Appeals and Revision Under Income Tax Act. [Sec. 246 to 264]

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Appeals refers to an act of referring the Case/ Matter/ Situation to a Higher Authority against the Assessment Order/ any other Order Passed by a Lower Authority in respect of that Case or Matter. It implies a complaint to a higher authority against the order or judgement (alleged to be erroneous) of an administrative authority or appellate authority. The complex nature of Income Tax Act and the various rules often, create a situation where there is difference of opinion among the assessee and the assessing officer (i.e., Income tax department). Quite often, an assessee is not satisfied by an assessment order/any other order issued by any income tax authority and such an aggrieved assessee can present his case before specified authorities prescribed under Income Tax Act. Such prescribed authorities constitute ‘appellate machinery’ or ‘appellate authorities’.

Appeals under Income Tax Act
Appeals under Income Tax Act

Table of Contents

1. ‘Right to Appeal’ is a Statutory Right Under Income Tax Act.

The right to appeal is not the natural or inherent right of the assessee. It is available to him only if specifically granted under Income Tax Act. Thus, it is a statutory, right of the assessee and cannot be denied to him by any order of Central Board of Direct Tax (CBDT). It can be snatched from the assessee only by an express provision provided under Income Tax Act.

A. Parties to an Appeal

There are following two parties to\any appeal:

  1. Appellant. The person filing an appeal is called ‘appellant’ or ‘applicant’. Under Income Tax, the first appeal can only be filed by assessee and—hence only assessee can be appellant in such a case. However, in subsequent appeals (i.e., appeal to ITAT, HC or SC) appellant can be assessee or C.I.T.
  2. Defendant / Respondent. The person against whom the appeal is filed is called ‘defendant’ or ‘respondent’.

B. Various Appellate Authorities under Income Tax Act

  1. Commissioner (Appeals).
  2. Income Tax Appellate Tribunal (ITAT).
  3. High Court / NTT.
  4. Supreme Court.
Various Appellate Authorities
Various Appellate Authorities

2. Appeal to the Commissioner (Appeals) [Section 246 (2)]

Any assessee aggrieved by any of the following orders (which are made before or after the appointed day) may appeal to the Commissioner (Appeals) against such order

Appealable Order Before Commissioner (Appeals) [Section 246A]

  1. Against an
    1. An order passed by a Joint Commissioner u/s 115VP (3)(ii) or an order making the assessee liable to tax but where he denies his liability,
    2. An intimation u/s 143(1) or 143(1B) objecting to the adjustments made,
    3. An order of assessment made u/s 143(3) or section 144 as regards income assessed or to an amount of loss computed or to the status under which he is assessed.
    4. An order of assessment made under section 1 15WE (3) or u/s 1 15WF, where the assessee being an employer objects to the value of fringe benefits assessed.
    5. An order of assessment or reassessment made uls 1 15WG.
  2. An order of assessment, reassessment, or re-computation of income u/s 147 or u/s 150; or u/s 153A
  3. An order u/s 154 or 155 by which his tax liability is enhanced or refund is reduced or to allow the claim made by him under either of these sections
  4. An order issued under section 163 regarding treating a person as agent
  5. An order made u/s 170(2) or (3) regarding assessment on succession
  6. An order made u/s 171 regarding partition of H.U.F.
  7. An order issued under section 185(1)(B), or 185(2) or 185(3) or 185(5) in respect of assessment of registered firms as they before 1-4-1992
  8. An order issued under section 186(1), or 186(2) in respect of assessment of firms as they existed before 1-4-1992
  9. An order made u/s 201
  10. An order made u/s 206C (6A)
  11. An order made u/s 237 regarding refund
  12. An order of penalty made
    1. u/s 221, regarding payment of tax in default,
    2. u/s 271, regarding non-filing of return,
      1. u/s 271A, regarding failure to keep or maintain accounts, documents etc., u/s 271AAA
      2. u/s 271 F, regarding failure to file return of income,
      3. u/s 271 FB for failure to furnish return f fringe benefits,
      4. u/s 272AA regarding failure to comply) with the provisions of section 133B,
      5. u/s 272BB regarding failure to comply with the provisions of section 203A regarding tax deduction account number.
  13. An order of imposing or enhancing penal u/s 275(1A)
  14. An order of assessment made by Assessing Officer under section 158BC(c), in respect of search commenced u/s 32 in respect of requisitioning of books of accounts, other documents or any asset u/432A-in or after 1-1-1997;
  15. An order imposing a penalty u/s 158BFA (2) regarding levy of interest on assessment under search and seizure
  16. An order imposing a penalty u/s 271B and 271BB regarding failure to get the accounts audited or failure to subscribe in eligible issue;
  17. An order made by a Deputy Commissioner (Joint Commissioner with effect from 1-10-98) imposing a penalty u/s 271C, section 271CA for not deducting tax at source, or u/s 271D o?271E for accepting or giving deposit or loan exceeding Rs. 20,000 in cash
  18. An order made by a Deputy Commissioner or Deputy Director (Joint Commissioner or Joint Director from 1-10-98) imposing a penalty u/s 272A regarding failure to sign, answer questions etc.
  19. An order imposing any penalty under chapter XXI
  20. An order made by an Assessing Officer except by Deputy Commissioner, (Joint Commissioner with effect from 1-10-98) under the provisions of this Act in the case of such persons or class of persons as directed by CBDT.

3. Form, Fee and Time Limit of Appeal to Commissioner (Appeal)

(A) Form of Appeal to Commissioner (Appeal) [Rule 45]:

  1. Form [Rule 45(1)]:
    An appeal to the Commissioner (Appeals) shall be made in Form No. 35.
  2. Manner of Furnishing the Appeal [Rule 45(2)]:
    Form No. 35 shall be furnished in the following manner, namely:
    1. in the case of a person who is required to furnish return of income electronically under rule 12(3), —
      1. by furnishing the form electronically under digital signature, if the return of income is furnished under digital signature;
      2. by furnishing the form electronically through electronic verification code in a case not covered under sub-clause (i);
    2. in a case where the assessee has the option to furnish the return of income in paper form, by furnishing the form electronically in accordance with clause (a) of rule 45(2) or in paper form.
  3. Verification of Appeal [Rule 45(3)]:
    The form of appeal referred to in rule 45(1), shall be verified by the person who is authorised to verify the return of income under section 140 of the Act, as applicable to the assessee.
  4. Manner of Furnishing the Accompanying Document [Rule 45(4)]:
    Any document accompanying Form No. 35 shall be furnished in the manner in which the said form is furnished.
  5. Procedure for Filing Appeal to be Specified [Rule 45(5)1]:
    The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall-
    1. specify the procedure for electronic filing of Form No. 35 and documents;
    2. specify the data structure, standards and manner of generation of electronic verification code, referred to in rule 45(2), for the purpose of verification of the person furnishing the said form; and
    3. be responsible for formulating and implementing appropriate security, archival and retrieval of policies in relation to the said form so furnished.

(B). Fee for Filing Appeal [Section 249(1)]:

Form 35 shall be accompanied by a fee as under:

(a) Where the total income/loss of the assessee as computed by the A.O. in the case to which appeal relates is Rs. 1,00,000 or lessRs. 250
(b) Where the total income/loss of the assessee, computed as aforesaid in the case to which appeal relates exceeds Rs. 1,00,000 but does not exceed Rs. 2,00,000Rs. 500
(c) Where total income/loss of the assessee, computed as aforesaid in the case to which appeal relates exceeds Rs. 2,00,000Rs. 1000
(d) Where the subject matter of appeal relates to any matter other than specified in clauses (a), (b) and (c) aboveRs. 250

The fee should be credited in a branch of the authorised bank or a branch of the State Bank of India or a branch of the Reserve Bank of India after obtaining a challan from the Assessing Officer and a copy of challan sent to the Commissioner of Income-tax (Appeals).

(C). Time Limit for Filing Appeal [Section 249(2)]:

The appeal should be presented within a period of 30 days of—

  1. the date of payment of tax, where appeal is under section 248; or
  2. the date of service of notice of demand relating to assessment or penalty if the appeal relates to assessment or penalty; or

    However, where an application has been made under section 270AA(1), the period beginning from the date on which the application is made, to the date on which the order rejecting the application is served on the assessee, shall be excluded.
  3. the date on which intimation or the order sought to be appealed against is served if it relates to any other cases.

Exclusion of time for calculating time limit for filing appeal [Section 268]:

For this purpose, the date on which the order complained of is served is to be excluded. Further, if the assessee was not furnished with a copy of the order when the notice of the order (say notice of demand) was served upon him then the time required for obtaining a copy of the order should be excluded, i.e. period taken for obtaining the order shall be added to the time limit of 30 days.

(D). Pre-requisites for Appeal (Amount of Tax Payable before filing Appeal) [Section 249(4)]:

No appeal shall be admitted unless at the time of filing of the appeal

  1. where a return has been filed by the assessee, the assessee has paid the tax due on the income returned by him; or
  2.  where the return has not been filed by the assessee, the assessee has paid an amount equal to the amount of advance tax which was payable by him.

Provided that, on an application made by the appellant in this behalf, the Deputy Commissioner (Appeals) may, for reason to be recorded in writing, exempt him from the operation of these provisions.

4. Procedure in Appeal [Section 250]

  1. Under Section 250 (1), the D.C. (A) and Commissioner (Appeals) shall fix a day and place for the hearing of the appeal and shall give notice of the same to the appellant and to the I.T.O. against whose order the appeal is preferred.
  2. The following shall have the right to be heard at the hearing of the appeal
    1. the appellant either in person or by an authorized representative
    2. Assessing Officer, either in person or by a representative [Section 250(2)].
  3. The Commissioner (Appeals) shall have the power to adjourn the hearing of the appeal from time to time. [Section 250 (3)].
  4. The Commissioner (Appeals), may before disposing off any appeal, make such further inquiries as they think fit or may direct the Assessing Officer to make further enquiry and report the result of the same. [Section 250 (4)].
  5. The Commissioner (Appeals) may, at the hearing of an appeal, allow the appellant to go into any ground of appeal, not specified in the grounds of appeal, the Commissioner (Appeals) is satisfied that omission of that ground from the form of appeal was not uthori or unreasonable. [Section 251 (5)].
  6. The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, decision thereon and the reason for the decision. [Sec. 250 (6)].
  7. Limitation of period to decide the appeal by Commissioner (Appeals) [Section 250(6)]. With effect from 1-6-1999, the Commissioner (Appeals) may decide upon the appeal (where it is possible) within a period of One year from the end of financial year in which appeal is made.
  8. On the disposal of the appeal, the orders passed by them shall be passed on the assessee as well as to the Commissioner. [Section 250 (7)]

5. Powers of Commissioner (Appeals) [Section 251]

In disposing off an appeal, the Commissioner (Appeals), shall have the following powers:

  1. in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; or
  2. in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment; or
  3. in an appeal against an order imposing a penalty — he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;
  4. in any other case — he may pass such orders in the appeal as he thinks fit.

The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.

6. Constitution of Appellate Tribunal (Section 252)

The Central Government shall constitute an Appellate Tribunal consisting of as many judicial and accountant members as it thinks fit to exercise the powers and discharge the functions conferred on the Appellate Tribunal by this Act.

A judicial member shall be a person who has for at least ten years held a judicial office in the territory of India or who has been 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 or who has been an advocate for at least ten years. However, in certain cases, his past experience may also be considered for computing the period of 3 years\10 years.

An accountant member shall be a person who had 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.

The Central Government shall appoint—

  1. a person who is a sitting or retired Judge of a High Court and who has completed not less than seven years of service as a Judge in a High Court; or
  2. one of the Vice-Presidents of the Appellate Tribunal to be the President thereof.

The Central Government may appoint one or more members of the Appellate Tribunal to be the Vice-President or, as the case may be, Vice-Presidents thereof.

The Vice-President shall exercise such of the powers and perform such of the functions of the President as may be delegated to him by the President by a general or special order in writing.

7. Appeals to Appellate Tribunal [Section 253(1) and (2)]

(A) Orders against which Appeal may be Filed by the Assessee [Section 253(1)]:

As per section 253(1), any assessee may file an appeal before the Appellate Tribunal against the following orders:

  1. an order passed by Commissioner (Appeals):
    1. under section 250 i.e. order passed on the appeal filed before him.
    2. order under section 270A.
    3. imposing penalty under sections 271, 271A, 271AA, 271G and 272A.
    4. under section 154 regarding rectification of mistakes in an order passed under section 250 or in an order imposing penalty under the above sections, if the rectification has not been done/satisfactorily done by him.
  2. an order passed by a Principal Commissioner or Commissioner:
    1. under section 12AA refusing to grant registration to a trust or institution;
    2. under section 80G(5)(vi) refusing to grant approval to the institution or fund;
    3. under section 263 relating to revision of erroneous order passed by Assessing Officer;
    4. under section 270A
    5. imposing penalty under section 271 or section 272A; or
    6. under section 154 amending his order under section 263 or order of penalty.
  3. order imposing penalty passed by a Principal Chief Commissioner or Chief Commissioner, Principal Director General or Director General or Principal Director or Director under section 272A.
  4. an order passed by Assessing Officer
    1. under section 115VZC (1) with the previous approval of Chief Commissioner excluding the shipping company from Tonnage Tax Scheme due to any transaction or arrangement referred to in section 115VZB (1) which amounts to an abuse of the Tonnage Tax Scheme.
    2. under section 143(3) or section 147 or section 153A or section 153C in pursuance of the directions of the Dispute Resolution Panel or an order passed under section 154 in respect of such order.
    3. under section 143(3) or section 147 or section 153A or section 153C with the approval of the Principal Commissioner or Commissioner as referred to in section 144BA (12) or an order passed under section 154 or section 155 in respect of such order.
  5. an order passed by the prescribed authority under section 10(23C) (iv), (v), (vi) and (via). In other words, fund or institution established by charitable purposes having regard to its importance throughout India or any State, trust wholly for public religious purposes and wholly public religious and charitable purposes, or universities and other educational institutions or hospital and medical institutions can now file an appeal to the Tribunal against the order of rejection of the application made for approval of the said institution.

B. Principal Commissioner or Commissioner may also direct the A.O. to File an Appeal [Section 253(2)]:

The Principal Commissioner or Commissioner may also, if he objects to any order passed by the Commissioner (Appeals) under section 154/250, direct the Assessing Officer to appeal to the Appellate Tribunal against the order.

Note:  
1. In case of appeal filed against the order of Principal Commissioner or Commissioner/ Principal Chief Commissioner or Chief Commissioner passed under section 12AA or 263 or 272A or section 154, the appeal can only be filed by the assessee.
2. No appeal is possible to Appellate Tribunal against an order passed by CIT under section 264 as it is a final order.

8. Orders of The Appellate Tribunal [Section 254]

(1) The Appellate Tribunal may pass such orders thereon as it thinks fit [Section 254(1)]:

The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.

(2) Order to be passed within 4 years if possible [Section 254(2A)]:

In an appeal filed by the assessee or Assessing Officer, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sections 253(1) or (2).

(3) Cost of any appeal [Section 254(2B)]:

The cost of any appeal to the Appellate Tribunal shall be at the discretion of that Tribunal.

(4) Tribunal to send the copy of the order [Section 254(3)]:

The Appellate Tribunal shall send a copy of any orders passed by it to the assessee and to the Principal Commissioner or Commissioner.

(5) Order passed by Appellate Tribunal shall be final [Section 254(4)]:

The order passed by Appellate Tribunal shall be final unless appeal is made under section 260A.

(6) Rectification of Mistake by the Tribunal [Section 254(2)]:

The Appellate Tribunal may, at any time within six months from the end of the month in which the order was passed, with a view to rectify any mistake apparent from record, amend any order passed by it under section 254(1), and shall make such amendment if the mistake is brought to its notice by the assessee or Assessing Officer.

If the application for rectification is filed by the assessee, it shall be accompanied by a fee of Rs. 50.

An amendment, which has the effect of increasing the tax liability of the assessee, shall be made only after the assessee has been given a reasonable opportunity of being heard.

9. Procedure for Filing Appeal to Appellate Tribunal [Section 253(3), (3A), (4), (5) and (6)]

(1) Time limit for filing appeal [Section 253(3)]:

The appeal to the Appellate Tribunal shall be filed within 60 days of the date on which the order sought to be appealed against, is communicated to the assessee or to the CIT, as the case may be.

(2) Filing of cross objections and time limit [Section 253(4)]:

The Assessing Officer or the assessee, as the case may be, on receipt of notice that an appeal against the order of the Commissioner (Appeals), has been preferred under section 253(1) or section 253(2) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof, within 30 days of the receipt of the notice, file a memorandum of cross objections, verified in the prescribed manner, against any part of the order of the Commissioner (Appeals), and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in section 253(3).

(3) Condonation of delay of time limit [Section 253(5)]:

The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross objections after the expiry of 60/30 days, if it is satisfied that there was sufficient cause for not presenting it within the specified period.

(4) Prescribed forms and documents to accompany [Section 253(6) and Rule 47]:

The appeal to the Appellate Tribunal shall be in Form No. 36 and memorandum of cross objections in Form No. 36A. The appeal and memorandum etc. are to be filed in triplicate and shall be accompanied by two copies (atleast one of which should be a certified copy) of the order appealed against and two copies of the order of the Assessing Officer. Two copies of the grounds of appeal and statement of facts before the first appellate authority are also to be filed. In case the appeal is against an order levying penalty, two copies of the relevant assessment order should also be filed.

Signing of appeal [Rule 47]:

Form No. 36, grounds of appeal at the verification should be signed by the person authorised to sign the return of income under section 140.

Fee for filing appeal [Section 253(6)]:

An appeal to the Appellate Tribunal shall be accompanied by a fee of—

(A) where the total income/loss of the assessee as computed by the Assessing Officer in the case to which the appeal relates is Rs. 1,00,000 or less :Rs. 500
(B) where the total income/loss of the assessee as computed aforesaid is more than Rs. 1,00,000 but does not exceed Rs. 2,00,000 :Rs. 1500
(C) where it exceeds Rs. 2,00,000:1% of the assessed income (subject to a maximum of Rs. 10,000)
(D) Where the subject matter of the appeal relates to any matter other than specified in clauses (a), (b) and (c) above:Rs. 500

However, no such fee shall be payable in case—

  1. the appeal is filed by the Principal Commissioner or Commissioner, or
  2. where the memorandum of cross objections is filed either by the assessee or the department.

Penalty appeal has no connection or bearing with the quantum of total income of the assessee and such normal filing fee of Rs. 500 should be sufficient.

10. Direct Appeal to High Court [ Section 260A]

An appeal shall lie to the High Court for every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law.

(1). Writ to High Courts:

In many instances where power to file appeal is not given by the Act, the assessee/commissioners can file writ petition to the High Court.

(2). Procedure for Filing Appeal:

  1. The Principal Chief Commissioner or Chief Commissioner/ Principal Commissioner or Commissioner or assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court.
  2. The appeal should be filed within 120 days from the date on which the order appealed against received by the assessee or the Principal Chief Commissioner or Chief Commissioner/Principal Commissioner or Commissioner.
  3. It should be accompanied by such fee as may be specified in the relevant law relating to Court fees for filing appeals to the High Court.
  4. It should be in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.

Condonation of delay: 

The Finance Act, 2010 has inserted section 260A(2A) in the Income-tax Act w.e.f. 1.10.1998. According to section 260A(2A), the High Court may admit an appeal after the expiry of the period of 120 days if it is satisfied that there was sufficient cause for not filing the same within that period.

(3). Procedure in Hearing Appeal:

  1. If the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.
  2. The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question. However, the High Court may, for reasons to be recorded, hear the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.
  3. The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit. At the time of hearing, the High Court can formulate other substantial questions of law not formulated earlier and can hear such questions on reasons to be recorded. [Indian Additives Ltd v Dy. CIT (2012) 67 DTR 389 (Mad)].
  4. The High Court may determine any issue which:
    1. (a) has not been determined by the Appellate Tribunal; or
    1. (b) has been wrongly determined by the Appellate Tribunal on such substantial question of law.
  5. The relevant provisions of Code of Civil Procedure, 1908 shall apply mutatis mutandis to appeals under section 260A to the High Court.

(4). Case before High Court to be heard by not less than two Judges [Section 260B]:

When an appeal has been filed before the High Court under section 260A, it shall be heard by a bench of not less than two Judges of the High Court, and shall be decided in accordance with the opinion of such Judges or of the majority, if any, of such judges. Where there is no such majority, the Judges shall state the point of law upon which they differ and the case shall then be heard upon that point only by one or more of the other judges of the High Court and such point shall be decided according to the opinion of the majority of the Judges who have heard the case including those who first heard it.

Where the High Court delivers a judgment in an appeal filed before it under section 260A, effect shall be given to the order passed on the appeal by the Assessing Officer on the basis of a certified copy of judgment.

Review or recall of the order passed by High Court: The High Court has power to recall its order if sufficient cause is shown and the fact that the order was passed on merits makes no difference.

12Intimation of Diary/ Lodging No to the 0/0 CIT/ CIT(J) / HC cell3 days118 days

11. Appeal to Supreme Court [Section 261]

The assessee or the Principal Commissioner or Commissioner may prefer an appeal to the Supreme Court from any judgement of the High Court. However, the appeal can lie to Supreme Court only if the High Court certifies the case to be a fit case for appeal to the Supreme Court. Thus, this certificate of fitness is a must for preferring an appeal to the Supreme Court. If, however, the High Court decides not to give such a certificate, then the aggrieved party may make an application to the Supreme Court under Article 136 of the Constitution for Special Leave to Appeal against the decision of the judgment.

(1). Hearing and Judgment by Supreme Court [Section 262]:

The Supreme Court upon hearing any such case shall decide the question of law raised therein and shall deliver its judgement thereon containing the grounds on which such decision is founded. Where the judgment of the High Court is varied or reversed in appeal, effect shall be given to the order of the Supreme Court in the manner provided in section 260A in the case of a judgment of the High Court. The cost of the appeal shall be in the discretion of the Supreme Court.

(2). Filing of Appeal or Application for reference by Income Tax Authority [Section 268A]:

The Hon’ble Supreme Court in Berger Paints India Ltd. v CIT, Kolkata (2004) 266 ITR 99 (SC) has held that if the revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, then it is not open to the Revenue to challenge the correctness in the case of other assessees without just cause.

With a view to protecting the Revenue’s right to file or not to file an appeal, the Act has inserted a new section 268A so as to provide that—

  1. The Board may issue orders, instructions or directions to other income tax authorities, fixing such monetary limits as it may deem fit. Such fixing of monetary limit is to be for the purpose of regulating filing of appeal or application for reference by any income tax authority under the provisions of this Chapter.
  2. Where an income-tax authority has not filed any appeal or application for reference on any issue in the case of an assessee for any assessment year, due to abovementioned order/instruction/direction of the Board, such authority shall not be precluded from filing an appeal or application for reference on the same issue in the case of—
    1. the same assessee for any other assessment year; or
    2. any other assessee for the same or any other assessment year.
  3. Where no appeal or application for reference has been filed by an income tax authority pursuant to the above mentioned orders/ instructions/ directions of the Board, it shall not be lawful for an assessee to contend that the income tax authority has acquiesced in the decision on the disputed issue by not filing an appeal or application for reference in any case.
  4. The Appellate Tribunal or Court shall have regard to the above-mentioned orders/ instructions/directions of the Board and the circumstances under which such appeal or application for reference was filed or not filed in respect of any case.
  5. Every order/instruction/direction which has been issued by the Board fixing monetary limits for filing an appeal or application for reference shall be deemed to have been issued under sub-section (1) of this new section and all the provisions of this section shall apply to such order/instruction/direction.

12.  Revision by the Principal Commissioner or Commissioner

(1). Revision of orders prejudicial to Revenue [Section 263]:

The Principal Commissioner or Commissioner may call for and examine the record of any proceedings under the Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue. He may pass such orders thereon as the circumstances of the case justify including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment.

Revision under Income Tax Act
Revision under Income Tax Act

However, he has to pass an order only after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary.

However, the Principal Commissioner or Commissioner can revise the order passed by the Assessing Officer only if he considers that the order passed is prejudicial to the interests of the revenue.

For removal of doubts, it is provided that the Principal Commissioner or Commissioner can revise the following orders also:

  1. an order of assessment made by the Assistant Commissioner/Deputy Commissioner or the Income-tax Officer on the basis of directions issued by Joint Commissioner under section 144A.
  2. an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of Assessing Officer conferred on him under the orders or directions issued by CBDT or Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by CBDT under section 120.

(2). Power of Revision involves 4 steps to be taken under Section 263

Step 1: The Principal Commissioner or Commissioner can call for and examine the records of any proceeding under the Act. For this purpose he does not need to show any reason.

Step 2: He would see whether the order passed under the Act by the Assessing Officer is erroneous in as much as it is prejudicial to the interest of the revenue. Up to this time, there is no question of the assessee appealing or making any submission.

Step 3: If after calling for and examining the records, the Principal Commissioner or Commissioner considers that the order of the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, then he has to give the assessee an opportunity of being heard. The Principal Commissioner or Commissioner must disclose in his notice to the assessee the grounds on which he desires to revise the order of the Assessing Officer. Further notice to show cause must be served upon the assessee reasonably ahead of the date fixed for hearing.

Step 4: The Principal Commissioner or Commissioner may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. He can enhance or modify the assessment. He has also power to cancel the assessment and direct fresh assessment.

(3).  Revision of orders in favour of assessee [Section 264]:

Revision of orders not covered by section 263, can be made by the Principal Commissioner or Commissioner either on his own motion or on an application made by the assessee, provided orders have been passed by an authority subordinate to him. The application made by the assessee shall be accompanied by a fee of `500. The Principal Commissioner or Commissioner may call for the record of any proceeding under this Act on the basis of which such order has been passed and may make such inquiry or cause such inquiry to be made. He may pass such orders thereon as he thinks fit as are not prejudicial to the assessee. The Principal Commissioner or Commissioner, under this section can cancel the assessment and direct the Assessing Officer to make a fresh assessment but such direction shall not be prejudicial to the assessee.

The Principal Commissioner or Commissioner shall not revise any order under this section in the following cases:

(i)            where the order has been made more than one year previously, the Principal Commissioner or Commissioner shall not, on his own motion, revise such an order; or

(ii)            the application for revision by the assessee has been made after one year from the date on which the order in question was communicated to him or the date on which he otherwise came to know of it, whichever is earlier. However if the Principal Commissioner or Commissioner is satisfied that the assessee was prevented by sufficient cause from making the application within the prescribed period he may admit an application made after the expiry of that period.

Example:

Assessing Officer has passed an order on 15.11.2015 which was received by the assessee on 19.11.2015. In this case CIT can make a revision order Suo moto up to 15.11.2016 whereas the assessee can file application under section 264 up to 19.11.2016.

(iii)          where an appeal against the order lies to the Commissioner (Appeals) but it has not been made and the time within which such appeal may be made has not expired; and the assessee has not waived his right of appeal; or

(iv)          where the order has been made the subject of an appeal to the Commissioner (Appeals) i.e. where an appeal has been filed to CIT (Appeal) on any issue relating to such order.

Time limit for passing the revision order under section 264:

On application made by the assessee under this section, the Principal Commissioner or Commissioner shall pass an order within one year from the end of the financial year in which the application is made by the assessee. In computing the period of limitation of one year, the following period shall be excluded:

(1) the time taken in giving an opportunity to the assessee to be re-heard under the proviso to section 129, and

(2) any period during which any proceeding under this section is stayed by an order or injunction of any court.

No time limit in the following case:

However, an order of revision may be passed at any time in consequence of or to give effect to any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, High Court or the Supreme Court.

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