By M. K. Mehendale, Ashok L. Sharma, Chartered Accountants
Lecture Meeting
Subject : Drafting of Appeals, Representation
and Rules of Evidence
Speaker : Chetan Karia, Chartered
Accountant
Venue : I.M.C. Hall, Churchgate, Mumbai.
Date : 6th August 2008
(1) The learned speaker, while setting out the scope and
coverage, remarked that the subject has three elements. Actually each element
can become a topic by itself for discussion. Still to make the discussion
concise and informative, he combined the first 2 elements, viz. drafting
and representation together and the third one was considered separately.
(2) The right of appeal is not an inherent right, but is
conferred by statute to ensure natural justice in arriving at fair and just
quantum of income through Appellate process. In CIT v. Ashoka Engineering
Co., 194 ITR 645 (SC), the Supreme Court held that such provisions giving
right of appeal should be liberally construed.
(3) The speaker suggested that before filing an appeal, the
order appealed against needs a careful study. Apart from quantum addition and
its tax effect, one has to ascertain whether the additions are unjust and unfair
and also whether they are contrary to provisions of law. One should also examine
whether addition, though small in the current year, would set a bad precedent
for future. While deciding whether the appeal is really called for the merits
and strength of the case should be looked objectively. The appellant should also
keep in mind the powers of enhancement vested in CIT(A). There is no right to
withdraw the appeal. The entire assessment gets open before CIT(A) and his
powers are co-terminus with powers of the AO. CIT v. Rai Bahadur Hardotrai
Motilal Chamaria, 66 ITR 443 (SC).
(4) Drafting of Statement of Facts and Grounds of Appeal
: The statement of facts plays very important role in appeal proceedings.
The Appellate authorities while deciding the appeal need to have before them the
basic facts and events that transpired during assessment proceeding. Whatever is
stated in the assessment order is the version and viewpoint of the AO while
arriving at his decision. If the appellant is in disagreement with the AO’s
version, he has to convincingly put forth before the Appellate Authority, his
standpoint and facts of his case and evidences in support of those facts. At
this juncture, it is necessary to consider whether all these facts and evidences
were laid before the AO during the assessment proceedings.
As regards drafting of grounds of appeal, the speaker advised
that grounds should not be argumentative and lengthy, but should be short,
precise and to the point. Once it is decided that the appeal is to be filed,
then it must be filed strictly within the period of limitation.
(5) The various issues that need consideration in appeal proceedings are :
(a) whether the AO had jurisdiction to pass the impugned
order. Jurisdiction means not only territorial, but also consideration of period
of limitation within which the order is to be passed (S. 153), the financial
limits, obtaining prior approvals of superior authorities, recording in
assessment order and on proceeding sheets about his satisfaction that a
particular default was committed, particularly in penalty proceeding
u/s.271(1)(c). In appropriate cases jurisdiction should be challenged.
(b) Consideration of additional evidence : If
it is the case of the appellant, that the AO has not given sufficient
opportunity to present such evidence before passing the order or that the
assesses was prevented by sufficient cause from adducing such evidence, then
specific prayer should be made to take on record and consider such evidence
before passing Appellate order.
(c) The appellant can take additional grounds and press fresh
claims not set out in appeal memo, if the material relevant thereto is already
on record. In the following cases before Supreme Court and High Courts, this
issue has been considered and the ratios of those cases should be considered
before taking up such additional grounds. The assessee can make alternative
pleas for consideration of Appellate Authority, e.g., allowing
depreciation, if certain expenditure is treated as capital expenditure.
The citation of cases on making fresh claims not originally
claimed in grounds of appeal are as follows :
(i) CIT v. Kanpur Coal Syndicate, 53 ITR 225 (SC).
(ii) CIT v. Jute Corporation, 187 ITR 688.
(iii) National Thermal Power Co. Ltd. v. CIT, 229
ITR 383 (SC).
(iv) Ahmedabad Electric Co. v. CIT, 199 ITR 351 (Bom.)
(FB)
(d) The following judgments on filing of additional grounds
not originally taken in the appeal memo :
(i) Shilpa Associates v. ITO, 263 ITR 317 (Raj.),
(ii) Baby Samuel v. ACIT, 262 ITR 385 (Bom.).
It was held that additional ground can be taken any time
before the appeal is heard.
(e) The appellant should ensure that all taxes due on
returned income are paid before filing of appeal. S. 249(4) puts a clear bar or
powers of CIT(A) to entertain any appeal if taxes due on returned income are
unpaid on date of filing of appeal.
(6) Filing appeal before ITA Tribunal and filing of cross
objections :
Both the parties i.e., the assessee and the Assessing Officer, aggrieved by order of CIT(A) can file their appeal before the ITA Tribunal. The time limit is 60 days from the date of receipt of Appellate order of CIT(A) where the Department has filed an appeal to ITAT; the assessee can file cross objection to the Department’s appeal. In such cross objections the assessee can file an appeal on all grounds raised by him which have not found favour with CIT(A). So also where the assessee has claimed allowability on alternate grounds and CIT(A) has allowed on one ground and dismissed the other, then the assessee can raise cross objection against alternate ground dismissed by CIT(A).
(7) Representation before Appellate authorities:
The role of the representative is to assist the Court in arriving at correct and judicious judgment. While taking every effort to present the client’s case more effectively, the tax representative should not identify himself with success of client’s case. The facts of the case should be carefully studied before making appearance before the Court. The submission both on facts and on law should be compiled in the form of paper book.
The paper book should be exhaustive enough to cover all materials supporting the grounds but not bulky. The order in which the papers should be arranged should assist smooth flow of presentation of arguments to be made before the Appellate authorities.
In case of appeal before ITAT as per ITAT Rules, though bulky paper book is filed during proceedings, it is only those papers which are referred to in the Appellate order form part of the case records.
The rules governing the filing of additional evidence are Rule 46A of IT Rules for appeal before CIT(A) and Rule 29 of ITA Tribunal Rule, for appeal before the Tribunal.
8) Presentation of judgments, decided cases before the Court :
The accessibility to innumerable cases with citations has become possible due to computer technology. This calls for skill of a professional to be selective. it is not the decision, nor discussion in a judgment cited is to be relied upon, but the ratio decidendi is more important. There is difference between ratio and obiter dicta. Doctrine of precedents should also be borne in mind. Supreme Court judgment is binding on all authorities and becomes the law of the land. After the Supreme Court, the judgment of jurisdictional High Court has equal binding force in that State, till such judgment is reversed. Where there is no judgment of jurisdictional High Court, then judgments of High Courts of other States have binding force on the Tribunal. If there is conflict in judgments of two High Courts, the Tribunal can follow judgments which are closer to the case before it. So also the judgment of Special Bench is binding on coordinate Division Benches.
9) Some practical suggestions on presentation and on ideal behaviour of tax representative during hearing:
a) Dress Code: The prescribed dress to be worn should not be too gaudy.
b) Behaviour gestures, body language, should not be irritating, provocative but should be normal and decent.
c) Eye contact should be maintained with Members of the Bench.
(d) The speech, its tone and speed: The tone should be polite and should have clarity whereby the message gets conveyed.
e) It must always be remembered that the Appellate authority i.e., CIT(A) or the Tribunal Bench being deciding authorities, have every power to ask any question for finding of facts as well as for collecting information. The representative must reply all such questions patiently and to the point. He should never question the relevance of enquiry.
f) The representative should avoid the habit of interrupting when the representative of other side (DR) or members of the Bench are speaking.
g) The representative should know where to stop.
(10) Rules of evidence:
The authorities deciding the case, the AO, CIT(A) and the Tribunal have to give their findings while deciding the case. For that purpose support has to be taken of some credible and conclusive evidence. Such evidences is required to be brought on record by following certain procedure:
a) In Prabhavati S. Shah v. CfT, 231 ITR 1 (Born.); the Bombay High Court has held that the Rules put fetters on rights of the assessee to produce additional evidence, but not on Appellate authorities to consider it if they want to consider. Where the AO has made addition based on statement of any party behind the back of the assessee and contents of such statement is contradicted by the assessee, then he must be given opportunity to cross-examine the deponent. This is relevant while deciding merits of additions u/s.68 and u/s.69.
b) Income-tax proceedings are quasi-judicial civil proceedings and hence the provisions of the Evidence Act applicable to criminal proceedings are not applicable to Income-tax proceedings. This is held in the following cases:
i) Dhakeshwari Cotton Mills v. CfT, 26 ITR 775 (SC)
ii) Kishinchand Chellaram v. CIT, 125 ITR 713 (SC)
iii) J. S. Parker v. V. B. Palekar, 94 ITR 616 (Born.)
iv) Chuharmal v. CfT, 172 ITR 250 (SC).
c) Books of accounts regularly maintained are good evidence but not conclusive. This is held as evidence in V. C. Shukla’s case 3 SCC 410 (SC), 82 ITD 85 (Mum.) (TM).
d) If opportunity is not given to the assessee, such evidence is not good evidence and addition based thereon will not sustain. [Kishinchand Chellaram, 125 ITR 713 (SC)]
e) Cross-examination and statement of witnesses: if during the cross-examination the witness contradicts his earlier statement, then his statement cannot be relied upon by the AO for making addition and is to be completely ignored.
f) The information given by the witness should be factual and not based on hearsay. It is necessary to prove what is apperant is real. [Durgaprasad More v. CIT, 82 ITR 540 (SC)]
g) Rule 46A : The CIT(A) has full right to decide whether additional evidence should be admitted or not. Where it is the contention of the assessee that he was prevented by sufficient cause, he has to prove it.
h) Substantial cause and Rule 46A of the LT. Rules or Rule 29 of the ITAT Rules: The Supreme Court in K. Venkat Ramaiah v. A. Seetharam Reddy, AIR 1963 SC 1526 has ruled that in the interest of a fair judgment, the Appellate authority should take a sympa-thetic view and should not deny admission of evidence on hypertechnical ground.
The meeting terminated with a vote of thanks to the learned Speaker.
