The right to appeal is the sine qua non of civilised legislation. There can be no levy of tax without the taxpayer being given the right to dispute the levy. In this sense, Chapter XX of the Income-Tax Act confers special rights to every taxpayer to file appeals against orders prejudicial to him.

However, Section 246 of the I-T Act, 1961 and its counterparts Section 246A specify the orders against which appeals will lie to the first appellate authority. If there is no provision for filing an appeal, the only recourse will be to approach the High Court with a writ petition seeking justice.

Enlargement of Appeals

The Finance Act, 2007 enlarges the list of appellate orders with effect from. June 1, 2007.

The law deems a person to be an assessee-in-default if he does not collect the whole or any part of tax or after collecting the same, fails to pay the same into government account.

Till now, there was no right of appeal against an order deeming such a person to be assessee-in-default. It is now laid down that he can prefer an appeal disputing such order made under Section 206C (6A).

Section 248 is now substituted by a new section. This concerns appeal by a person denying liability to deduct tax. Under the amendment, if there is an agreement or arrangement under which the tax deduction on income other than interest is to be borne by the person by whom the income is payable, he may appeal to the first appellate authority for a declaration that no tax was deductible by him as per the arrangement. There has been some liberalisation of time limit for filing appeals in such cases.

Section 80G

The law requires that institutions or funds engaged in charitable activities will require approval by the Administrative Commissioner of Income-Tax. In the nature of things, no appeal will lie against such an order to the CIT (Appeals). Hitherto, even the Income-Tax Appellate Tribunal (ITAT) was not empowered to hear appeals against orders passed by the Administrative Commissioner under Section 80G 5(vi) of the Act.

The only remedy was to approach the High Court with a writ petition seeking directions to the Commissioner. The Finance Act, 2007 removes the lacunae in this regard and provides for appeal against such orders.

Stay Orders

Several High Courts have decided that when an appeal is filed, the first appellate authority, namely, the CIT (Appeals), is empowered to grant stay of the disputed demand and dispose of the appeal by priority. However, in the present administrative set-up, no first appellate authority has bothered to invoke this power conferred on it by the High Court.

The affected taxpayers have to approach the Administrative Commissioner for stay. If there is no stay, the remedy is by way of writ petition to the High Court. The Tribunal comes into the picture for granting stay only when the first appellate authority disposes of the appeal. The Finance Act, 2007 now lays down that the Tribunal may grant stay of disputed demand for a period not exceeding 180 days and the Tribunal should dispose of the appeal within the period of stay specified in its order.

If the appeal is not disposed of within 180 days, the appellant before the Tribunal may file an application for extension of stay. He should show that the delay in the disposal of the appeal is not attributable to him.

The Tribunal then may pass an order extending the period of stay for a period not exceeding in all 365 days. The Tribunal should dispose of the appeal within this period. If it is not so disposed of, the stay shall stand automatically vacated.

Critics have pointed out that the amendment puts the appellants in a difficult situation. There can be cases where the appeal is delayed and such delay is not attributable at all to the taxpayer. There can be cases where the department seeks adjournment for want of records or for some other reason. Why should the appellant before the Tribunal be penalised in such cases by vacating stay?

It should have been provided in fairness that the stay would continue if it could be shown that the delay in the disposal of appeal is not attributable to the taxpayer appellant. Similar provisions under the Central Excise Act were considered by several Benches of the Tribunal and a uniform view was taken that stay will continue in all such cases till the disposal of the appeal.

This was also the view of the ITAT, Hyderabad Bench in B. Subhadra vs ITO (2004 85 TTJ Hyderabad 27). The Tribunal has been conferred with inherent powers of stay by the Supreme Court in the well-known Mohammed Kunhi (71 ITR 816) case.

The National Tax Tribunal Act contains a provision requiring payment of 25 per cent of disputed demand for admitting an appeal. The NTT has not taken off yet. It is not known why this provision is not incorporated into the present I-T Act.

T. C. A. Ramanujam
(The author is a former Chief Commissioner of Income-Tax.)