Who Can File an Appeal Under Income Tax Act | Section 246A

An appeal under the Income Tax Act refers to the legal right granted to an assessee (or other eligible persons like a deductor, collector, or legal heir) to challenge an order passed by the income tax authorities before a higher appellate authority. This process allows the aggrieved party to seek redressal if they believe the assessment, penalty, or any decision under the Act is incorrect or unjust.

Table of Contents

1. Introduction
2. Assessee
3. Person Deemed to be an Assessee
4. Person Deemed to be an Assessee in Default
5. “Deductor” or “Collector”
6. Meaning of Assessee “Aggrieved”
7. Who Can File an Appeal – General
8. Individual
9. Procedure for Registering Legal Heir

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1. Introduction

1.1 Section 246A of the Act gives a “right to appeal” to:

(a) any “assessee”,

(b) “deductor” or

(c) “collector”

“aggrieved” by any of the orders specified therein

2. Assessee

2.1 Section 2(7) defines an “assessee” to mean a person by whom any tax or any other sum of money is payable under this Act, and includes –

(a) every “person” in respect of whom any proceeding under this Act has been taken for the assessment of his income (or assessment of fringe benefits) or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person;

(b) every “person” who is deemed to be an assessee under any provision of this Act;

(c) every “person” who is deemed to be an assessee in default under any provision of this Act.

2.2 The word “person” used in the definition of an “assessee” has been defined in section 2(31) to include –

(a) an Individual;

(b) a Hindu Undivided Family;

(c) a Company;

(d) a Firm;

(e) an association of persons or a body of individuals, whether incorporated or not;

(f) a local authority; and

(g) every artificial juridical person, not falling within any of the categories listed above.

3. Person Deemed to be an Assessee

3.1 The category of “person deemed to be an assessee” would include persons who are either liable to pay taxes for income earned by third persons, who are not in a position to pay and file taxes themselves or “persons” who are legally made liable to pay taxes, for some other persons. A company, which has given a guarantee to the department to pay the tax, that may be found due from a foreign technician engaged by it, if any, would be entitled to appeal under this section as an aggrieved assessee.

3.2 The provisions of Sections 160 to 167 relate to the taxability of income in respect of which he is a representative assessee of another person and deal with the issues relating to assessment, collection of tax and generally income-tax proceedings where income is legally receivable by a person on behalf of or for the benefit of another.

3.3 Under Sub-section (1) of Section 160 of the Act, an assessment may be made on a representative assessee in the following cases:

(i) in respect of the income of a non-resident specified in sub-section (1) of Section 9, the agent of the non-resident, including a person who is treated as an agent under section 163;

(ii) in respect of the income of a minor, lunatic or idiot, the guardian or manager who is entitled to receive or is in receipt of such income on behalf of such minor, lunatic or idiot;

(iii) in respect of income which the Court of Wards, the Administrator General, the Official Trustee or any receiver or manager (including any person, whatever his designation, who in fact manages property on behalf of another) appointed by or under any order of a court, receives or is entitled to receive, on behalf or for the benefit of any person, such Court of Wards, Administrative -General, Official Trustee, receiver or manager;

(iv) in respect of income which a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise [including any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913) receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees;

(v) in respect of income which a trustee appointed under an oral receives or is entitled to receive on behalf or for the benefit of any persons, such trustee or trustees.

3.4 Arising from the above, in the following cases, income of an assessee is taxable in the hands of a representative assessee either because the assessee is –

1. not present in India (say a non-resident); or
2. not competent to contract (say a minor or lunatic); or
3. represented by Courts of Wards or Administrator, etc. appointed by the Court; or
4. an artificial person and thus has to be represented by some human being (say a trust)

3.5 A representative assessee as defined in Section 160 of the Act shall be deemed to be an assessee for the purpose of the Act only in respect of income specified, in the section and not for any other income and accordingly can pursue the matter in appellate proceedings only in respect of such income.

3.1 Judicial View

3.1.1 Section 166 reserves the right of the revenue to recover the tax from the beneficiary although the assessment may be on the representative assessee. Section 160(2) also deems every representative assessee to be the “assessee” for the purposes of the Act. Therefore, an appeal against such assessment may be filed either by the representative assessee assessed as such, or by the beneficiary, if the latter is otherwise legally competent to act [Shrimant Govindrao Narayanrao Ghorpade v. CIT [1963] 48 ITR 54 (Bom.); S.Inder Singh Gill v. CIT [1963] 47 ITR 284 (Bom.)]

3.1.2 If under an agreement A promises to pay the tax due of B, the revenue, being a party to the agreement, cannot treat A as the Assessee and demand from him the tax due by B. [Commissioner of Excess Profits Tax v. Ramnath Bajoria [1951] 19 ITR 79 (Cal.); Iqtida Khan v. ITO [1961] 41 ITR 165 (All.)]

4. Person Deemed to be an Assessee in Default

4.1 Section 246A of the Act provides a right of appeal to an assessee who is deemed to be in default under any provisions of the Act. While the term “assessee in default” has nowhere been defined in the Act extrapolating the normal meaning, it would refer to cases where an assessee has not discharged his/its statutorily obligations under the Act, particularly with reference to payment of taxes on the statutorily specified dates or in complying with the procedural requirements of the Act or default in the deduction/collection and deposit of TDS/TCS etc.

4.2 An illustrative list of instances/persons in which who can be deemed to be an “assessee in default” is as follows:

(i) failure to pay taxes as per the notices of demand issued under section 156 within the time specified;

(ii) Principal Officer of a Company in the event of failure to pay tax on undistributed profits under section 115-O and 115QA;

(iii) person responsible for making payment of the income distributed by a Securitisation Trust and the Securitisation Trust does not pay tax, as referred to in sub-section (1) of section 115TA,

(iv) person responsible for making payment of the income distributed by the [specified company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 or a Mutual Fund and the specified company] or the Mutual Fund, as the case may be who does not pay tax, as is referred to in sub-section (1) or sub-section (2) of section 115R.

(v) failure to pay self-assessment tax under section 140A(1) as per the manner specified therein;

(vi) failure to deduct or after deduction failure to pay the whole or any part of tax deducted at source (Section 191 and 201);

(vii) failure to collect or after collection to pay the whole or any part of the tax at source (Section 206C).

(viii) any assessee who does not pay on the date specified in sub-section (1) of section 211, any instalment of the advance tax that he is required to pay by an order of the Assessing Officer under sub-section (3) or sub-section (4) of section 210 and does not, on or before the date on which any such instalment as is not paid becomes due, send to the Assessing Officer an intimation under sub-section (5) of section 210 or does not pay on the basis of his estimate of his current income the advance tax payable by him under sub-section (6) of section 210.

(ix) failure to make payment to the Assessing Officer or Tax Recovery Officer pursuant to a notice issued under section 226.

4.3 Such persons can pursue the matter in appeal in respect of the issues for which they have been deemed to be “as assessee in default”.

5. “Deductor” or “Collector”

5.1 While there is no statutory definition of “Deductor” or “Collector”, in the specific context, it would refer to any person who is liable to deduct or collect tax at source in accordance with the provisions of Part B and C of Chapter XVII of the Act respectively. By giving a right to appeal to a “Deductor” or “Collector”, orders relating to tax deducted/collected at source have been specifically made appealable.

6. Meaning of Assessee “Aggrieved”

6.1 The right of appeal is granted by statute to “only a person aggrieved” and not necessary on any person disappointed by the order. The Merriam Webster Dictionary defines “aggrieved” as “suffering from an infringement or denial of legal rights and with a feeling of resentment”. Thus, an aggrieved person is one who feels the negative effects of the denial of a legal right or of a benefit which has been denied to him resulting in him being discontented, disgruntled and with a feeling of resentment.

6.2 “Aggrieved” connotes a feeling of resentment or unfair treatment arising from the denial of a rightful claim or legal right. The factum of being aggrieved may arise from denial of a legal benefit which was otherwise due to him or fostering additional tax liability which by being agitated in appeal has the chance of being either eliminated or reduced. For an appeal to be valid the link between the Assessee and the factum of “being aggrieved” has to be direct, intimate and proximate and not tenuous. Any person who feels disappointed with the result of the case is not a “person aggrieved”. He must be disappointed by the denial of a benefit which he would have received if the order had gone the other way.

6.1 Judicial View

6.1.1 For a “person to the aggrieved” the order must cause him a legal grievance by wrongfully depriving him of something. A person is said to be “aggrieved” by an order which is to his detriment – pecuniart or otherwise or causes him some prejudice in some form or the other. [Adi Pherozshah Gandhi v. H.M. Seeravai (1971) AIR 385(SC)];

6.1.2 A “person aggrieved” is a person sufficiently harmed by a legal judgment decree or order to have standing to pursue an appellate remedy. A person can be said to be “aggrieved” by an order only if that order directly affects or prejudices his interest. [India Tyre & Rubber Co. (India) Private Ltd v. CTO (1981) 47 STC 273 (Mad)];

6.1.3 Under section 246/246A any person who really is aggrieved by the assessment order and on whom the burden of tax will fall will be entitled to prefer an appeal so that the tax burden can be entirely reduced or lessened. A person who will not have to bear the burden of the tax will never appeal [CIT v. Hindustan Steel Ltd. [1989] 45 Taxman 273/179 ITR 213 (Cal.)]

6.1.4 A person will be held to be aggrieved by a decision if that decision is materially adverse to him. Normally, one is required to establish that one has been denied or deprived of something to which one is legally entitled in order to make one “a person aggrieved”. A person is aggrieved if a legal burden is imposed upon him. [Bar Council of Maharashtra v. M.V. Dabholkar (AIR 1976 SC 242)]

6.1.5 The creditor cannot be regarded as a person “aggrieved” in appeal against an assessment order passed against the debtor. [Gem Granites v. CIT [2004] 140 Taxman 362/267 ITR 640 (Punj. & Har.)]

6.1.6 To be entitled to file an appeal the person must be one aggrieved by the decree Unless a person is prejudicially or adversely affected by the decree, he is not entitled to file an appeal. [Banarsi v Ram Phal (AIR 2003 SC 1989)]

6.1.7 Where assessee-director of company filed an appeal before Tribunal against penalty imposed on company, as no tax was payable by assessee, he could not be treated as an aggrieved party and would not be entitled to file instant appeal before Tribunal. [R. Subba Rao v. ITO [2015] 58 taxmann.com 106 (Hyd. – Trib.)]

6.1.8 The right of appeal is not confined merely to the Assessee on whom order of assessment has been made but to any assessee aggrieved by the said order e.g. a beneficiary may be aggrieved for an order made on the Trust [CGT v. A.C. Mahesh [2002] 121 Taxman 269/[2001] 252 ITR 440 (Mad.)]

6.1.9 Even a third party has a right to appeal, if as a result of an order, he is saddled with liability for any tax or other sum [Kikabhai Abdulali v. ITAT Bombay [1957] 32 ITR 762 (Bom); CIT v. N Ch R Row & Co. [1982] 11 Taxman 226/[1983] 144 ITR 557 (Cal)].

7. Who Can File an Appeal – General

7.1 Ordinarily, it is only the assessee against whom the assessment order has been passed who shall have the right to appeal. Of course, the appeal can be filed in some cases through “legal heir”, “agent”, “representative assessee”, “successor” or any person authorised in this behalf by the particular assessee.

7.2 Where an Appellant dies or is adjudicated insolvent or in case a Company is wound up, the appeal filed will not abate and will continue against the executor, administrator, assignee, receiver, liquidator or other legal representative as the case may be of the Appellant.

8. Individual

8.1 In case the “aggrieved person” is an individual, he himself is competent to file an appeal. In case an assessee dies or is adjudicated insolvent, his legal heir or executor as the case may be is competent to file and pursue an appeal.

8.2 As per sub-section (1) of Section 159 of the Act

“Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased”. Moreover, as per sub-section (3) of the same section “The legal representative of the deceased shall, for the purpose of this Act, be deemed to be an assessee.”

8.3 Section 2(29) of the Act provides that “legal representative” has the meaning assigned to it in section 2(11) of the Civil Procedure Code, 1908 which defines it to mean

“a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued”.

8.4 The expression “legal representative” as defined in the Civil Procedure Code, is inclusive in character and its scope is wide and not confined to legal heirs only. Instead it stipulates that a person, who may or may not be the heir, competent to inherit the property of the deceased, but who should represent the estate of the deceased person is the Legal Representative. It includes heirs as well as persons who represent the estate even without title either as executors or administrators in possession of the estate of the deceased.

8.5 In case of death of an appellant, the procedure of registering a legal heir should be followed and thereafter a fresh memorandum of appeal signed by the legal heir should be filed for bringing the legal heir on record.

9. Procedure for Registering Legal Heir

9.1 With the advent of e-proceedings and e-filing of appeals, the following procedure is to be followed for registering a legal heir by using the login Id and password of the deceased:—

(i) Log on to ‘e-Filing’ Portal http://www.incometax.gov.in/iec/foportal

(ii) (a) Go to ‘Authorised Partners’ > ‘Register as Representative Assessee’

(b) Click ‘Lets Get Started’

(c) Click ‘Create New Request’

(d) Select the ‘Category of assessee who you want to represent’ as ‘Deceased (Legal Heir)’

(iii) Provide the following details:

(a) PAN of the Deceased

(b) Date of Death

(c) Reason for Registration

(d) Details of all Legal Heir – Number of surviving member as the legal heir for the deceased

(e) Bank account details of Legal heir.

(iv) Attach the following documents as attachments against the hyperlink provided for the same:

(a) Copy of the PAN card of Deceased

(b) Copy of the PAN card of the legal heir

(c) Copy of Death Certificate

(d) Copy of Legal Heir Proof from the below list:

(1) The legal heir certificate issued by a court of law/local revenue authorities or

(2) The surviving family members certificate issued by the local revenue authorities or

(3) The family pension certificate issued by Central/State Government or

(4) The registered will. Or

(5) Letter issued by the banking or financial institution in their letter head, with seal and signature mentioning the particulars of nominee or joint account holder to the account of the deceased at the time of the demise.

(e) Copy of the order passed in the name of the deceased (Mandatory only if the reason for registration is ‘Filing of an appeal against an order passed in the name of deceased’).

(f) Copy of the order/notice along with Reference Number, date, language of order/notice

(g) Copy of Letter of Indemnity.

(v) After attaching the documents, click ‘Continue’.

(vi) On the Verify your Request page, provide the 6-digit OTP received on your mobile number and email ID registered with the e-Filing portal and click Verify.

(vii) A Success Message will be displayed confirming the submission of request to ‘Register as Legal Heir’.

(viii) Upon submission, request will be sent to the e-Filing Admin for approval. The e-Filing Admin will check the authenticity of the request details and may Approve/Reject the request and Upon Approval/Rejection, an e-mail and SMS will be sent to the user who raised the request. A legal heir can file the appeal only after the request is approved by the E-filing Admin.