Understanding the Income Tax Appellate Tribunal (ITAT) and Its Appeal Process

Overview of the Income Tax Appellate Tribunal (ITAT)

The Income Tax Appellate Tribunal (ITAT), established in 1941, serves as the second appellate authority under the Direct Taxes Acts, considering appeals against the decisions made by the Commissioner of Income Tax (Appeals). The tribunal comprises both Judicial and Accountant members. To initiate an appeal, the Assessing Officer (AO) must submit a scrutiny report, evaluate the tax effect, frame relevant questions, and accurately complete Form No. 36. Notably, the timeline for submitting an appeal spans 55 days from the date of receiving the first appellate order. The ITAT's composition includes its President, Vice Presidents, and various departmental members.

In the context of corporate insolvency, it is essential for Assessing Officers to participate actively in Committee of Creditors (CoC) meetings, especially when the debts owed exceed 10% of total liabilities. Additionally, the Special Leave Petition (SLP) functions as a crucial legal remedy, permitting individuals to appeal to the Supreme Court against lower court rulings. The Supreme Court retains broad discretion to grant SLPs, often based on significant legal questions or instances of judicial error. The procedural requirements and timelines for filing an SLP require obtaining a fitness certificate from the High Court and preparing necessary documentation, with emphasis on ensuring the tax effect is substantial.

Functions of ITAT

Introduction

The Commissioner of Income Tax (Appeals) represents the first appellate authority; conversely, the ITAT acts as the second appellate authority. It addresses appeals filed by both taxpayers and Assessing Officers dissatisfied with the first appellate authority's decisions and operates under the Ministry of Law.

Pre-requisites for Filing an Appeal

Scrutiny Report: The AO must submit a report as per Section 253 to the Principal Commissioner of Income Tax (PCIT), adhering to the CBDT Instruction No. 08/2011 dated August 11, 2011.
Tax Effect: Assess the tax effect for Income Tax and Wealth Tax cases, along with any exceptions.
Framing Questions: Formulate relevant questions of fact and law.
Form No. 36: Ensure accurate completion and submission of Form No. 36.

Appeal Timelines

Stage Description	Number of Days
Receipt of CIT(A)’s order	0 days
Sending the order to AO for action	5 days
Entry in the register and scrutiny report	25 days
Submission of recommendation by the Range Head	10 days
Decision by the Pr.CIT/CIT	7 days
Actual filing of appeal in ITAT by AO	6 days
Notification of filing to Pr.CIT/CIT	2 days
Total Time	55 days

Structure and Setup of ITAT

Registrar
Judicial Members
Accountant Members
Vice Presidents
President

Departmental Setup Includes

CIT (DR)
Senior AR-JC/Addl. CIT
ITO(HQ) to CIT (DR) or Senior AR
CIT (DR)(ITAT)(Admin.)
Inspectors
Administrative Staff (OS/TA/MTS)

Benches of ITAT

Two-Member Bench: A combination of one Judicial and one Accountant member.
Single Member Bench: Led by either a Judicial or Accountant member.
Special Benches: Established for issues with broad implications.
Third Member Bench: Engaged when division bench members disagree.

Appellate Proceedings

Filing and Review: Appeals are filed using Form No. 36 and are checked by the Registrar for correctness.
Communication: Once accepted, a memo is sent to the Respondent, who may file cross-objections.
Hearing Process: Cases are listed, and both parties present their arguments.
Order Issuance: The bench must pass an order within 90 days post-hearing, extendable by an additional 30 days if necessary.
Disputes: If consensus is not reached, the case may go to a third member for resolution.

Powers and Limitations of ITAT

Case Handling: ITAT can issue orders based on case merits.
Admission of Evidence: Additional evidence can be accepted with recorded reasoning.
Assessment Resolutions: ITAT can refer cases back for fresh assessments.
Error Corrections: Obvious mistakes in records can be corrected upon request.
Order Recalls: Orders cannot be retracted if already decided.

Filing Appeals to ITAT

Mandates and Authority

The ITAT adjudicates appeals filed against orders by:

CIT(A)
DRP
CIT/PCIT under section 263
CIT (Exemption) under section 12AA
PCIT under section 80G(5)(vi)
Miscellaneous applications against ITAT orders.

Departmental Appeals and Authority

The PCIT or CIT can direct the AO to appeal to ITAT against the Joint Commissioner’s or Commissioner’s decisions if dissatisfied, provided the tax effect exceeds Rs. 50,00,000 as specified in Circular No. 17/2019 and Circular No. 05/2024.

Filing Timelines

An appeal must be filed within 60 days from communication of the decision to the taxpayer or authorities. The ITAT may allow appeals post-deadline if justified.

Appeal Requirements and Signature Regulations

Filing requires adherence to format, with signatures mandated according to the filing entity type, including individuals, Hindu Undivided Families, corporations, and other associations.

Cross Objections

Following the filing of an appeal, the opposing party may submit a memorandum of cross-objections within 30 days of notification, using Form No. 36A.

Document Submission for Appeals

Mandatory documents include copies of the appeal forms, orders appealed against, financial statements, and payment evidence, among others.

Conclusion

The ITAT plays a fundamental role in the Indian tax framework, ensuring transparency and fairness in tax assessments and appeals. With clearly defined procedures for filing, evidence presentation, and appeal processes, it serves as an effective platform for both taxpayers and the administration for dispute resolution and upholding legal standards in tax matters.