Which Orders are appealable before the CIT Appeals?

Table of Contents

1. Introduction
2. Appealable Orders
3. Judicial view
4. Order by a Joint Commissioner u/s 115VP(3)(ii) rejecting an application under Tonnage Tax Scheme
5. Order holding a person liable to be assessed under the Act
6. Judicial view

Check out  Taxmann's Your Appeal Before Commissioner (Appeals) which provides a comprehensive and annotated guide to the appellate process before the Commissioner (Appeals) in a thoroughly researched & logically sequenced format. It includes discussions on the relevant legal provisions duly supplemented by the judicial view on the various topics/issues involved. This book is amended by the Finance Act, 2022 and also includes a discussion on the Faceless Appeals Scheme.

1. Introduction

1.1 Section 246 of the Income-tax Act, as originally enacted by the Parliament, listed down orders passed by an Assessing Officer/Deputy Commissioner against which appeals could be preferred to the Deputy Commissioner (Appeals)/Commissioner (Appeals). The Finance (No.2) Act, 1998 introduced Section 246A providing for appeals before the Commissioner of (Appeals) in respect of appeals against orders passed on or after the appointed date i.e. October 1, 1998. The introduction of Section 246A was necessitated due to the abolition of the institution of Deputy Commissioner (Appeals).

1.2 While Section 246A came into effect from October 1, 1998 no sunset clause was provided to sub-sections (1) of (2) of Section 246, presumably, to take care of pending matters. The Finance Act, 2000 has amended Section 246 to make it inapplicable to appeals filed on or after June 1, 2000. However, it has been further clarified that any appeal filed u/s 246 on or after October 1, 1998 and before June 1, 2000 shall be deemed to be an appeal filed u/s 246A. Accordingly, in effect all appeals filed on or after October 1, 1998 shall be deemed to be appeals filed under section 246A and dealt with in accordance with the provisions of that section. It has also been provided that any appeal pending before the Deputy Commissioner (Appeals) on the appointed day shall stand transferred to the Commissioner (Appeals) who may proceed with such appeal or matter from the stage at which it was on that day.

2. Appealable Orders

2.1 As per the provisions of Section 246A of the Act as currently in force, after amendments, additions or deletions made from time to time, an assessee “aggrieved” by any of the following orders may appeal to the Commissioner (Appeals):—

(a)  an order passed by a Joint Commissioner under section 115VP(3)(ii) refusing to approve the option to opt for the tonnage scheme in case of a company operating ships; or

(b)  an order against the assessee, where the assessee “denies his liability” to be assessed under the Act; or

(c)  an intimation under sub-section (1) or sub-section (1B) of section 143 where the assessee objects to the making adjustment; or

(d)  an intimation under sub-section (1) of section 200A or sub-section (1) of section 206CB where the assessee or deductor or collector object to the making of adjustments; or

(e) any order of assessment under section 143(3) (except an order passed in pursuance of directions of the Dispute Resolution Panel) or an order referred to in Section 144BA or 144, where the assessee objects:

(i)  to the income assessed; or

(ii)  to the amount of tax determined; or

(iii)  to the amount of loss computed; or

(iv)  to the status under which he is assessed;

(f)  an order of assessment under section 115WE(3) or section 115WF, where the assessee, being an employer objects to the value of fringe benefits assessed or an order of assessment or reassessment of Fringe Benefits u/s 115WG (upto A/Y 2010-11); or

(g)  an order of assessment, reassessment or re-computation under section 147 (except an order passed in pursuance of directions of the Dispute Resolution Panel or an order referred to in Section 144BA) or Section 150; or

(h)  an order of assessment or reassessment under section 153A (except an order passed in pursuance of directions of the Dispute Resolution Panel or an order referred to in Section 144BA) consequent upon any search conducted or books of account requisitioned; or

(i)  any order made under section 92CD(3) relating to an order passed by the Assessing Officer with respect to a modified return filed in accordance with and limited to the advance pricing agreement; or

(j)  an order of rectification made under section 154 or order under section 155 (except an order referred to in section 144BA) having the effect of:

(i)  enhancing the assessment; or

(ii)  reducing a refund; or

(iii)  an order refusing to allow the claim made by the assessee under either of these sections;

(k)  an order made under section 163 treating the assessee as the agent of a non-resident.

(l)  an order under Sub-sections (2) or (3) of Section 170 relating to assessment on successor when the predecessor cannot be found or recovery of tax of the predecessor from the successor in case of succession to business otherwise than on death;

(m)  an order under section 171 refusing to recognize partition of a HUF;

(n)  orders under sections 185 and 186 relating to registration and cancellation of Firms (not applicable w.e.f. A/Y 1992-93);

(o)  an order made under section 201 treating the assessee deemed to be assessee in default for failure to deduct the whole or any part of the tax or pay tax after deduction;

(p)  an order made under section 206C(6A) treating the assessee as deemed to be assessee in default for:—

(i)  failure to collect the whole or any part of the tax; or

(ii)  after collecting, failure to pay the tax as required by or under this Act;

(q)  an order under section 237 relating to grant of refunds;

(r)  an order made under section 239A

(s)  an order imposing a penalty under section 221, Section 271, Section 271A, Section 271AAA, Section 271AAB, Section 271F, Section 271FB, Section 272AA, Section 272BB; or

(t)  order imposing penalty under section 272, Section 272B or Section 273B (applicable upto A/Y 1988-89);

(u)  an order imposing or enhancing penalty under section 275(1A); or

(v)  an assessment order made under section 158BC and penalty imposed under section 158BFA in respect of search or requisition of books of account etc.;

(w)  an order imposing a penalty under section 271B or 271BB;

(x)  an order made by a Deputy Commissioner imposing a penalty under section 271C, section 271CA, section 271D or section 271E; or

(y)  an order made by a Deputy Commissioner or Deputy Director imposing a penalty under section 272A; or

(z)  An order made by a Deputy Commissioner imposing a penalty under section 272AA;

(aa)  an order imposing a penalty under Chapter XXI i.e. under sections 270 to 275

(ab)  an order made by an Assessing Officer other than a Deputy Commissioner under the provisions of this Act in the case of such person or class of persons, as the Board may, having regard to the nature of the cases, the complexities involved and other relevant considerations direct.

2.2 Section 246A lists out specifically and categorically the orders which are appealable to a Commissioner (Appeals). Accordingly, any order/issue which does not find mention in Section 246A can neither be the subject matter of an appeal to or be adjudicated by the Commissioner (Appeals).

2.3 Section 246A permits an assessee to file a common or composite appeal against more than one order made against him if such orders are specifically enumerated under this section. The issue of whether one or more appeals will have to be filed is entirely a procedural matter and not one dealing with the right to appeal. Thus, a composite appeal against two interconnected orders passed contiguously would be competent. The Act does not contemplate that even against a composite order passed by the Assessing Officer pursuant to the powers vested in him under different sections of the Act, separate appeals have to be preferred with reference to the sections under which the Assessing Officer has sought to exercise his jurisdiction.

3. Judicial view

3.1 Section 246 of the Act specifically enumerates in great detail the orders which are appealable to the first appellate authority. The said authority, therefore, cannot have jurisdiction to entertain appeals which fall outside the specific grounds and orders mentioned in the section. On the other hand, if an order is appealable under this section, an appeal would lie even though the Assessing Officer making the order had no jurisdiction to make the order. [CIT v. Bhikaji Dadabhai [1961] 42 ITR 123 (SC)].

3.2 If appeals are provided to the same authority against two or more orders passed by the Income Tax Officer, then merely because those appeals are provided by different clauses of section 246(1), it would be too technical to say that, for that reason, separate appeals should be filed, and that if a composite appeal is filed, then it should be regarded as incompetent. In a case where one of such orders has become time-barred, then it may not be regarded as improper not to entertain such a composite appeal. But where such a question does not arise and the appeal is otherwise not incompetent, there can be no justification in holding that a composite appeal is not competent. [Dalpatbhai Damjibhai v CIT [1994] 205 ITR 144 (Guj.)].

4. Order by a Joint Commissioner u/s 115VP(3)(ii) rejecting an application under Tonnage Tax Scheme

4.1 Chapter XII-G of the Act provides for special provisions relating to income of shipping companies by putting in place a “tonnage tax scheme”. The said Chapter was inserted into the Act by the Finance (No. 2) Act, 2004 w.e.f. 1/4/2005. Further Section 115VP provides that a qualifying company may opt for the Tonnage-tax Scheme by making an application in this regard to the jurisdictional Joint Commissioner. In the event of the Joint Commissioner rejecting it, which power is vested in him by Section 115VP(3)(ii) of the Act, an assessee can file an appeal against the same before the Commissioner (Appeals) as provided in the first limb of Section 246A(1)(a) of the Act.

5. Order holding a person liable to be assessed under the Act

5.1 This limb of Section 246A(1)(a) confers on an assessee who has been held liable to be assessed under the Act, a right to appeal to the Commissioner (Appeals) against such order if he “denies his liability to be assessed under the Act”.

5.2 The expression “denies” his liability to be assessed is a broad-based comprehensive phrase which could cover not only the entire spectrum but also some part of the liability or the manner of computation thereof e.g. assessment of income under a different residential status or under a different head or taxing it under a different section. It would also include denial of liability under particular circumstances, e.g. the denial by an association of persons to be assessed as such, by a specified trust to be assessed as an Association of persons or a person treated as a partner denying his liability to be assessed as a partner.

5.3 An assessee who denies his liability to be assessed under this Act is entitled to appeal on that ground even if he had not denied his liability before the Assessing Officer, but only after the assessment is made. Mere filing of a return of income does not tantamount to an admission by the person submitting the return that he is liable to be assessed under this Act.

5.4 The phrase “denies his liability to be assessed” would include denial of:—

(i)  liability to be assessed;

(ii)  whole or some part of the liability or the manner of its computation;

(iii)  liability to be taxed under a specific circumstance(s);

(iv)  liability to be taxed under a specific section or under a specific residential status.

6. Judicial view

6.1 The expression “denies his liability to be assessed” in Section 246A even takes within its fold every case where the assessee denies his liability to be assessed under the Act. It is not confined to the liability to be assessed under section 143(3) but also applies to liability to pay tax under section 115QA. If there is adequate appellate remedy, a writ petition under Article 226 cannot be maintained. [Genpact India (P) Ltd. v. Dy. CIT [2019] 111 taxmann.com 402/419 ITR 440/[2020] 268 Taxman 299 (SC)]

6.2 A partial denial of liability to be assessed is comprised in the expression “denies his liability to be assessed under this Act” [Gopi Lal v. CIT [1967] 65 ITR 477(Punj. & Har.)].

6.3 Where an assessee, who claims to be assessed as a registered firm, has been assessed as an unregistered firm and challenges the assessment order on the ground that it should be assessed as a registered firm, it can be said that the assessee is denying the liability to be assessed under particular circumstances as laid down by the Supreme Court in CIT v Kanpur Coal Syndicate [1964] 53 ITR 225 (SC)]. Such an assessment order is appealable under section 246(1)(a) [CIT v. Angadi Bros. [1985] 22 Taxman 578/[1986] 157 ITR 426 (Kar.)].

6.4 The word “assessed” in section 246(1)(a) has been used in a comprehensive sense to mean and imply the whole procedure for ascertaining and imposing liability on the taxpayer. There is nothing in section 246(1)(a) to indicate that a narrow meaning should be given to the word “assessed” there. On the contrary, the words “under this Act” clearly shows that reference there is to the whole procedure laid down in the Act imposing liability upon the taxpayer. The denial of liability to be assessed may be in respect of the entire income or of a part thereof. It may be based on any ground, whether of fact or of law, and it may be total denial of liability or denial of liability under particular circumstances. But the denial must be of the liability to be assessed under the Act and not merely under any particular provision of the Act. [Mandal Ginning & Pricing Co. Ltd. v. CIT [1973] 90 ITR 332 (Guj.)].

6.5 If an assessee makes a mistake in submitting a return and submits to be assessed on a particular income before the Assessing Officer, he is not estopped or precluded by law from preferring an appeal and showing to the appellate authority to examine the matter and determine the proper tax payable. There is no question of invoking doctrine of estoppel in such a case of [Narsepalli Oil Mills v. State of Mysore (1973) 32 STC 599 (Kar)]

6.6 An assessee who denies his liability to be assessed under this Act is entitled to appeal on that ground even if he had not denied his liability before the Assessing Officer, but only after the assessment is made. The words “denies” and “objects” are words imparting present continuous state of affairs. They do not import a past state of affairs. [M.M Muthuwappa v. CIT [1962] 46 ITR 1107 (Mad.); CIT v. M Pyngrope [1962] 200 ITR 106 (Gau.)]

6.7 In a case where the assessee who failed to pay advance tax on due date did not contest the very liability of advance tax, it was held that he cannot challenge the levy of interest on advance tax alone under this section, since that would not amount to him having denied his liability to tax. [E Merck (India) Ltd. v. CIT [2017] 79 taxmann.com 21/393 ITR 91 (Bom.)]

6.8 A person treated as a partner in the assessment on a firm may appeal, if he denies his liability to be assessed as a partner. [Gokuldas v. Kikabhai Abdulali  [1958] 33 ITR 94 (Bom); Vedantham v. ITO [1963] 49 ITR 314 (Mad.)]

6.9 The expression “denial of liability” covers not only the total denial of liability but also the denial of liability under particular circumstance e.g. the denial by an association of persons to be assessed as a unit on the ground that judicial exercise of the department’s option would require that the members should be individually assessed. In both cases, the denial is denial of liability to be assessed under the provisions of the Act. [CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC); ITO v. Sh. Bhogavati Sah Sahkari Karkhana Ltd. [2006] 101 ITD 302 (Pune-Trib.)]

6.10 Clause (c) of section 246 provides an appeal against an order where the Assessee denies his liability to be assessed. The clause “to dispute the levy in appeal” would be required to be read as disputing the levy of interest in an appeal challenging the assessment (original assessment and not any assessment of interest) on the ground that the assessee is not liable to be assessed. If the original assessment itself is challenged in the said appeal, the assessee can certainly challenge the levy of interest. [Sk Muneer Sk Mannu Chaudhary v. Dy. CIT [2008] 166 Taxman 439/300 ITR 216 (Bom.)]