Analysis, Income Tax

Most Litigated Income Tax Issues (Procedural)

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Procedural aspects are relevant in the lifecycle of every case, irrespective of the substantive legal issue involved. Here are the most frequently occurring procedural issues which a lawyer might face in his day to day daily practise.

Can a tribunal examine a question raised for the first time before it? 

Short answer: Yes, it can examine a question so long as the relevant facts are on record


Supreme Court TAX REF. CASE NO. 4 OF 1988 (cited 1500+ times)

Reasoning: The court observed that the powers of tribunal have been expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. The powers of tribunal are not restricted only to decide the grounds which arise from the order of the CIT(A).

Can assessee make a claim for deduction to AO, without filing a revised return?

Short answer: No


Supreme Court CIVIL APPEAL NO. 1761 OF 2006 (cited 1100+ times)

Reasoning: The court held that Assesse cannot claim deduction other than by filing revised return. Assesse cannot rely on National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC)249 as this decision related to the power of the Tribunal under s. 254 of the IT Act, 1961. Tribunal can entertain for the first time a point of law provided the fact based on which the issue of law can be raised before the Tribunal. This decision does not in any way relate to the power of the AO to entertain a claim for deduction otherwise than by filing a revised return.

Can the income tax officer (ITO) initiate reassessment proceedings u/s 147 of the IT Act, 1961 for a “mere change of opinion”?

Short answer: No

Most cited case: CIT vs. KALVINATOR OF INDIA LTD

(Delhi HC,  ITC 4 of 2000) (cited 1200+ times)

Reasoning: The AO sought to open the proceedings u/s 147 based on a tax audit report. The catch here was that the tax audit report had already been submitted by the assesse during asessement u/s 143(3) and AO had overlooked the information in the report while passing the order. Therefore, it was held that it is one thing to say that the AO had received information from an audit report which was not before the ITO, but it is another thing to say that such information can be derived by the material which had been supplied by the assessee himself. The expression “reason to believe” contained in s. 147 of the IT Act denotes that the reassessment must be based on a change of fact or subsequent information or new law. The “tax audit report” would not fall under the ambit of “subsequent information.

Also Read : To Appeal or To Writ?

Can an appeal be dismissed on account of non-appearance of the appellant’s representative without an ex parte hearing and not considering merit of the appeal?

Short answer: Yes


, ITAT Delhi, ITA NO. 800/DEL/1989 

(cited 4800+ times)

Reasoning: The provisions of Rule 19(2) of the Tribunal Rules, 1963 support dismissal of appeal such action by stating that mere issue of notice could not by itself mean that appeal had been admitted. The tribunal further clarified their stand by stating that, when the appeal is presented, the concerned Clerk in registry verifies whether accompanying documents are received or not and if not a memo is issued calling for the papers which are also required to be attached to appeal memo. But at no stage usually the scrutiny is made on points whether the appeal memo and contents really conform to various Tribunal Rules or is it a legally valid appeal under section 253 of the Act. Those points if arising can be considered only at a time of hearing. And that is why the rule prescribing that mere issue of notice does not mean appeal is admitted.

Is the Court bound to answer the reference, if the party making the reference fails to appear or fails in taking steps for preparation of the paper books to enable hearing?

Short answer: No, court is not bound to answer the reference.

Most cited case: Estate Of Late Tukojirao Holkar vs. Commissioner Of Wealth Tax 

Madhya Pradesh HC, MISC. CIVIL CASE NO. 302 OF 1991

(cited 3800+ times)

Reasoning: In the case , at the instance of the applicant, the Tribunal had referred the case to Madhya Pradesh HC on for opinion on a question of law.  However, as the assessee had expired and no one had appeared on his behalf, the HC held that if the party at whose instance the reference is made, fails to appear at the hearing, or fails in taking steps for preparation of the paper books so as to enable hearing of the reference, this Court is not bound to answer the reference.

(Written by Anuj Sharma, Product Counsel @ Riverus)

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