Appeal to Income Tax Appellate Tribunal (ITAT): A complete Guide as per I-T Act 1961

Introduction: Appeal to Income Tax Appellate Tribunal

The Income Tax Appellate Tribunal (ITAT) serves as a crucial platform for hearing appeals related to income tax orders issued by tax authorities. It operates under the oversight of the relevant High Court and is considered subordinate to it. When dealing with appeals, Income Tax Appellate Tribunal is obligated to adhere to the legal precedent established by the jurisdictional High Court as well as the Supreme Court of India.

The first level of appeal is with the Commissioner of Income Tax (Appeals), followed by the Income Tax Appellate Tribunal (ITAT) as the second appellate authority. Should either the taxpayer or the Assessing Officer feel dissatisfied with the Commissioner of Income Tax (Appeals)’s decision, they have the right to file an appeal with the Income Tax Appellate Tribunal.

In this article, we will delve into various provisions within the Income Tax domain pertaining to the second appeal process, specifically focusing on appeals made to the ITAT.

Orders Appealable by Taxpayers

A taxpayer can file an appeal to the Income Tax Appellate Tribunal (ITAT) in respect of following orders:

• Rectification order passed by the Commissioner of Income-Tax (Appeals) under section 154;
• Order passed by the Commissioner of Income-Tax (Appeals) under section 250, 270A, 271, 271A, 271AAB, 271AAC, 271AAD, 271J or 272A;
• Order passed by a Joint Commissioner (Appeals) under section 154, 250, 270A, 271, 271A, 271AAC, 271AAD or 271J;
• Order passed by a Principal Commissioner of Income-Tax or Commissioner of Income-Tax under section 12AA or 12AB (it relates to registration application made by a charitable or religious trust);
• Order passed by a Principal Commissioner of Income-Tax or Commissioner of Income-Tax under section 80G(5)(vi) (relates to approval of a charitable trust for donations made to it which would be eligible for deductions in the hands of the donor);
• Order passed by a Principal Commissioner of Income-Tax or Commissioner of Income-Tax under section 263 (relates to revision of the order of Assessing Officer which is considered as prejudicial to the interest of revenue);
• Order passed by a Principal Commissioner of Income-Tax or Commissioner of Income-Tax under section 154 for rectification of order;
• Order of penalty passed by a Principal Commissioner of Income-Tax or Commissioner of Income-Tax under section 270A, 271 or 272A;
• Order passed by a Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Director or Director of Income-tax under section 263 (relates to revision of the order of Assessing Officer which is considered as prejudicial to the interest of revenue);
• Order passed by a Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Director or Director of Income-tax under section 154 for rectification of order;
• Order of penalty passed by a Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Director or Director of Income-tax under section 272A;
• Order passed by the Assessing Officer under section 115VZC(1) (i.e., order of excluding the taxpayer from tonnage tax scheme);
• Order passed by the Assessing Officer under section 143(3), 147, 153A or 153C in pursuance of the direction of Dispute Resolution Panel or a rectification order passed under section 154 in respect of such order;
• Order passed by the Assessing Officer under section 143(3), 147, 153A or 153C with the approval of the Principal Commissioner of Income-Tax or Commissioner of Income-Tax as referred to in section 144BA(12) (i.e., assessment after invocation of General Anti-avoidance Rules), or under section 154 or 155 in respect of such order (applicable from 01-04-2016);
• Order passed by the Commissioner of Income-tax (Exemption) under section 10(23C)(vi) or 10(23C)(via) [relates to filing of application by educational institute or hospital (other than those which are wholly or substantially financed by the Government or whose aggregate annual receipt do not exceed Rs. 1 Cr.) for the purpose of grant of exemption under section 10(23C)(vi) or 10(23C)(via), respectively.]
• Order passed by the Commissioner of Income-tax (Exemption) under section 10(23C)(iv) (relates to approval of a charitable institution or fund for exemption under section 10(23C)(iv) having regard to its objects and its importance throughout India or throughout any State or States);
• Order passed by the Commissioner of Income-tax (Exemption) under section 10(23C)(v) [relates to granting exemption under section 10(23C)(v) to any trust (including any other legal obligation) or institution formed wholly for public religious purposes or wholly for public religious and charitable purposes].

Orders Appealable by the Assessing Officer

In situations where the Principal Commissioner of Income-Tax or Commissioner of Income-Tax disagrees with a decision made by the Joint Commissioner of Income-tax (Appeals) or the Commissioner of Income-Tax (Appeals) under section 154 or section 250, they have the authority to instruct the Assessing Officer to file an appeal with the Income Tax Appellate Tribunal (ITAT) challenging these orders.

This specific type of appeal, known as a departmental appeal, refers to when the Income-Tax department takes the matter to the Income Tax Appellate Tribunal (ITAT)against the decision of the Joint Commissioner of Income-tax (Appeals) or the Commissioner of Income-Tax (Appeals). It’s important to note that a departmental appeal can be pursued only if the tax effect involved in the appeal exceeds Rs. 50,00,000. This threshold ensures that departmental appeals are pursued in cases where a significant tax impact is at stake.

But any adverse judgment relating to the following issues should be contested by department on merits, notwithstanding that the tax effect entailed is less than the monetary limits specified above.

1. a) Where the Constitutional validity of the provisions of an Act or Rule is under challenge,
2. b) Where Board’s order, Notification, Instruction or Circular has been held to be illegal or ultravires,
3. c) Where Revenue Audit’s objection in the case has been accepted by the Department.
4. d) Writ matters
5. e) Matters pertaining to other direct taxes, i.e., other than Income-Tax
6. f) Where the tax effect is not quantifiable or not involved, such as case of registration of trust or institution under section 12A.
7. g) Where the addition relates to undisclosed foreign assets/bank accounts.

Time- limit of filing appeal to Income Tax Appellate Tribunal

When looking to file an appeal with the Income Tax Appellate Tribunal (ITAT), it’s crucial to adhere to the time limits set for this process. The appeal must be submitted within a span of 60 days from the date when the order, which is being appealed against, is communicated either to the taxpayer or to the concerned Principal Commissioner of Income-Tax or Commissioner of Income-Tax.

However, it’s worth noting that the ITAT has the flexibility to accept an appeal even if it’s filed after the 60-day period. This can happen if there’s a valid and sufficient reason for the delay in presenting the appeal within the stipulated time frame.

Form Used for Appeal to ITAT and Signing Authority

The appeal to Income Tax Appellate Tribunal shall be filed in Form No. 36 and it should be signed by the following persons.

1. In case of appeal by the individual taxpayer, by the individual taxpayer himself or by a person duly authorized by him who is holding a valid power of attorney
2. In case of a Hindu Undivided Family, by the Karta of the family or if Karta is absent from India or is not capable for signing, by any other adult member of such family.
3. In case of a company, by the Managing Director or if Managing Director is not available or where there is no Managing Director by any director of the company.
4. In case of a firm, by the Managing Partner or if Managing Partner is not available or where there is no Managing Partner by any partner (not being a minor)
5. In case of a LLP, by the Designated Partner or if Designated Partner is not available or where there is no Designated Partner by any partner.
6. In case of a Local Authority, by the Principal Officer thereof
7. In case of a Political Party, by the Chief Executive Officer of such party
8. In case of any other Association, by the Principal Officer thereof or by any member of the Association.
9. In case of any other Person, by that Person or by some person competent to act on his behalf.

Memorandum of Cross Objection by Opposite Party

When a taxpayer or the Assessing Officer files an appeal with the Income Tax Appellate Tribunal (ITAT), the opposing party is notified about the appeal. Subsequently, the opposing party is required to submit a Memorandum of Cross Objection using Form No. 36A within a 30-day period upon receiving the appeal notice. Notably, there is no fee associated with filing this memorandum.

However, if there are valid reasons for not meeting the initial 30-day deadline, the Income Tax Appellate Tribunal (ITAT) has the authority to accept the Memorandum of Cross Objection even after this period. The individual authorized to sign and verify Form 36 (the appeal form) must also sign the Memorandum of Cross Objection. The Income Tax Appellate Tribunal (ITAT) will then handle and resolve the memorandum of cross objections in a manner similar to an appeal.

Documents to be Submitted with the Appeal

• Form No. 36 – in triplicate.
• Order appealed against – 2 copies (including one certified copy).
• Order of Assessing Officer – 2 copies
• Grounds of appeal before first appellate authority [i.e., Commissioner of Income Tax (Appeals)] – 2 copies.
• Statement of facts filed before first appellate authority [i.e., Commissioner of Income-Tax (Appeals)] – 2 copies.
• In case of appeal against penalty order – 2 copies of relevant assessment order.
• In case of appeal against order under section 143(3), read with section 144A – 2 copies of the directions of the Joint Commissioner under section 144A.
• In case of appeal against order under section 143, read with section 147 – 2 copies of original assessment order, if any.
• Copy of challan for payment of fee.

Fees for filing the appeal to Income Tax Appellate Tribunal

(A) When assessed income is:

(i) Up to Rs. 1,00,000                                                           Rs. 500

(ii) More than Rs. 1,00,000, but up to Rs. 2,00,000             Rs. 1,500

(iii) More than Rs. 2,00,000                                                 1% of assessed income (Max 10000)

(B) In other Cases:

(i) Where application is under section 254(2)                                                                    Rs. 50

(ii) Where subject-matter of appeal relates to any other matter                                       Rs. 500

(iii) Where application is for stay of demand                                                                     Rs. 500

(iv) Where Appeal is filed u/s 253(2) or Memorandum of Cross objection u/s 253(4)       NIL

Submission of paper book with Appeal

When proceeding with an appeal, whether as the appellant or the respondent, it’s essential to compile and submit a paper book. This document, provided in duplicate, is a collection of relevant materials such as documents, statements, or papers referred to in the assessment or appellate order that the appellant or respondent intends to rely upon. To ensure clarity and accessibility, the paper book should be properly indexed, paginated, and certified as true copies of the original documents.

A crucial step in the process is to file the paper book at least a day before the scheduled appeal hearing, accompanied by proof of service to the opposite party a week prior. In case of delays in submission, the Income Tax Appellate Tribunal (ITAT) may consider genuine cases and condone the delay.

If necessary, the Income Tax Appellate Tribunal (ITAT) holds the authority to direct the preparation of a triplicate paper book, at the cost of the appellant or respondent, to aid in the effective disposal of the appeal. It’s important to note that any additional evidence should be filed separately and not included within the paper book.

Process of Hearing of the appeal by the ITAT

Understanding the process of an appeal hearing with the Income Tax Appellate Tribunal (ITAT) is important. Once the Income Tax Appellate Tribunal schedules the hearing date and location, both parties are duly informed. The appellant’s memorandum of appeal is shared with the respondent either before or simultaneously with the hearing notice.

On the designated date, the ITAT conducts the appeal hearing. If needed, the hearing can be adjourned to subsequent dates for a comprehensive discussion. In cases where the appellant, though summoned by the ITAT, fails to attend the hearing in person or through an authorized representative, the ITAT has the authority to proceed and make a decision after hearing the respondent.

In the event of an ex-parte hearing, if the appellant later presents a valid case for their initial non-appearance, the ITAT may reconsider and reinstate the appeal, setting aside the ex-parte order. This process also applies when the appeal is disposed of without the presence of the respondent.

Restriction on Filing of Additional Evidence

When presenting a case to the Income Tax Appellate Tribunal (ITAT), it’s important to note that introducing new evidence, whether in the form of oral statements or documents, is generally restricted. However, if the ITAT deems it necessary for a document, witness testimony, or affidavit to be provided in order to make informed decisions, they have the discretion to permit the submission of such evidence.

In essence, the ITAT prioritizes a thorough evaluation of the existing evidence and arguments presented during the appeal process. If, in specific instances, they require additional evidence to better comprehend the case, they may authorize its submission.

Process of Judgement & Order by the ITAT

In the process of appealing to the Income Tax Appellate Tribunal (ITAT), a panel of members carefully reviews the case. After thorough consideration, the ITAT issues its judgment and promptly communicates it to both the taxpayer and the Assessing Officer. Typically, a Bench consists of one judicial member and one accountant member, and appeals with a total computed income below Rs. 50 lakhs can be handled by a single member Bench.

When the Bench encounters differing opinions among its members, a majority decision is reached. If an equal division occurs, the case is referred to the ITAT President for further consideration by other members. The ultimate decision is then based on the majority opinion of the Income Tax Appellate Tribunal (ITAT) members who have been involved in the case.

Ordinarily, judgments are pronounced in Court, but in exceptional cases, the Income Tax Appellate Tribunal (ITAT) posts a list of signed orders and their appeal outcomes on the bench’s notice board. Ideally, the ITAT aims to resolve appeals within four years from the end of the financial year in which the appeal was filed.

Scope for E-filing an appeal to ITAT

The Appeals, Memorandum of Cross Objections, Stay Applications and Miscellaneous Applications, which, in terms of Income Tax (Appellate Tribunal) Rules, 1963, are hitherto being presented before the Benches of Income Tax Appellate Tribunal (ITAT) in physical mode (Paper form) only, henceforth may also be presented in electronic format using the newly developed e-Filing Portal of the ITAT (https://itat.gov.in/efiling/register).

The facility of e-Filing is not mandatory but optional and will not substitute the existing practice of presenting Appeals, Cross Objections, Stay Applications and Miscellaneous Applications in paper form. Any person who is entitled to file an appeal before the Income Tax Appellate Tribunal under section 253 of Income Tax Act, 1961 or any other enactment, may file the same electronically through the said e-Filing Portal.

Until it is notified otherwise by Hon’ble President of the Income Tax Appellate Tribunal, the presentation of Appeals, Cross Objections, Stay Applications and Miscellaneous Applications in physical / paper form in terms of Income Tax (Appellate Tribunal) Rules, 1963 and other respective enactments continue to remain mandatory even after e-Filing. Therefore, the date of presentation of Appeals, etc., physically in terms of Rule 6 & 7 of the Income Tax (Appellate Tribunal) Rules, 1963 or the respective enactments shall continue to be reckoned as the date of presentation for all intents and purposes.

After e-Filing of an Appeal, Cross Objection, Stay Application or Miscellaneous Application, the acknowledgement of e-Filing and Memorandum of Appeal or Memorandum of Cross Objection or Stay Application or Miscellaneous Application, as the case may be, along with all the prescribed enclosures shall be presented before the Tribunal in the manner and time prescribed in the said rules or other enactments, as the case may be.

All the documents which require the signature of the parties shall be physically signed before scanning and uploading in the e-Filing Portal. All prayers, petitions, Grounds, affidavits, etc. which are to be filed electronically shall be typed in Arial font, font size 12 on one side of A4 size paper with double spacing, justified horizontally.

Link to e-file the Appeal to ITAT

Link to access the relevant provisions on Appeal to ITAT under I-T Act

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