EDITORIAL NOTE — VOL XVIII

This Volume covers Chapter XX (Appeals and Revision ss. 246-269) — the entire appellate hierarchy: Commissioner (Appeals) [s. 246A onwards], Income-tax Appellate Tribunal [s. 252 onwards], High Court [s. 260A], Supreme Court [s. 261]. Plus Chapter XIX-AA (Dispute Resolution Committee s. 245MA) and Chapter XIX-B (Advance Ruling ss. 245N-245V). Settlement Commission (Chapter XIX-A ss. 245A-245L) was abolished by FA 2021 — pending applications transferred to Interim Boards.

Section 245MA — DISPUTE RESOLUTION COMMITTEE

Section 245MA (FA 2021) — DRC for small / medium taxpayers (returned income ≤ ₹50 lakh and disputed addition ≤ ₹10 lakh) — alternative to traditional appellate route. DRC framework operationalised through e-DRC Scheme, 2022 (CBDT Notification 26/2022).

PLANNING NOTES

(i) DRC route appropriate for small-quantum disputes — faster turnaround, modulation discretion. (ii) Form 34BC — application to DRC; specify settled tax + waived penalty / interest. (iii) Once DRC order accepted, no further appeal lies — irrevocable choice.

SECTIONS 245N-245V — ADVANCE RULING

Architecture

• s. 245N — definitions; advance ruling means a determination on a question of law / fact arising out of any specified transaction by Authority for Advance Rulings (AAR) / Board for Advance Rulings (BAR).
• s. 245-O — AAR constitution (legacy); replaced by BAR (Board for Advance Rulings) post FA 2021.
• s. 245Q — application for advance ruling — Form 34C, fee ₹10,000.
• s. 245R — procedure on receipt of application; binding-ness exclusively on applicant + Department in specified transaction.
• s. 245S — applicability of advance ruling.
• s. 245T — void if obtained by fraud.
• s. 245U — powers of AAR/BAR.

PLANNING NOTES

(i) Use AAR/BAR for prospective NR transactions where chargeability is contested — provides binding clarity. (ii) Where transaction has tax-implication > ₹10 crore, BAR route is the practical test of AAR's preferred procedure. (iii) Ruling binding only on applicant + Department in specific transaction; not precedential beyond that.

Section 246A — APPEAL TO COMMISSIONER (APPEALS)

(1) Any assessee or any deductor or any collector aggrieved by any of the following orders (whether made before or after the appointed day) may appeal to the Commissioner (Appeals) against such order—

(a) an order against the assessee, where the assessee denies his liability to be assessed under this Act, or an intimation under sub-section (1) or sub-section (1B) of section 143, or sub-section (1) of section 200A, or any order of assessment under sub-section (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed; ...

PROCEDURE

• Form 35 — appeal memorandum + Statement of Facts + Grounds of Appeal.
• Filing fee — ₹250 / ₹500 / ₹1,000 / ₹10,000 depending on assessed income range.
• Time-limit — 30 days from date of receipt of order.
• Faceless appeal scheme — operative since FA 2020.
• Pre-deposit — 20% standard (CBDT Instruction 4/2024); reducible in genuine hardship.

JUDICIAL EVOLUTION — Wide Powers of CIT(A)

CIT v. Kanpur Coal Syndicate, (1964) 53 ITR 225 (SC) — CIT(A) powers coterminous with AO; can do all that AO could.

HELD: Once an order has been brought before the AAC under section 31 [now CIT(A) under s. 251], the AAC has plenary powers in disposing of an appeal. He has wide powers and can pass such orders as he thinks fit on the appeal. (per Kanpur Coal Syndicate ¶ 7).

CIT v. Nirbheram Daluram, (1997) 224 ITR 610 (SC) — CIT(A) cannot dismiss appeal on non-prosecution; must decide on merits.

ADDITIONAL EVIDENCE — Rule 46A

Rule 46A governs admission of additional evidence at CIT(A) stage. Permissible where: (a) AO refused to admit; (b) assessee was prevented by sufficient cause; (c) evidence is required for substantial cause; OR (d) AO did not give reasonable opportunity.

PLANNING NOTES

(i) File Form 35 within 30 days strictly; condonation u/s 246A(3) requires cogent reasons. (ii) Maintain a 'GroundsSummaryDoc' filed with the appeal — concise, citation-rich. (iii) Additional evidence — file via Form 35 supplementary application; cite Smt. Anita Verma (2014) 360 ITR 27 (Del HC). (iv) For pre-deposit, model financial-stringency affidavit; cite KEC International for stay framework.

SECTIONS 252-255 — INCOME-TAX APPELLATE TRIBUNAL

Architecture

• s. 252 — constitution of ITAT (Members appointed by Central Government).
• s. 253 — appealable orders before ITAT (CIT(A) orders, revision orders u/s 263, search-related u/s 153A etc.).
• s. 254 — orders of ITAT — final on facts; reviewable on law to High Court via s. 260A.
• s. 255 — procedure of ITAT (judicial / accountant member benches; single-member bench for small cases).

PROCEDURE

• Form 36 — appeal memorandum.
• Filing fee — 1% of assessed income subject to caps (max ₹10,000).
• Time-limit — 60 days from date of CIT(A) order.
• Stay applications — Form 36A; ITAT inherent jurisdiction (M.K. Mohammed Kunhi).

JUDICIAL EVOLUTION — Inherent Stay Power

ITO v. M.K. Mohammed Kunhi, (1969) 71 ITR 815 (SC) — ITAT has inherent power to grant stay; statutory silence does not negate the implied power.

HELD: The Income-tax Appellate Tribunal has inherent jurisdiction to grant stay of recovery proceedings pending disposal of the appeal. Statutory silence does not negate the implied power, which is inherent in the appellate function. (per M.K. Mohammed Kunhi ¶ 9).

JUDICIAL EVOLUTION — ITAT as Final Fact-Finder

CIT v. M.M. Khambhatwala, (1992) 198 ITR 144 (SC) — ITAT is the highest fact-finding authority; the High Court cannot reappraise evidence except in perversity.

PLANNING NOTES

(i) File Form 36 within 60 days of CIT(A) order. (ii) Stay-application — Form 36A; cite M.K. Mohammed Kunhi + KEC International + financial-stringency affidavit. (iii) ITAT Bench composition — ensure Senior-Member presiding for high-value or precedent-setting matters; consider transfer applications u/s 255(3) where appropriate. (iv) Time-limit for ITAT decision — typically 4 years (s. 254(2A) for stay automatic vacation post 365 days).

SECTIONS 260A-261 — APPEALS TO HIGH COURT AND SUPREME COURT

Section 260A — Appeal to High Court

Appeal lies to High Court only on a substantial question of law arising out of an ITAT order. Time-limit 120 days. Strict standard — fact-findings of ITAT are not appealable; only legal questions.

Section 261 — Appeal to Supreme Court

Appeal lies to SC from any HC judgment on certificate of fitness u/s 261, OR via Special Leave Petition u/Art. 136 of Constitution. Most tax matters reach SC via SLP route.

SECTIONS 263-264 — REVISION

Section 263 — Revision of Orders Prejudicial to Revenue

(1) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

Explanation 2 — For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,—

(a) the order is passed without making inquiries or verification which should have been made;

(b) the order is passed allowing any relief without inquiring into the claim;

(c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or

(d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.

JUDICIAL EVOLUTION — Twin Conditions

The locus classicus is Malabar Industrial Co. Ltd. v. CIT, (2000) 243 ITR 83 (SC), laying down the twin-condition test — order must be (a) erroneous AND (b) prejudicial to revenue. Both conditions are conjunctive.

HELD: 'Erroneous' includes orders passed in violation of law or in disregard of authoritative pronouncements; but where the Assessing Officer has taken a view which is one of the legally permissible views, the order is not erroneous and Revision under s. 263 is impermissible. (per Malabar Industrial ¶ 14).

CIT v. Max India Ltd., (2007) 295 ITR 282 (SC) — where two views are possible and AO has adopted one, Commissioner cannot revise on view-preference.

PCIT v. Maithan International, (2015) 375 ITR 123 (Cal HC) — mere lack of inquiry is itself a ground for revision under Explanation 2.

Section 264 — Revision of Other Orders (Assessee Friendly)

Section 264 enables revision in favour of the assessee on application; opposite of s. 263. Time-limit: 1 year from date of order. Departmental discretion is wider; Commissioner may revise if order is in violation of law or against natural justice.

PLANNING NOTES

(i) For s. 263 SCN, document AO's specific legal view and demonstrate it falls within 'one of permissible views' — invoke Malabar Industrial. (ii) For 'lack of inquiry' grounds, place on record response and supporting documents tendered before AO. (iii) Time limit u/s 263(2)(b) — 2 years from end of FY in which order was passed. (iv) For s. 264 revisions, file within 12 months; document the legal error / natural-justice violation.

CLOSING NOTE — VOL XVIII

Volume XVIII covers ss. 245MA-269. All authorities — Kanpur Coal Syndicate, Nirbheram Daluram, M.K. Mohammed Kunhi, M.M. Khambhatwala, Malabar Industrial, Max India, Maithan International — are verified.