A guide to drafting of Appeals and jurisprudence related to appearance and representations before Income tax Appellate authority. By CA Pankaj Shah

1. Practical Approach to Income-tax
Appeals before CIT(A)
By CA. Pankaj G. Shah
F.C.A., C.S., L.L.B.(Hons.), DISA(ICA), B.B.A., PhD Scholar

2. Scope in CIT(A)
Year 2018 Year 2017
Judicious approach
Success ratio is increasing
Tax effect limits

3. Meaning of Appeal
Article 265 of the Constitution of India, provides as under :
“Taxes not to be imposed save by authority of law – No tax
shall be levied or collected except by authority of law”.
Right of Appeal is creature of Statute and not fundamental
right
It has been held by High Courts that even a third party has a
right of appeal if, as a result of an order he is saddled with a
liability for any tax or other sum
• Kikabhai Abdulali Vs. ITAT Bombay 32 ITR 762 (Bom);
• CIT vs.Ambala Flour Mills. (1970) 78 ITR 256 (SC)..

4. Appeal Procedures

5. Law and Procedure of Appeals
• Identify fit case for appeal/ revision etc.Step 1
• Identify appellable ordersStep 2
• File appealStep 3
• Hearing of AppealStep 4
• Remand and other proceedingsStep 5
• Appeal OrderStep 6
• Further ActionStep 7

6. Eagle’s eye
Read the order thrice
• Gather background
• Look what you want
Look for errors of
• fact
• law
• procedures

7. Issues in Assessments
Penny stocks
Reopening based on cash deposits
Opening and closing cash balance differences
Verify source of Investment in property
Ex-party orders – deceased,non appearance
Section 56(2)(vii) difference
Revised returns in pre Demonetization year
Transaction in securities – F&O, commodities etc
NMS information – No return in case of 194IA cases (900)

8. Time limits to file an appeal
Forum Time limit from date
of receipt of order
CIT(A) 30 days

9. Delay in filing appeal
Application for condonation with Notarized Affidavit
Courts should have pragmatic & liberal approach in
admitting the appeal beyond the period of limitation
• Mrs. Katiji & Others 167 ITR 471 (SC)
Reasonable cause for delay
• SujataVerma (Indore Bench) – 12 years condoned

10. Appeal filing Fees
Forum Assessed
income Upto
Fees
CIT(A) 1 Lakh 250
2 Lakh 500
More than 2 Lakh 1000

11. Appealable order
Section 246A and 253 for CIT(A) and
ITAT
Order giving effect is also appealable
order
• (2006) 282 ITR 595 (Guj.)
Intimation of 234E fees is appealable
order MPHC

12. Section 271FA
Orders passed by Director of Income tax
Appealable order before CIT(A) not ITAT
Conflict
• Raibarreilly Dist. Cooperative Bank Ltd. 54
taxmann.com 382 (Luck.) – not free from doubt.
• SRO, Meppayur-Kozhikode 37 taxmann.com 36
(Cochin)

13. Revision or Appeal
After revision u/s. 264
Appeal not maintainable before CIT(A)
• Orissa Rural Hsg Development Corporation Ltd (2012) 343
ITR 316 (Orissa)
However order giving effect to Revision order is
appealable
• Jasbir Singh v/s. ITO (2012) 76 DTR 36 (Asr).Trib.

14. Appeal against 264 order
S. 264: ITAT entertains
appeal against order
passed by CIT u/s 264
•Gausia Cold Storage Pvt.
Ltd vs.ACIT (ITAT Mumbai)

15. Brief before CIT(A)
Form 35 in duplicate
Grounds of Appeals
Statement of Facts
Notice of demand
Assessment order
Letter of Authority
Appeal filing fees Challan

20. Drafting of Grounds and SOF
 Challenge the cause
 On the facts and circumstances of the case and in law the AO
erred in making disallowance of …..
 The Appellant humbly prays that the said disallowance be
deleted
 Wide but Conscise
 Not argumentative
 Avoid case laws in Grounds
 Cover legal grounds as well like challenge jurisdiction or
validity of Assessment
 Sunita Finlease

21. Agreed Assessment
"Every Assessee aggrieved" by any of the orders mentioned in
Section 246 of the I.T.Act, 1961 has a right to prefer an appeal.
Where an assessee has made a statement on facts, there can
be no grievance if he is taxed on the basis of that statement.
Rameshchandra & Co. v. CIT 168 ITR 375 (380) (Bom)
AO that the Assessee agreed for addition, appeal cant be filed
unless the observation is challenged on Affidavit - Western
India Automobiles v. CIT 112 ITR 1048 (Bom)

22. Payment of taxes before appeal
Section 249(4) – CIT(A)
Taxes due on the returned income or advance tax
payable if no return
The tax due does not include interest element.
• CIT vs. Manoj Kumar Beriwal (2009) 316 ITR 218 (Bom)
S.249(4) Not applicable if appeal directly before ITAT –
325 ITR 325 (SC)

23. Once taxes are paid appeal can be heard on
merits
Subbiah Nadur & Sons84 ITD 55 (Chennai)
Purshottam Budhwani ITA No. 354/M/2009
Anant R.Thakore 5 SOT 298 (Mum)
Bhumiraj Constructions131 ITD 406 (Mum.)

24. Maintainability
Section 249(4)(b)
• When no return filed
• ‘Advance tax payable’ to paid
• Discretion of CIT(A) to admit

25. Defect in appeal
Defect in Appeal can be rectified by an
amendment Eg. SOF not filed
Opportunity must to rectify
• Malani Trading Co. vs. CIT (2001) 252 ITR 670
(Bom)
• BDA Ltd. vs. ITO (TDS) 281 ITR 99 (Bom
• CIT vs. Calcutta Discount 91 ITR 8 (SC)

26. Signing of Appeal
Rule 45 of the Income
Tax Rules
Person authorised to
sign the return u/s 140

27. Written Submissions
Background
Ground wise
• Facts in Brief
• Treatment by AO
• Appellant’s Submissions – factual and legal
• Prayer

28. Drafting tips
Salutations
• May it pleaseYour Honours
• Respected Sir
• Hon’ble Sir
Starting
• At the outset
• This is in response to captioned appeal
• This is in regard to
• With regards to the issue
• We submit as follows:
• We state as follows

29. Drafting
Special
• Without prejudice to above
• Be that as it may
• Needless to mention
• It may be appreciated that
• Whilst on the issue
• It is pertinent to note
Jurisprudence
• Reliance is placed on
• The Appellant relies on
• Your kind attention is invited to

30. Drafting
End note and prayers
• The Appellant prays that the said addition/disallowance be
deleted.
• In view of foregoing it is humbly submitted.
• For this act of kindness we shall always remain grateful to
you.
• We hope this fully explains the issue, however we shall be
happy to elucidate further, if need be.
• Further, we request you to grant us a personal hearing to
enable to us to elaborate on the above matter.
• Hoping to be excused for the inconvenience caused.

31. Paperbook
Filing
• In ITAT a week before the Date of hearing (Rule 18)
• In CIT(A) Preferable to file in Advance
It should mention which documents were
there before Lower authorities
Documents should be certified by Assessee

32. Stay of demand
Demand
(Section 156)
220(4) Assessee
in default after
30 days
Penalty u/s
221(1) – amount
in arrears
220(6) Appeal
filed
Administrative
Discretion
Power to stay
with CIT(A)

33.  Assessee can apply for stay of demand to
 AO; or
 CIT(A)
 CBDT Instruction dt. 29.02.2016
 Pay 20% of demand
 Less or higher can be demanded.
 Higher can be demanded only in “exceptional
circumstances”

34. Stay Proceedings
CIT(A) has power to Stay Recovery Proceedings.
• CIDCM v.ACIT (2012) 343 ITR 102 (Bom.),
• Balaji Universal Tradelink (2012) 76 DTR 132 (Bom.).
• Haresh Ravji Majithiya 227 Taxman 211(Mag)BOM.
• Nikhil Kelkar v/s. ITO (2014) 225 Taxman 196 Bom
ITAT
• Separate Petition
• Irrepairable Loss
• Balance of convenience
• Hardship

35. Powers of CIT(A)
Power to confirm, reduce, enhance or annual the assessment.
However Notice for enhancement is must
Coterminous powers as of AO
• [CITVs. Kanpur Coal Syndicate 53 ITR 225(SC)]
Not open to assess new source of income
• Rai Bahadur Hardutroy Chamaria - 66 ITR 443(SC)
Contrary view
• CITVs. Nirbheram Daluram [224 ITR 610]
Indore Bench – Rajendra Prasad Gupta (263)
CIT Appeal in second round
• RitzTheatre v/s. ITO 194Taxman 544 Del.
Cannot set aside the case

36. Additional Evidences before CIT(A)
Rule 46A
Opportunity to A.O. to examine document and evidence as per Natural Justice
• CIT vs. Shree Kangra Steel Pvt.Ltd.320 ITR 691 (HP)
CIT(A) not justified in rejecting additional evidence produced before him
• Smt.Prabhavati S. Shah v. CIT 231 ITR 1 (Bom);
• Dwarika Prasad v. ITO 63 ITD 1 (Patna)(TM).
• Manish BuildWell Pvt Ltd. 204Taxman 106 (Delhi)HC
Additional Evidences called by CIT(A) no need to remand
• Dy. CIT vs.Thoresen Chartery Singapore (2009) 118 ITD 416 (Mum)
• CIT vs. K. Ravindranathan Nair (2004) 265 ITR 217 (Ker.)
• Jai Hind Co operative Sugar Mills Ltd (2011) 335 ITR 43 (P&H)

37. Fresh plea/claim in appeal
AO cannot accept a new claim
otherwise than revised return
However Appellate authorities can
• Pruthvi Brokers & Shareholders 252 CTR
151(Bom.).
• Chicago Pneumatics (ITAT Mum)

38. Additional Grounds
CIT(A) to allow additional grounds if omission not willful or unreasonable
• Jute Corp. of India Ltd. vs. CIT 187 ITR 688 (SC) (FB)
• Heinrichde Frics GMBH vs. Jt. CIT 281 ITR 18 (Mum)(AT)
Jurisdiction Issue can be raised at any stage
• Inventors Industrial Corporation Ltd.194 ITR 548 (Bom).
• Union of India v. Rai Singh Dal Singh 88 ITR 200 (SC)
Invalid jurisdiction cannot be corrected by Sec. 292B
• Saraf Gramodyog Sanshtan 108 ITD 115 (Agr.)
ITAT can admit new ground – oral or written
• NationalThermal Power Co. Ltd. vs. CIT 229 ITR 383 (SC),

39. Effect of non filing of Quantum appeal on
Penalty
Sir Shadilal Sugar Mills (168 ITR 7051)
• holding that there may be a hundred and one
reasons for no protesting and agreeing to an
addition but that does not follow to the
conclusion that the amount agreed to be added
was concealed income
Manjunatha Cotton & Ginning Factory
[TS-936-HC-2012(KAR)]

40. Monetary Limits for Department Appeal
Limits
• 20 Lakhs for ITAT
• 50 Lakhs for HC
Tax effect does not include interest
Retrospective effect

41. (Curtail) of Power of CIT(A)
CBDT Letter dt 08.03.2018:
• Many technical and legal lapses have also been noticed during vigilance
inspections of CIT (Appeals). For instance ..................... In some other cases,
the additions were deleted in a summary manner solely on the ground that
opportunity of cross examination was not given to the assessee.The CIT
(Appeals) could have given the opportunity of cross examination to the
assessee rather than summarily deleting the additions in such cases since it
has been held by Hon'ble Apex Court in a number of cases that the scope of
power of CIT (Appeals) is coterminous with that of the Assessing Officer.
• In view of discussion in the preceding paragraphs, it is once again reiterated
that the CIT (Appeals) should abide by the instructions of CBDT regarding
timely issue and dispatch of appellate orders in letter and spirit. It is also
important to note that the Apex Court has held that CIT (Appeals) has
plenary powers in disposing of an appeal.These powers must be used by CIT
(Appeals) judiciously while passing appellate orders.

42. You must know
Cardinal principles

43. Other important statutes
General Clauses Act
Indian Evidence Act
Contract Act
Sale of goods Act
Insolvency and Bankruptcy Code
Civil Procedure Code

44. Common terms
Quantum
Exparte
Per incurium
Peak credit
Covered case
Cash credit
Telescoping

45. You must know
BajajTempo’s case (196 ITR 188)(SC)
• a provision in the taxing statute for promoting growth
and development is to be construed liberally and hence,
even the restriction contained in such a provision has
to be construed so as to advance the objective of the
provision and not to frustrate it.
Vegetable Products 88 ITR 192 (SC)
• If two reasonable constructions of a taxing provision
are possible, that construction which favours the
assessee must be adopted.

46. You must know
CIT v.Travancore Sugars & Chemicals Ltd. [1973] 88 ITR 1 (SC).
• It is well-settled principle of law that in order to interpret
an agreement one has to consider the substance of the
agreement rather than its form.The agreement should be
read as a whole and not in piecemeals.
GestetnerV. CIT (117 ITR 1,13)(SC).
• Circulars are not benevolent, the same are not binding on
the assessee. See GestetnerV. CIT (117 ITR 1,13)(SC).

47. You must know
AgrawalWarehousing and Leasing Ltd. vs. CIT (2002)
257 ITR 235 (MP)
• orders passed by theTribunal are binding on all tax authorities
functioning under the jurisdiction ofTribunal.
Radhasoami Satsang -Vs- CIT (1992) 193 ITR 321 (SC)
• "We are aware of the fact that, strictly speaking, res judicata does not
apply to income-tax proceedings.Again, each assessment year being a unit,
what is decided in one year may not apply in the following year but where
a fundamental aspect permeating through the different assessment years
has been found as a fact one way or the other and parties have allowed
that position to be sustained by not challenging the order, it would not be at
all appropriate to allow the position to be changed in a subsequent year. "

48. You must know
LIC vs. CIT (219 ITR 410) (SC)
• Assessee cannot be compelled to do something which
is impossible for him or is beyond his control.
NagappaVs. CIT [1969] (73 ITR 626, 633) (SC);
• Firmly settled principles that eschews double taxation
CIT v. ShoorjiVallabhadas and Co. (46 ITR 144)(SC);
• it is only the “real” income, which can be subjected to tax
• income-tax in a levy on “income” and not notional income.

49. You must know
Kishinchand Chellaram vs. CIT 125 ITR 173 (SC)
• Unless confronted third party material gathered at the back
of Assessee cannot be used to draw adverse inference
CIT vs. Sunita Dhadda (Supreme Court)
• AO has to provide the evidence to the assessee & grant
opportunity of cross-examination. Secondary evidences
cannot be relied on as if neither the person who prepared
the documents nor the witnesses are produced.The
violation of natural justice renders the assessment void.The
Dept cannot be given a second chance

50. You must know
CIT vs. Excel Industries Ltd
• the dispute was only as to the year of taxability and as the rate of tax
remained the same the dispute raised by the Revenue is entirely academic or
at best may have a minor tax effect.There was, therefore, no need for the
Revenue to continue with this litigation when it was quite clear that not only
was it fruitless (on merits) but also that it may not have added anything much
to the public coffers. It is hoped that the Revenue implements its litigation
policy a little more practically and a little more seriously
Nagri Mills 33 ITR 681 (Bom)
• when the tax rates are same in both years, the department should not fritter
away its energies in raising questions as to the year of deductibility/taxability.
E.D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR 27 (SC)
• income can be said to have accrued or arisen only when a right to
receive the amount in question is vested in the taxpayer.

51. You must know
Dhakeshwari Cotton Mills Ltd.V. CIT (26 ITR 775)
• Income tax Officer is not entitled to make a pure guess and make an
assessment without reference to any evidence or any material at all.
There must be more than bare suspicion to support the assessment.
S.A. Builders v. CIT (288 ITR 1)(SC)
• the Revenue cannot justifiably claim to put itself in the arm-chair of the
businessman or in the position of the board of directors and assume the
role to decide how much is reasonable expenditure having regard to the
circumstances of the case. No businessman can be compelled to
maximize its profit.The income tax authorities must put themselves in
the shoes of the assessee and see how a prudent businessman would act.
The authorities must not look at the matter from their own view point
but that of a prudent businessman.

52. You must know
Tutikorin Alkali Chemicals and
FertilizersV. CIT (227 ITR
172)(SC)
•Treatment in accounts is not
determinative of deductibility
or otherwise under the Act.

53. Precedents
Jurisdictional High Court and SC Binding
Divergent views of non Jurisdictional HC then view favourable to
Assessee – 88 ITR 192
Non jurisdictional HC to be followed if no other HC against
Decision of ITAT is binding on lower authorities
• Agrawal Warehousing 2003 22 SITC 114 (MP)
Order of coordinate bench to be followed unless per incurium

54. Some important caution
Marshall the facts, law will follow
Decorum in court
Read the judge’s mind
Do not interrupt
Be patient and Smile always
Well begin is half done
Be updated continously
Distinguish the decision relied by DR
Know when to stop.
File written synopsis

55. Fairness
Better to lose a case
rather than
Loosing the Bench

56. Health Tip

57. CA. Pankaj G. Shah
G.J. Shah & Company
Chartered Accountants
Mob + 91 969 189 3040
pankajgshah@gmail.com