An examination of the E-Appeals Scheme, 2023 and surrounding aspects

Arjun Gupta, Advocate

Introduction

An ‘appeal’ is a creature of statute. An appeal from the decision of a Court, Tribunal or quasi- judicial authority lies to a higher forum only if there exists an underlying statute(such as the Income-tax Act, 1961(“Act”)) providing for the same, failing which no appeal lies. The Finance Act, 2023 has introduced far reaching changes to the first appeals procedure under the Act which is evident below.

Under Section 246(1) as it stood before amendment by the Finance Act, 2023, every appeal filed before 1st June, 2000 against certain orders of the Assessing Officer(“AO”)(other than the Deputy Commissioner) was maintainable before the Deputy Commissioner(Appeals), and under Section 246(1A), every appeal filed between 1st October 1998 and 1st June, 2000 before the Deputy Commissioner(Appeals), stood transferred to the Commissioner(Appeals). After 1st June, 2000, there was no provision for filing an appeal before the Deputy Commissioner(Appeals). Hence, for a period of more than 20 years, an appeal from more or less every conceivable order under the Act was maintainable before the Commissioner(Appeals) only. It is only by the Finance Act, 2023 that an amendment was made roping in the Joint Commissioner(Appeals)(“JCIT(Appeals)”) and is discussed in detail in the ensuing portions of this article.

Discussion

Provisions pertaining to JCIT(Appeals) under the Act

By the Finance Act, 2023 sweeping changes have been made to the first appellate procedure under the Act. Parliament has roped in an additional appellate authority viz. the Joint Commissioner(Appeals) who has plenary power to adjudicate appeals from various orders as mentioned under Section 246(1) and this power is exercisable in addition to that exercised by the Commissioner(Appeals).

• Section 246(1) lists the orders which are appealable to the JCIT(Appeals). Proviso to Section 246(1) provides that no appeal shall be filed before the JCIT(Appeals) if an order as referred to in Section 246(1) is passed by, or with the prior approval of, an income-tax authority above the rank of Deputy Commissioner. At this stage it is relevant to note Section 116 which lists the income-tax authorities. Only the Inspectors of Income-tax, Tax Recovery Officers, Income-tax Officers, Assistant Directors of Income-tax/Assistant Commissioners of Income-tax are the authorities which are lesser in rank than the Deputy Commissioner. Hence only if the orders are passed by or with the prior approval of these authorities is an appeal maintainable before the JCIT. Pertinent to note, that the legislature has used the words ‘income-tax authority’ and not ‘Assessing Officer’ and the proviso is to be construed accordingly.
• Section 246(2) enhances the jurisdiction of the JCIT by providing for the transfer, by the CBDT or an income-tax authority so authorized by the CBDT, of any appeal pending before the Commissioner(Appeals) to the JCIT, who may proceed with the adjudication of the appeal from the stage at which it was before it was transferred.
• Likewise, Section 246(3) in similar terms, provides for the transfer of appeals from the JCIT to the Commissioner(Appeals).
• Section 246(4) provides for granting an opportunity of being heard to the appellant-assessee where an appeal is transferred under the provisions of Section 246(2) or Section 246(3). The said provision eliminates any arbitrary transfers from one appellate authority to another and safeguards the rights of assessees to be heard in a fair and transparent manner.
• Section 246(5) states that a scheme may be formulated by the Central Government by notification in the Official Gazette, for the purposes of disposal of appeals by the JCIT. Also, to ensure transparency and accountability, the interface between the appellant and the JCIT is to be eliminated to the extent technologically feasible and the Central Government may direct that any of the provisions of the Act relating to jurisdiction and procedure for disposal of appeals by the JCIT, shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification. The e-Appeals Scheme, 2023 derives its power under this section of the Act
• Section 246(6) states that the CBDT may specify that the provisions of Section 246(1) shall not apply to any case or any class of cases.
• The Explanation clarifies that the term ‘status’ used in Section 246 means the category under which the assesse is assessed as individual, HUF etc.

Powers of JCIT (Appeals) & Commissioner (Appeals)

The orders appealable to the JCIT (Appeals) are listed below:

 

• an order being an intimation under sub-section (1) of section 143, where the assessee objects to the making of adjustments, 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;
• an order of assessment, reassessment or recomputation under section 147;
• an order being an intimation under sub-section of section 200A;
• an order under section 201;
• an order being an intimation under sub-section (6A) of section 206C;
• an order under sub-section (1) of section 206CB;
• an order imposing a penalty under Chapter XXI; and
• an order under section 154 or section 155 amending any of the orders mentioned in clauses

 

 

It can immediately be gleaned that though the JCIT(Appeals) is now an additional appellate authority, its powers are limited to adjudicating appeals against the abovementioned classes of orders whereas the CIT(A) can entertain appeals against a wider range of orders passed under the Act as is evident on a bare perusal of Section 246A(1).

Examination of the e-Appeals Scheme, 2023 & Faceless Appeal Scheme, 2020 Faceless Appeal Scheme, 2021

Before the amendments brought in by the Finance Act, 2023, certain provisions viz. Section 250(6B), (6C) and (6D) were inserted by the Finance Act, 2020 which Act heralded the faceless regime. Pursuant to the power granted under Section 250(6B), the Faceless Appeal Scheme, 2020 was notified on 25th September, 2020 i.e during the pandemic. Thus, all the appellate proceedings before the Commissioner(Appeals) were conducted in a faceless manner by virtue of the scheme. The scheme of 2020 was replaced with the Faceless Appeal Scheme, 2021(“faceless scheme”) which came into force on 28th December, 2021.

The Faceless Appeal Scheme, 2021 may be summed up in brief:

• Section 4 and Section 5 are the pivotal sections dealing with the constitution of the National Faceless Appeal Centers (“NFAC”) and Appeal Units and their regulation thereof.
• Section 4(2) states that all communication between the Commissioner(Appeals) and the appellant or AO shall be through the NFAC.
• Section 4(3) states that the Appeal Unit shall comprise of one Commissioner(Appeals), and any other income-tax authority, staff or authority to assist the Commissioner(Appeals).
• Notices to be issued, information or evidence to be obtained, report to be obtained from the AO, further enquiries to be made under Section 250(4) by the Commissioner(Appeals) are all required to be made through the NFAC.

e-Appeals Scheme, 2023

As noted earlier, the e-Appeals Scheme, 2023 (“e-scheme”) derives its power from Section 246(5) of the Act. It was notified on 29th May, 2023 by publication in the Official Gazette and came into force from that date(Para 1(2) of the e-scheme).

•  Definitions

Para 2 of the e-scheme provides the definitions of various terms and defines inter alia an ‘appeal’, ‘e-appeal’, ‘National Faceless Appeal Centre’, and ‘authorised representative’. The definition of appeal under Section 2(iii) means any appeal filed under Section 246, or Section 246A as well.

•  Scope of the Scheme

Para 3 provides for the scope of the scheme and it states that it shall apply to such persons, class of persons, incomes, class of incomes, cases or class of cases as covered under Section 246 except those excluded under Section 246(6).

•  Disposal of Appeals

Para 4 states that the JCIT(Appeals) shall dispose of the appeals filed before it or allocated or transferred to it, in accordance with the e-scheme. Section 4(2) states that the staff, authorities, consultants of the JCIT shall be provided by the Board.

•  Transfer and allocation of Appeals

Para 5 deals with allocation of appeals. It states that the Principal Director General of Income-tax (Systems) or the Director General of Income tax (Systems) shall, with the approval of the CBDT, devise a process to randomly allocate or transfer the appeals, referred to in paragraph 3, to the JCIT(Appeals).

•  Procedure to be followed in Appeal

Para 6 elucidates the procedure to be followed in appeal. The following is to be noted:

• The JCIT(Appeals) has the power to condone the delay if the appeal is filed beyond limitation as provided in Section 249 and reasons are to be recorded for the same.
• It shall give notice for filing submissions to the appellant and specify a timeline for compliance. The notice is also to be forwarded to the AO.
• It may call for further information, documents, evidence from the appellant or any other person
• It may obtain a report of the AO on grounds of appeal or information, documents, or evidence furnished by the appellant
• It may direct the AO to make a further enquiry under Section 250(4) and furnish a report.
• It shall serve a notice to the AO or the appellant or any other person for submission of documents, evidence within a specified timeline.
• Appellant shall file his response to any notice or query raised by the JCIT(Appeals) within the time prescribed or based on such extended time as allowed on an application made by the appellant.
• AO may furnish a report within a specific timeline as well.
• Appellant may file additional grounds of appeals before the JCIT(Appeals) in such form as may be specified and specify the reasons for not supplying/omitting the grounds earlier.
  • If additional grounds are filed, the JCIT(Appeals) shall admit the same if the appeal is against orders passed under Section 143(1), 200A or in any other case where the appealable order is passed by the Central Processing Centre(CPC).
  • In any other case, the JCIT shall send the additional grounds to the AO for providing comments, if any.
  • The AO shall provide a report with his comments within the date and time specified or such extended date and time as allowed on an application made to the JCIT (Appeals).
  • JCIT (Appeals) shall admit the additional ground if he is satisfied that the the omission was not wilful or there was sufficient cause for not mentioning the same. In any other case, after recording reasons, the JCIT(Appeals) shall not admit the appeal ground.
  • The appellant may furnish additional evidence after complying with Rule 46A of the Income-tax Rules, 1962.

Similar provisions exist for furnishing additional evidence and the provisions pertaining to filing additional grounds of appeal apply mutatis mutandis to the provisions providing for admitting additional evidence.

• The JCIT(Appeals) shall send a show- cause notice specifying reasons to the appellant if he wishes to enhance a penalty or reduce a refund. The appellant is required to send a reply within such time mentioned in the notice or extended time pursuant to application made in that behalf.
• The JCIT(Appeals) shall thereafter prepare an order in accordance with Section 251 of the Act stating the points for determination, the decision thereon and the reasons for the decision. The order is to be signed digitally and sent to the appellant along with details of penalty proceedings, if any, to be initiated therein. The order must be communicated to the AO, the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in line with Section 250(7). Where penalty has been initiated, to show cause why penalty ought not to be imposed.
• Transfer of Appeals inter se JCIT (Appeals)
• Para 6(2) provides for transfer of appeals from one JCIT(Appeals) to another in accordance with Section 120 of the Act.
• Penalty

Para 7 provides for initiation of penalty proceedings against the appellant by issuing a show cause notice for non-compliance of notice, direction, order issued under the e-scheme. Para 7(2) states that the appellant or any other person shall furnish his reply to the notice within the time prescribed in the notice or extended time pursuant to application made by the appellant. Under para 7(3) the JCIT(appeals) may pass an order of penalty or drop the penalty order after recording reasons and send an intimation to the appellant and the AO.

• Rectification

Para 8 states that the JCIT(Appeals) may for rectifying errors apparent from the record amend any order passed by it under the provisions of the Act by an order to be passed in writing. Para 8(2) states that the application may be filed by the JCIT or any other person or the AO. Para 8(3) states that the JCIT(Appeals) shall examine the application and grant an opportunity to the AO, appellant or any other person, for showing cause why the rectification should not be carried out. A response is to be furnished to the above notice under para 8(4). Under Para 8(5), the JCIT shall after taking into account the response of the appellant or any person and the AO, pass an order carrying out the rectification or reject the application after recording reasons. Under para 8(6) the JCIT(Appeals) shall send the order after digitally signing it to the AO and the appellant or any other person as the case may be.

• Appeal from order of JCIT(Appeals)

Under Para 9, an appeal against the order of the JCIT(Appeals) shall lie before the Income tax Appellate Tribunal having jurisdiction over the jurisdictional officer of the appellant assessee. Under para 9(2), if an order of the JCIT(Appeals) is set aside and remanded to the JCIT(Appeals) by a higher forum, it shall be assigned to the JCIT(Appeals) for further action.

• Communication

All communications between the JCIT(Appeals) and the appellant or any person shall be exchanged by electronic mode to the extent technologically feasible. Also, all internal communications between the authorities of the Revenue including the JCIT(Appeals) shall also be exchanged by electronic mode.

• Authentication

Para 11 deals with authentication of electronic record. The JCIT(Appeals) shall authenticate the electronic record in case of order passed under 6(1)(IX) or under sub-paragraph (3) of paragraph 7 or under sub-paragraph (5) of paragraph 8, by affixing his digital signature. The appellant or any other person, shall authenticate the electronic record by affixing his digital signature or under electronic verification code or by logging into his registered account in the designated portal;

• Delivery of electronic record

Para 12 deals with delivery of electronic record and provides that every record shall be sent either to the appellants registered account, email address of the appellant, or Mobile App of the appellant followed by a real time alert. However, every notice or other electronic record sent to any other person other than the appellant shall be sent to the registered email address of such person followed by a real time alert. The appellant shall send his response to such notice or order or other electronic communication and once an acknowledgment is received it is deemed to be authenticated.

• Para 13 states that the appellant or his authorized representative shall not be required to appear personally in connection with any proceedings under the scheme. Para 13(2) and Para  13(3) state that a request for personal hearing if granted shall be made by video conferencing and any statement to be recorded and all communication shall be through video conferencing only. Under Para 13(5) the Board shall establish suitable facilities for video conferencing or video telephony including telecommunication application software.
• Para 14 states that the Principal Chief Commissioner(National Faceless Appeal Centre) shall have the power of transfer of cases in and out of e-scheme, from one JCIT(Appeals) to another, co-ordinate processes for allocation of appeals, approve formats of notices or letters, issue SOP’s, or any other procedural function assigned by the Board from time to time.
• Para 15 deals with the power to specify format, mode, procedure and processes and provides that the Principal Director General or the Director General of Income-tax (Systems) shall in consultation with the Principal Chief Commissioner of Income-tax National Faceless Appeal Centre if required, lay down the standards, procedures and processes for effective functioning of the JCIT (Appeals)
• Para 16 states that the provisions of clause (28CA) of section 2, section 120, section 129, section 131, section 133, section 134, section 136, section 140, section 154, section 155, section 282, section 282A, section 283, section 284, Chapter XX and Chapter XXI, and other provisions of the Act, shall apply to the procedure in disposal of appeal by the JCIT (Appeals) under the e-scheme.

Concluding Remarks

On a bare perusal of the two schemes viz. the Faceless Appeal Scheme, 2021 and the e-Appeals Scheme, 2023, it is evident that the Union government(CBDT) has put in place strict and tight control over the proceedings to be conducted by the Commissioner(Appeals) since there is a third party authority namely the NFAC which acts more or less like an agent of communication between the AO, appellant and the Commissioner(Appeals). The NFAC thus supplements the adoption of faceless conduct of proceedings and ensures transparency by eliminating a direct interface between the parties. However, such an authority viz. the NFAC does not exist under the e-Appeals Scheme, 2023 and it is interesting to know whether such an ‘agent to facilitate communication’ and ensure transparency and eliminate the direct interface in furtherance of the faceless regime would be added to the e-Appeals Scheme, 2023 in the near future.

It is also important to reiterate that the scope of entertaining appeals before the JCIT(Appeals) is narrower than that of the Commissioner(Appeals). Also, an order passed by or with the approval of a person above the rank of Deputy Commissioner is not appealable before the JCIT(Appeals).