APPEAL ADMINISTRATION: COMMISSIONER (APPEALS) – PART DISPOSAL OF APPEALS CAN EXPEDITE JUSTICE AND RECOVERY .

[C.A. DEV KUMAR KOTHARI]

Quick disposal of appeal by CIT(A) is very much desirable for proper assessment, and collection of tax. Most of appeals involve many covered and routine type of issues which can be decided very easily and quickly in a provisional or part order. This will reduce demands or speedup recovery quickly. Therefore, part disposal of appeal can be introduced. The CIT(A) should issue orders within a reasonable time from the final hearing. There are instructions from the Board in these regards as to period within which appeal should be disposed off, heard appeals should be disposed off before going on leave and in case of transfer also. However, these instructions are not taken very seriously and in many cases such instructions are not complied with. When subsection (6) in S.250 was proposed in the Budget 1999, the author has written an article and  suggested some amendments in law regarding administration of appeals. Those suggestion shave been reviewed and  new drat of suggestions are given in this article.

The author also point out that due to non compliance of instructions of the Board in relation to disposal of appeals within prescribed time, and in case of transfer etc. the matter went up to the Supreme Court, and the Supreme Court has directed the authorities for  not giving effect of the transfer orders of particular officer who held office of the CIT(A), before he dispose off appeals which have been heard by him.    

CIT (A) is the first appellate authority:

CIT (A) is the first appellate authority in direct taxes and play a very important role indetermination of correct taxable income, tax demands and refunds due to assessee. It is observed that about 75 -80% of additions and disallowances made by the A.O. are deleted by the CIT(A). Generally appeals are required to be preferred by assessee before the CIT(A), when a case is selected for scrutiny u/s 143(3), because as per general practice the A.O. makes huge additions and disallowances when he makes an assessment u/s 143(3). The assessee and the A.O. both are given opportunity of hearing by giving notice of hearing and both can make representation before CIT(A). The CIT(A) hears parties who appear before him, can grant adjournment on request of any party, and re-fix the case to provide further opportunity of hearing.   

Time limit for disposal of appeal:

Strictly speaking there is no limitation prescribed for disposal of appeal. However, there is a guidance for disposal of appeal as found in  sub-section (6) of section 250 of the Income-tax Act, 1961. The said provision reads as follows:

                  “(6A) In every appeal, the Commissioner (Appeals), where it is possible, may hear and decide such appeal within a period of one year from the end of the financial year in which such appeal is filed before him under sub-section (1) of section 246A.”

From highlighted (underlined) words as used in the said provision, we find that the CIT(A) may hear and decide the appeal within prescribed time, and that too if it is possible. Hus there is no limitation prescribed.

The  period of limitation is also unrealistic because it runs from the end of the financial year in which an appeal is filed. For example:

An appeal is filed on first day of the financial year that is say 01.04.2008,  within FY 2008-09. As per the above provision the CIT(A) may hear and decide the appeal, if it is possible, by 31.03.2010. Thus he gets time of twenty four months.

Another appeal is filed on the last day of FY say on 31.03.2009 that is within FY 2008-09. As per the above provision the CIT(A) may hear and decide the appeal, if it is possible by 31.03.2010. In this case he get time of twelve months only.

Therefore, it is felt that the language used to prescribe the manner of computing suggested period of limitation (if it can be so called) is not proper.

Circular about disposal of appeals:

In context of section 251 about disposal of appeals by CIT(A) the board has issued Instruction : No. 20/2003 [F. No. 279/Misc. 53/2003-ITJ], dated 23-12-2003. The same is reproduced below with highlights for analysis:

                “Appellate orders should be issued within 15 days of the last hearing - The Board desires that appellate orders by Commissioner of Income-tax (Appeals) should be issued within 15 days of the last hearing. Any lapse on this account shall be viewed adversely.

This shall also be applicable to orders passed by the CIT (Administration)/CCIT as regards matters within their purview under varied sections of Income-tax Act, 1961 such as sections 80G, 264, 263 or orders under rule 86 of Second Schedule and under other allied direct taxes.”

From above instruction we find that what the board has expressed is its desire. It is also just like provision of S. 250 (6A) as discussed earlier. As in case of provision we find that the legislature has also expressed its desire that the CIT(A) may decide the appeal within prescribed time, but there is no clear direction to do so. Similarly, the Board has simply expressed its desire that CIT(A) should issue his order within fifteen days from the last hearing of appeal.

However, the board has also stated that any lapse in this regard shall be viewed adversely. How an inaction of CIT(A) in not issuing order within fifteen days of last hearing is to be decided by the board, and it can be an internal matter of the administration.

Practice:

In practice we find that there is hardly any guidelines followed. We find several orders that were issued after long period of time from last hearing. We find many appeals pending for hearing/ disposal for long period of time. We find many appeals heard but are not disposed off simply because the CIT(A) is expecting some transfer orders. Usual practice is that appeals are heard, but orders  are not passed when there is expectation of transfer. In case transfer order is passed, then usually officers do not pass orders even if matter was heard and case is ready for disposal. This practice is also contrary to the above instruction and also another old instruction, in which the Board has directed that the officers should dispose of all matters hearing of which has been completed before going on leave or leaving the charge on account of transfer. We also find that many times orders are passed and signed by officers but they are not issued (released to assessee) within a reasonable time.

Therefore, it appears that there is hardly any follow-up for adherence of such circulars. 

Supreme Courts intervention needed to get heard appeals disposed off:

Recently we find that the assessee had to approach the Supreme Court for expeditious justice, where cases were partly heard , but not decided and the CIT(A) was transferred.. The case concerned is   Standard Chartered Bank Versus ACIT Ors. 2009 -TMI – 34491(SC). Summary from the relevant paragraph of the judgment in context of this write-up are analyzed below:

                                  Mr. Kuntal K. Sen, CIT (A), Central V, Mumbai, who has already heard out the appeal, is under transfer.

                                 That he has heard out the matter in detail and only the matter is to be decided finally after hearing the heirs and legal representatives of Harshad Shantilal Mehta(   HSM who have given undertaking that they will not take adjournemtn.

                            Court felt it  proper that Mr. Kuntal K. Sen should be allowed to stay for a period of six months from the date to hear out the Income Tax Appeal and dispose of the same finally.

                       The learned Additional Solicitor General of India, Mr. Tripathi, appearing on behalf of the Income Tax Authorities as well as Ms. Kamini Jaiswal jointly submitted before the court  that directions could be made to dispose of the Income Tax Appeal within four months from this date without granting any adjournment on any ground whatsoever.

                         Accordingly, the court directed the CIT (A), Central V, Mumbai to dispose of the Income Tax Appeal pending before it within six months from this date without granting any unnecessary adjournment whatsoever.

                           The court therefore felt it proper to direct the authorities not to dislodge Mr. Kuntal K. Sen, CIT (A), Central V, Mumbai without the final decision is made by him as the court was  of the view that if a new incumbent takes over from Mr. Sen, then a denovo trial has to be made, which would take a long time to dispose of the pending appeal.

Administration need toning up:

The above case is one which went up to the supreme court, not mainly because of appeal proceedings but because of other stakes of bank involved and tied up with appeal. There are many cases which we find are delayed a long and in the meanwhile assessees are harassed for payment of disputed dues.   

Earlier article by author:

When the subsection (6A) was proposed in the Finance bill 1999 an article titled “Budget 1999-2000 -Meaningless Limitation for Disposal   of Appeals by Commissioner(Appeals) was published with citation [1999]103 TAXMAN 140 (ART).

In the summary and editorial note it was mentioned as follows:

             At present there is no time limit prescribed for disposal of appeals by the Commissioner (Appeals). In the Finance Bill, 1999, it is proposed to provide for limitation period for disposal of appeals by the Commissioner (Appeals). However, according to the author of this article, the proposed provisions
will hardly serve any meaningful purpose. In the present context, it would be very relevant if the provisions are made to enforce upon such authorities duty-bound programme not only for disposal but also disposal in meaningful manner of appeals. For expediting justice, part disposal may also be permitted on grounds which are covered or involve clear matters which can be decided without further enquiry. In this article, the author critically examines the proposal in the Finance Bill, 1999 to put a time limit for disposal of appeal by the Commissioner (Appeals). He makes various suggestions to make a meaningful and effective disposal of appeals possible. The author also gives a draft of the amendments suggested.

New draft of suggested for amendment:

As discussed in the earlier article, the amendment by insertion of Sub-section (6A) has not yielded desired result. In fact the provision is not a limitation provision, rather it is suggestive of situation that perhaps  CIT(A) should not decide appeal as early as possible but he can decide early after this amendment.

We find that in any appeal there are some grounds of appeal which are of covered nature or routine nature. Such covered grounds or routine grounds can be decided easily and quickly. There may be some grounds which require further enquiry, investigation, studies and deliberations. These grounds are really speed breaker in early disposal of appeal. Therefore, it is desirable that appeal may be allowed to be disposed of by more than one order in part order manner.

After considering working of the amendment brought in by the Finance Bill 1999 and further  experience gained it is desirable that administration and disposal of appeals by CIT(A) need more toning-up. Author suggests provisions in this regard as follows:

  (1) The Commissioner (Appeals) shall hear and finally decide every appeal within a period of   twenty four months from the end of the month in which the appeal is filed.

   (2)  The Commissioner (Appeals) may from time to time partly decide any appeal within twelve months from the end of the month in which appeal is filed in respect of covered issues or routine issues. In respect of other grounds of appeal, the appeal may be kept pending for  which further enquiry, investigation or clarifications are required from assessee or the Assessing Officer and such grounds shall be decided within limitation as provided in para (1).

  (3) As far as possible, the Commissioner (Appeals) shall decide himself the  grounds of appeal in an effective manner so as to ensure proper assessment of income.

  (4) Only when the Commissioner (Appeals) is of opinion that the matter in respect of some grounds of appeal is such which requires further investigation by lower authorities, he will ask for such investigation and after obtaining report from lower authorities decide the appeal himself in respect to those grounds of appeal so as to ensure proper assessment.

(5)    Commissioner (Appeal) shall  decide  any ground of the appeal and issue order on such grounds  within one month from the date on which  any of the grounds of appeal have been heard finally.

Appeal memo- further information can be added:

The grounds of appeal may be divided in (a) covered matters (b) routine matters and (c) complicated matters.

The assessee may be required to furnish written submission and paper book within three months from end of the month of filing of appeal. A copy of the same should be forwarded to the A.O. also.

The A.O. should send his observations and comment on written submission of the assessee within one month. In case the A.O. does not file any objections, it can be assumed that the A.O. has n objection on written submission of the assessee.

Now the CIT(A) can fix appeal for hearing and hear the assessee and A.O. both.

The above process shall help in quick and better disposal of appeal.  

The CIT(A) can decide the  ground of appeal of covered and routine nature, very easily and quickly.

The above suggestions, if implemented, shall go a long way in making remedy by way of appeals before the Commissioner (Appeals) more meaningful for the assesses as well as the revenue.

In case during course of pendency of appeal there is change in circumstances by which some issues are further covered by judgments of Tribunal or Courts, the appellant can submit updates on the same and request the CIT(A) to consider the newly covered issues and decide the appeal partly and keep the appeal pending on other issues.