ITAT- Fees payable for appeal against order of CIT(A) before ITAT in form 36 - some issues and related aspects on fees and service by way of justice

[DEV KUMAR KOTHARI]

Appeal before ITAT:An appeal before ITAT can be filed by an assesse against order u/s 250-251 passed by CIT(A) to seek further relief. Some other appeals are also provided, however, main thrust of this article is about appeals against order of CIT(A) because fees payable on appeal against order of revision u/s 263 falls under other provision.

Fees payable as per S.253.6 of IT Act:

When assesse file an appeal he is required to pay fees as per provisions. In case of appeal against order of CIT(A) it is based on amount of income computed by the AO. Maximum amount payable is ₹ 10000/- irrespective of higher amount of income computed, if 1% formula was to be applied.

Under this provision fees is not based on amount of disputed income or tax but the amount of income computed by the AO. This also results into unjust situations of assesse forced to pay higher fees for seeking paltry relief. The S.253.6, so far it relates to appeal against order of CIT(A) reads as follows (with highlights added by author):(6) An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner and shall, in the case of an appeal made, on or after the 1st day of October, 1998, irrespective of the date of initiation of the assessment proceedings relating thereto, be accompanied by a fee of,-(a) where the total income of the assessee as computed by the Assessing Officer, in the case to which the appeal relates, is one hundred thousand rupees or less, five hundred rupees,(b) where the total income of the assessee, computed as aforesaid, in the case to which the appeal relates is more than one hundred thousand rupees but not more than two hundred thousand rupees, one thousand five hundred rupees,(c) where the total income of the assessee, computed as aforesaid, in the case to which the appeal relates is more than two hundred thousand rupees, one per cent of the assessed income, subject to a maximum of ten thousand rupees,[(d) xxx 43[Provided xxxx From prescribed form 36 Row no. 3B and verification portion:3B. Total income as computed by the Assessing Officer for the assessment year referred to in item 3I,……………. …………………. the appellant, do hereby declare that what is stated above is true to the best of my information and belief.

Verified today the ………….. day of …………… 20

On reading of the requirement relating to fees as per S. 253.6 and as per row 3B and verification in form 36 which is on particular date when appeal document is signed, it can be said that the amount of income as computed by the AO as on that day is relevant. Amount computed as on any other day will not be verified on the day of verification. Amount computed by the AO:Amount computed by the AO can undergo changes due to rectification, appeal effect etc. for example:

a. not setting off brought forwarded loss and depreciation is a common practice followed by many AO, particularly when orders are passed manually just few days before limitation period is to expire or lapse. Subsequently the AO may allow such set off by rectification of order on application by assesse after verification of past assessment and appeal effect etc.

b. Re-computation for other mistakes,c. Re-computation for giving effect to the order of CIT (A).

Amount reduced on such re-computation is also justifiable for determination of appeal fees, for the reason that AO committed mistake - he computed income at higher amount which is reduced by subsequent order, passed before the date of signing of appeal memo in form 36. Furthermore the assesse should not suffer by higher amount of even fees payable to seek relief from second appellate authority. Therefore, the amount of income computed by the AO as on the date of signing of appeal memo can only be basis for determining amount of fees payable.

Therefore, when the amount of income has been recomputed by the AO, and the amount has been reduced, then the amount so reduced on such recomputed should be considered and accordingly fees payable for appeal should be determined.

Information for clarification in appeal memo:Information in this regard can be given in Row 3B or by way of annexure to Form 36, as situation may require. For example information can be given as follows:Details of order of AO computing and re-computing income Rs. In lacs Remarks Amount of income computed in order u/s 143.3 dt. 200 Amount of income re-computed in order u/s 154 dt. allowing set off of depreciation 50 lacs Amount of income re-computed in order u/s 154 dt. after allowing set off of b/f losses 10 lacs Amount of income re-computed in order u/s 250 after giving effect to the order of CIT(A) 2 lacs In above example income computed by the AO as on the date of signing and verification of Form 36 is ₹ 2 lacs. Therefore fees payable should be ₹ 1000/- and not ₹ 10000/- based on income originally computed by the AO in order u/s 143.3, particularly so when we find that due to mistakes of the AO higher amount of income was computed.

This approach is rational and is on due consideration of ground reality, that many times AO, in scrutiny assessments make high-pitched assessment and raised huge demands. For that the assesse is not at all default. The default is clearly committed intentionally by the AO to raise (and also collect if not fully to some extent) demand in illegal, unjust and high handed manner. For such defaults of the AO, assesse should not suffer by forced collection of higher appeal fees.

There should not be appeal fees because assesses are forced to prefer appeals :

Ground realities are that demands are raised by making high-pitched assessments and the assesse is forced to prefer appeal. If such tax demands are not contested, they can be a reason of bankruptcy of many tax payers who faced scrutiny assessment and harassing officers. Overall statistics of department and many individual cases shows that more than 80% of additions were deleted in first appeal. We have empirical experience of huge demands raised, collected, refunds denied in course of assessment and ultimately assesse getting refund. We can find cases wherein even against substantial losses suffered by assesse, huge income was assessed but ultimately after disposal of appeals loss was determined and refund was allowed. We also find such cases of even some Public Sector Undertakings who are listed companies. No relief being allowed by CIT(A) : Presently, however situation is different and many CIT(A) are not allowing relief and are also adopting practice of enhancement. While doing so they are not following law and legal precedence. Unfortunately, CBDT has also announced incentives for CIT(A) for such orders. This is also forcing assesses to prefer appeals before ITAT

Recently in a case, the CIT(A) made enhancement by not following binding precedence in form of order of CIT(A) in case of same assesse / appellant particularly when such order was not challenged by Revenue, and the order of CIT(A) was not even hit by S.268A for monetary limit for second appeal. The Revenue has accepted the order of CIT(A) in case of the same assesse/ appellant before the CIT(A) as it was based on settled legal position by way of concurrent orders in favor of another assesse passed by CIT(A), Tribunal and jurisdictional High Court which have attained finality as Revenue has not challenged the same , those orders are also not hit by S.268A, and long time has passed for filing of SLP. And in some cases where order of Tribunal has attained finality because the Revenue has not preferred appeal before the High Court. In fact, unfortunately , in patently improper, wrong, unjust and illegal manner the CIT(A) went to mention as if the CIT(A), Tribunal and the jurisdictional High Court has not applied their mind and mechanically passed order based on some other provision applicable in earlier years on the same issue but with some more or less conditions. Therefore, the CIT(A) held that the earlier orders are not binding precedence.

Whereas the fact is that old provisions and new provision are similar on many pre-conditions, and in case of new provision there was additional requirement which was also met. In case of old provisions CIT(A) did not allow relief to the assess and assesse preferred appeal, in case of new provision, the CIT(A) allowed relief and Revenue preferred appeal before Tribunal. The Tribunal passed a consolidate order on several such appeals for different years and slightly different provisions on the same issue , and after considering differently worded grounds of appeal, difference in provisions, applicable old and new provisions allowed appeals of assesse on old provisions and dismissed appeal of revenue and confirmed order of CIT(A) in case of new provision in which an extra pre-condition was also involved in comparison to pre-conditions in old provisions. On appeal of revenue, the High Court also affirmed order of Tribunal. This seems to be a case of ill –effect of incentives announced for CIT(A) to confirm assessments and make enhancements. We find many orders being passed by CIT(A) by not following large number of binding and persuasive precedence and large number of cases decided in favor of assesse by most of Tribunal benches and many High Courts. The relief is being denied by CIT (A) by wrongly following few orders of Tribunal in favor of revenue in which facts were different and tribunal denied relief in view of facts peculiar to those cases. In such circumstances even the golden rule that when two views are possible a view in favor of assesse should be followed is not being followed.

Assesse is forced to prefer appeals:

Therefore, generally assesse is forced to file appeals and contest wrong orders of AO, CIT(A) and CIT.

For seeking justice and redress of grievances caused due to wrong actions and order of tax authorities. Therefore, there should not be any appeal fees the justice against un-just orders of government officers should be without any costs to the sufferer public.

There must be service for the fees charged:Any fees is for a service, when law provides assesse to pay a fees for appeal. Then the appellate authority / Tribunal must also consider this aspect and should try to render justice. Unfortunately, many CIT (A) and also many times Tribunals have adopted wrong practice of denying relief and not rendering service by rendering justice, when assesse has also paid appeal fees and submitted sufficient documents and information which are sufficient enough to decide the appeal on merits. The ground reality is that in many cases assesse had filed paper books, written submissions and was present at the appoint time of hearing and appeals were heard to some extent but hearing was adjourned (order not passed) and then when for some reason assesse could not present , appeals were dismissed as if assesse is not a vigilant litigant and as if assesse is not interested in prosecuting appeal. This is totally unjust and high-handed approach adopted by many CIT(A) and some benches of Tribunal.