1). Hence, Tribunal
cannot exercise the power of remand for the purpose of enhancing
the tax.
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Power to
award cost
With effect from 1-6-1999, sub-section 2B is inserted to section
254, which gives the discretion to the Tribunal to award costs
in suitable cases if the facts so warrant. In ACIT vs. Shanti
Star Builders ITA No. 9601/B/91 dated 30-6-1999, Bench ‘B’, Mumbai,
the Tribunal awarded a cost of Rs. 2,000/- for the inconvenience
caused to the assessee. In that case, the departmental counsel
had sought an adjournment though on earlier occasions, it was
agreed that on the next date, the case would be argued. The assessees’
counsel had come from Calcutta on both the occasions. In another
case, the Appellate Tribunal awarded costs while disposing of
dept. appeal holding the issue involved in the appeal as self-evident
and appeal as frivolous (M/s. Jay Brothers Investment &
Trading vs. DCIT ITA No. 6542/M/97, dated 6th November, 2000
)
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Power for
rectification of mistake apparent on record
The Tribunal’s power to rectify its orders is derived from
the provisions contained in section 254(2) of the Act. The said
section provides that the Tribunal shall rectify any mistake apparent
from the record by amending any order made by it under sub-section
(1) within four years from the date of the order if the mistake
is brought to its notice by the assessee or the Assessing Officer.
The proviso to section 254(2) makes it clear that any amendment
which has the effect of enhancing an assessment or reducing a
refund or increasing the liability of an assessee cannot be made
unless the Tribunal has heard the assessee of its intention to
do so. The Appellate Tribunal Nagpur Bench in the case of Bhilai
Engg. Corpn. Ltd. vs. DCIT 92002) 81 ITD 282 (Nag) has held
that setting of section 254(2) suggests that words ‘at its own’
are implied, and therefore, time limit of four years is in the
context of suo motu rectification and where rectification
is to be done in accordance with the prayer made by either parties,
such time limit is not much relevant.
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Fees
Miscellaneous Applications filed after 1-10-1998 shall
be along with the fees of Rs.50/-.
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Rule
Rule 34A of the Appellate Tribunal Rules 1963 which was
inserted w.e.f. 25th July, 1991 provides for the procedure
for dealing with application under section 254(2). It provides
that an application shall clearly and concisely set out the
mistake apparent from the record of which rectification is
sought. The application must be in triplicate and the procedure
for filing of appeals is to apply mutatis mutandis
to such applications. The Bench which originally heard the
matter must ordinarily hear the application, unless the President,
Senior Vice President, Vice President or the Senior Member
present at the station otherwise directs. The application
must be disposed of after hearing both the parties. The proviso
to sub-rule (3) of Rule 34A provides that it would not be
necessary to post a Miscellaneous Application for hearing
if it prima facie appears to be a petition for review. Sub-rule
(4) provides that an order disposing of an application under
sub-rule (3) shall be in writing with reasons in support of
its decision.
- No power of review
The Appellate Tribunal does not have any power to review its
own order. The statute only permits rectification of mistake apparent
on record.
The power of review is not an
inherent power but must be conferred by law either specifically
or by necessary implication. (Patel Thackersy vs. Profyumansinghji
Arjunsinghji AIR 1970 SC 1273. The Courts have consistently
held that review proceedings imply those proceedings where a party
as of right can apply for consideration of the matter already
decided after a fresh hearing on the merits of the controversy
between the parties and that such a remedy is available only if
provided by the statute. As early as in Trikamlal Maneklal
In Re : (1958) 33 ITR 725 (Bom) the Bombay High Court held
that the Tribunal having once delivered a judgment which has by
operation of law become final is not entitled to review its decision
in a subsequent proceeding.
It is said that an exception
proves the rule and the same is true with respect to this rule
also. One of the exceptions is that a Judicial Tribunal can always
recall and quash its own order when it is shown that it was obtained
by fraud or by palpable mistake or was made in utter ignorance
of the statutory provision. (Mangat Ram Kutiala vs. CIT (1960)
38 ITR 1 (Pun). However, an inherent power to rectify a wrong
committed by itself cannot be construed to be a power of review.
(Shew Paper Exchange vs. ITO (1974) 93 ITR 186 (Cal.). Thus
a Court or Tribunal can be said to have an inherent power and
jurisdiction to rectify a wrong or correct an error committed
by itself. (S.B. Singar & Sons vs. ITAT (1965) 58 ITR 626
(All.)
It is a moot point as to when
the Tribunal can be said to be exercising its inherent power to
correct a mistake or its statutory power to correct a mistake
apparent from the records under section 254(2) and when the exercise
of the power tantamounts to a review of its earlier order.
CERTAIN IMPORTANT CASE LAWS
TO ILLUSTRATE THE POINT
-
Failure to consider material
on record rectifiable In CIT vs. Mithalal Ashokkumar (1986)
158 ITR 755, the Madhya Pradesh High Court laid down the
principle that although the Appellate Tribunal has no power
to review its own order, yet it can certainly correct its
mistakes by rectifying the same in case it is brought to its
notice that the material which was already on record before
deciding the appeal on merits was not considered by it.
-
Non-consideration of relevant
provision of law rectifiable Non-consideration of a provision
of law which would have material bearing on the decision is
a glaring, obvious and self-evident mistake apparent from
the record. Such a mistake would be required to be corrected.
(CIT vs. Quilon Marine Produce Co. (1986) 157 ITR 448);
Modu Finblo vs. 1st WTO (1995) 53 ITD 53 (Pune) (TM) ; ITO
vs. Gilard Electronics (1986) 18 ITD 176 (Jp); ACIT vs. Sornamy
Alkington Ltd. (1994) 49 ITD 207 (Del.) Similarly, non
consideration of a Rule would also be rectifiable CIT vs.
Ballabh Prasad Agarwalla (1997) 90 Taxman 283 (Cal.).
-
Order contrary to pronouncement
constitutes mistake apparent on the record A decision which
is delivered contrary to a pronouncement made in the court
would constitute a mistake rectifiable. The announcement made
in the open court, would constitute an order of the Tribunal.
The order which is written subsequently merely consists of
reasons for coming to the conclusion which it announced in
the court. If the written order is at variance with the pronouncement
made in the case there is a mistake in the order which can
be rectified. CIT vs. G. Sagar Suri and Sons (1990) 185
ITR 484. (Del).
-
Order can be amended in the
light of retrospective amendment It is, of course, well settled
by the decision in M. K. Venkatachal vs. Bombay Dyeing
and Mfg., Co. Ltd. (1958) 34 ITR 143 that an amendment
with retrospective effect would require a rectification consequent
to the retrospective amendment. Also refer CIT vs. Eva
Raha (1980) 121 ITR 293 (Gau); CIT vs. Kelvin Jute
Co. Ltd. (1980) 126 ITR 679 (Cal.).
-
Order can be amended in the
light of a subsequent Supreme Court decision It is well settled
that where no further investigation of facts is called on
the facts found, the principle of law declared by the Supreme
Court be straightaway applied with the consequence of rendering
order mistaken, it would be case of a mistake apparent from
record [Walchandnagar Industries Ltd. vs. V. S. Gaitonde
(1962) 44 ITR] 260 (SC); CBDT Circular No. 68 dated 17/11/1971
– Chaturvedi & Pithisaria – Circular Book Vol. II page
1847.; ITO vs. Shashi Raj Kapoor (1987) 21 ITD 406 (Bom.)
; His Highness Sir Rama Varma vs. ITO 1982) 2 ITD 491
(Coch).
-
Failure to consider alternative
argument rectifiable In CIT vs. ITAT (1988) 172 ITR 158
(MP) the issue which arose before the Tribunal was as
regards the genuineness of certain cash credits and an alternative
argument was raised that in any event only the peak ought
to have been added. The Tribunal rejected the main contention,
but omitted to give its findings on the alternative ground
raised. On a Miscellaneous Application moved, the Tribunal
held that the non-consideration of the alternative ground
as regards the excessiveness of the addition was a mistake
apparent on record. The High Court upheld the order of the
Tribunal. However, the above decision has to be understood
along with the decision of the Bombay High Court wherein,
failure to consider argument advanced was held not an error
apparent on the record [CIT vs. Ramesh Electric and Trading
Co. (1993) 203 ITR 497 (Bom)]. The High Court was concerned
with the question whether the non-consideration of an argument
constitutes a mistake apparent on the record or not. The Bombay
High Court held that such non-consideration would be an error
of judgment but not an error apparent on record. It is submitted
with due respect that an application of such a principle would
be erroneous. The ratio of this decision must be considered
in the light of the facts therein and in view of the observation
of the court that one of the alleged failures was of the Income-tax
Officer and not of the Tribunal. This is also because Bombay
High Court in Khushalchand B. Daga vs. ITO (1972) 85
ITR 48 had endorsed the principle that a Tribunal has an inherent
jurisdiction to rectify a wrong committed by itself when that
wrong causes prejudice for which that party was not responsible.
Unfortunately the High Court’s attention had not been drawn
to Daga’s case in Ramesh Electric.
-
Order rejecting Miscellaneous
Application cannot be rectified In CIT vs. ITAT (1992)
196 ITR 838, the Orissa High Court took the view that
an order rejecting an application for rectification under
section is not an order passed under section 254 (1) and therefore
it cannot rectified under section 254(2). It is submitted,
however, that a Miscellaneous Application would lie if the
mistake which is sought to be corrected is in the original
order made under section 254(1).
-
Order made under misconception
or misapprehension rectifiable In Maharaja Martant Singh
Ju Deo vs. CIT (1988) 171 ITR 586 (MP) Tribunal rectified
its order and substituted its earlier findings. The High Court
held that the earlier findings where the Tribunal under some
misapprehension or misconception. Therefore, when the Tribunal
corrected its earlier order it had rightly exercised power
under section 254(2) and it was not a review of its earlier
order.
-
Order rejecting Miscellaneous
Application cannot be rectified In CIT vs. ITAT (1992)
196 ITR 838, the Orissa High Court took the view that
an order rejecting an application for rectification is not
an order passed under section 254 (1) and therefore it cannot
be rectified under section 254(2). It is submitted, however,
that a Miscellaneous Application would lie if the mistake
which is sought to be corrected is in the original order made
under section 254(1).
-
No power of enhancement
Under section 254(1), the Appellate Tribunal is not competent
to give a finding which is adverse to the assessee and make the
latter’s position worse than before, thus resulting in an enhancement
of assessment, [Puranmal Radhan Kishore & Co. vs. CIT 31
ITR 294 (Bom)]. It is not open to the Tribunal to give a finding
adverse to the assessee which does not arise from any question
raised in the appeal nor it is open to it to raise any ground
which would work adversely to the appellant and pass an order
which makes his position worse than it was under the order appealed
against [J.K. Bankers vs. CIT 94 ITR 107 (A ll)];
so much so that where a set aside of the entire order of assessment
and a remand order has the effect of the probability of resulting
in an enhancement of the assessment under appeal. The Tribunal
is not empowered to do indirectly what it cannot directly do [V.
Rama Swamy Iyengar vs. CIT 40 ITR 377 (Mad); Pathi Kanda Balasubba
Setty vs. CIT 65 ITR 252 (Mys.)].
However, the Appellate Tribunal’s
bench constituted under section 24 of the Wealth Tax Act, 1957
can dispose of the appeal in the manner in which it thinks fit,
the order passed by the Appellate Tribunal can enhance the assessment
or penalty. But any enhancement to the assessment of penalty should
be in conformity with the conditions mentioned in section 24.
Tribunal’s power is limited to
the subject matter of the appeal before it. The powers of the
Tribunal in dealing with appeals are expressed in section 254(1)
in the widest possible terms. The word ‘Therefore of’ restricts
the Jurisdiction of the Tribunal to subject matter of the appeal
[Hukumchand Mills Ltd. vs. CIT 63 ITR 232 (236, 237) (SC)].
The power restricted to the year under appeal, incidental observations
relating to other years, if any, made is not strictly speaking,
a finding. The Tribunal has no jurisdiction to give direction
with regard to the proceedings of the earlier year or to include
deleted amount in other years assessment. ITO vs. Murlidhar
Bhagwan Das 52 ITR 335 (SC).
-
No power
to pronounce upon validity of the Act
In CIT vs. Straw Products Ltd. 60 ITR 156 (163-4) the
Supreme Court held that the Tribunal and the tax authorities being
preservers of this Act, cannot pronounce upon the constitutional
validity or vires of any provision of this Act, therefore such
a question cannot arise out of the order of Tribunal and cannot
be made subject matter of reference to the High Court. Such a
question of validity can be raised only in writ petition.
Venkatraman & Co. Ltd.
vs. State of Madras 60 ITR 112 (SC)
Dhorggdhra Chemical Works Ltd. vs. CIT 101 ITR 491 (Bom).
-
Ex parte
order
Rules 24 and 25 of Appellate Tribunal Rules, 1963, deals with
procedure for hearing ex parte by the Tribunal. Proviso to rule 24
provides that when an appeal has been disposed of ex parte and the
appellant applies afterwards and satisfies the Tribunal that there
was sufficient cause for his non-appearance when the appeal was called
out for hearing, the Tribunal shall make an order setting aside the
ex parte order and restoring the appeal. If a notice is sent to the
assessee by Registered Post, the postal authorities may send back
the notice stating that refused to accept or postal authorities may
deliver to a person who is not authorised to receive. If on receiving
the acknowledgment from postal authorities, ex parte order is passed,
if an assessee files an affidavit and brings to the notice to the
Tribunal that he has not received or he has not been served, the Tribunal
should restore the matter. In Meghji Kanji Patel vs. Kundanmal
Chamanlal AIR 1968 Bom 387, the Hon’ble Bombay High Court held
that where an affidavit is filed the same has to be accepted. This
view of Bombay High Court, is affirmed by the Supreme Court in Puwada
Venkateswara Rao vs. Chindamana Venkata Ramana AIR 1976 SC 869, 871.
In CIT vs. Multiplan India (P)
Ltd. 38 ITD 320, the reference was filed by the department. On
the date of hearing neither the representative of the department was
present nor an adjournment application was moved. The Tribunal passed
the order after 5 days dismissing the appeal of department, treating
the appeal as unadmitted. Against the order, the department filed
reference application to refer the matter to High Court. Hon’ble Tribunal
rejected the reference application on the ground that the department
should have made application for restoration of appeal under rule
24 of the Income tax Appellate Tribunal Rules and observed that revenue
chose to add to the litigation for no justifiable reason, hence no
question of law arise.
However, the Tribunal has not considered
the ratio laid down by Supreme Court in CIT vs. Chenniahha Mudaliar
74 ITR 41 (SC), wherein the Court held that the Tribunal must
decide the case on merit and cannot dismiss it for non-appearance
of appellant, hence judgment in Multiplan India requires reconsideration.
It has been observed that in number
of cases, matters have been dismissed by the Tribunal applying the
ratio of Multiplan India and thereafter when an assessee makes an
application for restoration under rule 24 of the Income-tax Appellate
Tribunal Rules, the same is restored. This results in multiplicity
of litigation. The matters come for hearing before the Tribunal after
6 years of filing, it may be possible that the appellant might have
changed its address, consultant etc. In such case, before passing
the ex parte order, if a notice is sent through Assessing Officer
lot of unintended paper work and time can be saved. When an assessee
pays the Tribunal fees, it cannot be said that he has no interest
in pursuing the matter. It is therefore urged that before applying
the ratio of Multiplan India (P) Ltd, a notice may be sent to the
assessee through Assessing Officer.
Where an ex parte order is passed
against the assessee, great responsibility is cast on the members
of Tribunal. The Members have to act not only as Judges but also as
representative for the party who is not represented. Duty of the Court
is to decide correct interpretation of Law, hence it may not be desirable
to decide the issue which is an important question of Law in an ex
parte order, however it is inevitable, then the Tribunal may request
any member of Bar to help the court as amicus curaie to help the Tribunal.
In such situation help of Bar Association may be sought. If such system
is developed, it may go a long way in building the confidence of institution
in the mind of public. Even ex parte order, should not lead to punishment
to an assessee who may not be in a position to engage a competent
representative.
-
Preparation
of paper book
The provisions regarding filing of paper book before the Income-tax
Appellate Tribunal are contained in Rule 18 of the Income-tax Appellate
Tribunal Rules, 1963.
Rule 18 of the Appellate
Tribunal Rules, 1963:
If the appellant or the respondent, as the case maybe, proposes
to refer or rely upon any document or statements or other papers on
the file of or referred to in the assessment or appellate orders,
he may submit a paper book in duplicate containing such papers duly
indexed and paged at least a day before the date of hearing of the
appeal along with proof of service or a copy of the same on the other
side at least a week before:
Provided, however,
the Bench may in an appropriate case condone the delay and admit the
paper book.
The Tribunal may suo motu
direct the preparation of a paper book in triplicate by and at the
cost of the appellant or the respondent containing copies of such
statements, papers and documents as it may consider necessary for
the proper disposal of the appeal.
The papers referred to in sub-rule(1)
above must always be legibly written or typewritten in double space
or printed. If xerox copy of a document is filed, then the same should
be legible. Each paper should be certified as a true copy by the pary
filing the same, or his authorised representative and indexed in such
a manner as to give the brief description or the relevance of the
document, with page numbers and the authority before whom it was filed.
The additional evidence, if any,
shall not form part of the same paper book. If any party desires to
file additional evidence, then the same shall be filed by way of a
separate paper book containing such particulars as are referred to
in sub-rule (3) accompanied by an application stating the reasons
for filing such additional evidence.
The parties shall not be entitled
to submit any supplementary paper book, except with the leave of the
Bench.
Paper/paper books not conforming
to the above rules are liable to be ignored.
The Hon’ble Tribunal in exceptional
cases accept the paper book even on the day of hearing provided the
other side does not object for the same.
As regards the case laws which are
not reported in the ITR or ITD, it may be desirable to file the copies
of the same as separate paper book which may help the members for
speedy disposal of matters.
-
Procedure of Appellate Tribunal
The sub-section (5) to section 255 provides that subject to the
provisions of the Act, the Appellate Tribunal shall have power to
regulate its own procedure and the procedure of Benches thereof in
all matters arising out of the exercise of its power. The sub-section
(6) further provides that the Appellate Tribunal shall, for the purpose
of discharging its functions, have all the powers which are vested
in the income-tax authorities referred to in section 131, and any
proceeding before the Appellate Tribunal shall be deemed to be a judicial
proceeding within the meaning of sections 193 and 228 and for the
purpose of section 196 of the Indian Penal Code (45 of 1860), and
the Appellate Tribunal shall be deemed to be a civil court for all
the purposes of section 195 and Chapter XXXV of the Code of Criminal
Procedure, 1898 (5 of 1898).
-
Guidance to
authorised representative
Rule 16 of the Income Tax Appellate Tribunal Rules, 1963
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 authorizing
the representative to appear for him and if the representative is
a relative of the assessee, the document shall state what his relationship
is 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 employed.
It is important to note that Rule
17 provides that the letter of authority shall be furnished before
the Bench before the commencement of the hearing.
Persons who are not authorised to
appear u/s. 288 may be permitted to produce books of account should,
however, be given by the assessee himself or by a person who is entitled
to appear on behalf of an assessee u/s. 288 Circular No. 19-D(XL-62)
of 1964, dated 3-7-1964.
A brother-in-law or father-in-law
of an assessee can appear as authorised representative u/s. 288(2)(i).
A person who works part time as an
accountant for any assessee regularly will be one who is ‘regularly
employed’ within the meaning of section 288(2)(i).
An employee, who merely holds a power
of attorney to represent his employer at every stage in the income-tax
or sales tax or any Court case will not be considered as a person
‘regularly employed’ within the meaning of section 288(2)(i).
However, if he is qualified to represent
an assessee otherwise than as an employee
u/s. 288 he may appear on the basis of a power of attorney executed
by the assessees. Letter: F.No. 21/4/63-IT, dated 14-6-1963.
The practice of filing power of attorney/
vakalatnama/general power of attorney in favour of a firm or a legal
body is not correct and the President, Income-tax Appellate Tribunal,
has decided that proper authority in favour of the individual or a
joint authority in favour of two or more individuals, only should
be filed before the Tribunal.
Notification No. F. 161-Ad(AT)/70,
dated 30-12-1971.
-
Dress code
for authorised representative
Rule 17A of the Income-tax Appellate Tribunal Rules prescribes
the dress for the authorised representative of the parties (other
than a relative or regular employee of the assessee) appearing before
the Tribunal. As per this rule, in the case of a male, a suit with
a tie or buttoned up coat over a pant or National Dress; i.e. a long
buttoned up coat or dhoti or churidar pyjama is prescribed. The colour
of the coat shall preferably be black. In the case of a female, black
coat over white or any other sober colour saree. However, if the authorised
representative belongs to a profession like that of lawyers or Chartered
Accountants and they have been prescribed a dress for appearing in
the professional capacity before any Court. Tribunal or other such
Authority, they may at their option appear in that dress in lieu of
the dress mentioned above.
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