Central Scrutiny Report (CSR), as it is called here, is essentially a report on the examination of the appeal orders be it that of the JCIT(A)/CIT(A) or the ITAT or the High Court. Quality of CSR particularly those relating to the orders of JCIT(A)/CIT(A) and that of ITAT are crucial so far as the litigation in High Courts and the Supreme Court are concerned. Assessing Officer has to carefully go through the appellate order being scrutinized to find out that the facts have been correctly noticed and properly appreciated therein. Thereafter the application of law should be seen. If the finding of fact recorded therein is contrary to the materials on record or conclusion drawn is at variance, then such perversity has to be specifically highlighted.
Scrutiny
of the JCIT(A) or CIT(A)’s order is important
§
The
scrutiny of the JCIT(A) or CIT(A)’s order is important in so much as it is the
first stage that marks the beginning of the litigation.
§
At
this stage new facts are also introduced and by and large the contours of
future litigation take shape.
§
The
scrutiny of his order has to be carefully carried out. Only when there is
adequate reason(s) to contest the decision, the appeal should be authorized.
§
Has
JCIT(A) or CIT(A) admitted additional evidence without giving opportunity to
A.O.
§
Averments
(affirmation) of fact of the assessee which have been accepted by JCIT(A) or
CIT(A), to be checked for factual inaccuracies.
§
Factual
inaccuracies in recording of facts by JCIT(A) or CIT(A).
§
Have
the correct provisions of law been applied by JCIT(A) or CIT(A)?
§
Are
case laws relied by JCIT(A) or CIT(A) relevant? Distinguishable on facts?
§
All
issues to be challenged in appeal including general observations which would
adversely affect Revenue’s case.
§
Also
general prayer to amend, alter, etc. grounds later
Responsibility for Filing of Appeals to ITAT
§
Subject
to the Instructions issued by the CBDT for the time being in force on monetary
limits for filing appeals under section 268A, the jurisdictional Pr. CIT/CIT
shall be the authority to decide whether to contest an order of the JCIT(A)/CIT(A),
in the light of the facts and circumstances of a particular case and the
statutory provisions.
§
While
taking decision in the matter, he shall, inter alia, take into consideration
reports of the authorities below.
§
Every
appeal should be filed within 60 days of the receipt of JCIT(A)/CIT(A) order.
§
Once
the Pr. CIT/CIT communicates his decision to contest a particular order of CIT(A),
it shall be the responsibility of the Range Head to ensure timely and proper
filing of appeal in the ITAT and consequential follow up actions.
§ The actual filing of appeal is to
be ensured by the Assessing Officer (AO).
Responsibility for Filing of Appeals to High Court [SOP on filing of Appeals to High Court]
[CBDT
Instruction No. 7/2011, Dated 24.05.2011]
§
Jurisdictional
CCIT to decide whether to file appeal in High Court
§
Jurisdictional
Pr. CIT/CIT to ensure timely and proper filing of appeal
§
Appeal
should be filed within 120 days of the receipt of ITAT order
§
Appeal
to be filed only on Substantial Question of Law
Content
of Central Scrutiny Report (CSR)
The
CSR should broadly conform to following parameters.
§
The
issue involved should be concisely stated as is recorded in the assessment
order.
§
If
any additional evidences have been relied upon to decide the issue adversely,
without affording the AO an opportunity to examine the same, it should be so
stated. If the AO was provided an opportunity then there can be no grievance on
this count.
§
If
a finding of fact has been recorded, which is contrary to the evidences on
record, then such perversity should be clearly demonstrated in the scrutiny
report.
§
The
ratio of judicial precedents relied upon by the appellate authority is
appropriate i.e. factual matrix of cases relied upon and that of the case at
hand are identical.
§
If
a particular issue is recurring from earlier years, then the latest status must
be ascertained. If finality has been reached on that issue in the meanwhile,
then further appeal should not be recommended.
§
Most
importantly, non-acceptance of the appellate decision on any point must be
backed up by valid reasons.
AO
should suggest the proposed grounds of appeal
If
there are several observations in respect of an issue which are adverse but not
acceptable, these should be separately challenged under sub paragraph of the
main ground.
Usually
the grounds of appeal are drafted by the ITO(Judicial) in the o/o CIT in a
mechanical manner If AO suggests the proposed grounds of appeal, the CIT would
have better input to draft/approve the grounds of appeal.
Grounds
of Appeal
§
Should
be brief and specific
§
Should
not be argumentative
§
Should
avoid repetition
§
Should
not contain intemperate language
§
Should
not refer to case laws unless binding decisions
§
In
fact, apart from the quality of assessments framed by an officer, the comments
on CSRs and on audit objections indicate his/her technical competence in real
sense.
JCIT(A) or CIT(A)’s Orders
While
giving comments / recommendations or taking decision to contest JCIT(A) or
CIT(A)’s order, the officers concerned shall, inter alia, ensure that the
following issues have been taken into consideration:
(a)
Facts
of the case and basis of addition / disallowance are clearly brought out.
(b) Reasons for granting relief by the JCIT(A) or
CIT(A)on the relevant issues are clearly spelt out.
(c) The reasons as to why the JCIT(A) or CIT(A)was
not justified in recording the findings of fact or law on each issue are
clearly brought out. Evasive stand or ambiguous language is to be avoided.
(d) If any factual finding by JCIT(A) or CIT(A)is
inconsistent with or contrary to the material on record, the relevant material
should be clearly identified to show perversity.
(e) Cogent reasons for the decision to file
appeal on relevant issues are properly and clearly recorded by the Pr. CIT/CIT,
as this will constitute the basis for further litigation in appropriate cases.
(f) The grounds of appeal arising out of the
order of JCIT(A) or CIT(A)are carefully drafted to clearly spell out the
grievance of the department and the relief sought.
(g) In case of mixed question of facts and law,
the grounds of appeal should clearly bring out specific legal and factual
issues to be contested.
(h) The grounds are precise and not
argumentative.
(i) JCIT(A)
or CIT(A) order not acceptable on merits but appeal not filed due to tax effect
below the prescribed monetary limit.
§
Has
the ITAT adjudicated on all grounds raised in the appeal? Has it travelled
beyond the grounds raised in appeal?
§
Is
the finding of fact given by ITAT correct or contrary to facts on record?
§
Has
the ITAT considered all relevant and material facts and evidences?
§
Is
the conclusion drawn by ITAT such that a reasonable person would reach?
§
Has
the ITAT made some observations which would adversely affect the case of
Revenue if left unchallenged?
§
Have
the correct provisions of law been applied by ITAT?
§
Are
case laws relied by ITAT relevant?
§
Distinguishable
on facts? Any Special Bench / jurisdictional High Court/ Supreme Court decision
ignored?
§
Is
application for rectification required?
§
Can
the ITAT order be challenged on the grounds of perversity ?
§
If
yes, a specific question on perversity to be raised before High Court.
§
Questions
of law to be correctly drafted
§
All
issues to be challenged including general observations which would adversely
affect Revenue’s case.
High
Court
§
All
the above points to be seen.
§
Has
the High Court adjudicated on all questions of law raised in the appeal?
§
Has
it travelled beyond the questions raised in appeal?
§
Are
case laws relied by High Court relevant? Distinguishable on facts? Any Full
Bench High Court/ Supreme Court decision ignored?
§
Is
a review required? If yes, it has to be filed within 30 days of the date of
order.
§
SLP
not to be recommended lightly.
§
First
frame the substantial question of law which arises from High Court’s order.
This helps achieve clarity.
Role
of the Range Head
§
There
is a perception amongst the Addl./Joint CIT that they have a role of post
office.
§
The
CSR received from the AO is merely forwarded by way of endorsement to the CIT
with contributing even one sentence in a large number of cases.
§
This
is not at all a responsible attitude on the part of the middle management
officers.
§
The
Range head is expected to critically examine the CSR with reference to its
factual and legal content.
§
A
real and meaningful assistance to the Pr. CIT/CIT has to come from this level
by way of citation of judicial precedents relevant to the issue under
consideration.
Appeal
Effect and Scrutiny Report
§
On
receipt of the order of the JCIT(A) or CIT(A), the
AO shall give appeal effect promptly and properly. The Range Head shall monitor
correctness and timely appeal effect in respect of orders of JCIT(A) or CIT(A).
§ Any pendency in regard to the
appeal effect beyond one month shall be reported by the Range Head to the Pr. CIT/CIT
in the DO reporting monthly activities of the Range, along with reasons for the
delay.
No
Central Scrutiny Reports are required to be sent
§
All
appeals dismissed by ITAT or High Court due to tax effect being below monetary
limit prescribed, even though the order of the ITAT or High Court is not
acceptable.
§
All
appeals decided in favour of the revenue and against the assessee.
Check
List - Quality Scrutiny Reports, Streamlining Litigation
CIT(A)
Stage
§
Furnishing
of Form No. ITNS 51, duly filled by Assessing Officer (A.O.) to CIT(A)
§
Personal
representation by the A.O. before CIT(A) in important cases
§
Timely
submission of Remand Report by A.O. duly approved by the Range head to CIT(A)
ITAT
stage
§
Preparation
of paper book by A.O.
§
Furnishing
of brief by A.O. to the Sr. D.R.
§
Filing
of cross objections, wherever required
Appeal
not to be filed by the department in certain cases
§
The
Central Board of Direct Taxes (CBDT) vide a Circular No. 17/2019, dated
08.08.2019 has prescribed the monetary limits for filing of appeal by the
income-tax department before the Income-tax Appellate Tribunals and High Courts
and Special Leave Petition (SLP) before the Supreme Court.
§
Further,
it states that all the existing departmental appeals having tax effect below
the prescribed monetary limits should be pursued for dismissal as withdrawn/not
pressed.
|
S. No. |
Appeals/SLPs
in Income-tax matters |
Monetary
Limit (in Rs.) |
|
(1) |
Before Appellate Tribunal |
50,00,000 |
|
(2) |
Before High Court |
1,00,00,000 |
|
(3) |
Before Supreme Court |
2,00,00,000 |
Appeals may be filed on merits as an exception
[1] Cases where organised tax-evasion scam is
noticed through bogus Long-Term Capital Gain (LTCG)/Short Term Capital Loss
(STCL) on penny stocks [CBDT Circular No. 23/2019, dated 06.09.2019 and Office
Memorandum No. 279, dated 16.09.2019]
[2] Monetary limits specified in para 3 above
shall not apply to writ matters. – [CBDT Circular No. 5/2019, Dated 05.02.2019]
[3] Amendment to para 10 of the Circular No. 3
of 2018, dated 11.07.2018 - Regarding [CBDT letter F No 279/Misc.
142/2007-ITJ (Pt), dated 20.08.2018]
Para 10 of the Circular No. 3 of
2018 dated 11.07.2018 is hereby amended as under:
“10. Adverse judgments relating to
the following issues should be contested on merits notwithstanding that the tax
effect entailed is less than the monetary limits specified in para 3 above or
there is no tax effect:
§
Where
the Constitutional validity of the provisions of an Act or Rule is under
challenge, or
§
Where
Board’s order, Notification, Instruction or Circular has been held to be
illegal or ultra vires, or
§
Where
Revenue Audit objection in the case has been accepted by the Department, or
§
Where
addition relates to undisclosed foreign income/undisclosed foreign assets
(including financial assets)/ undisclosed foreign bank account.
§
Where
addition is based on information received from external sources in the nature
of law enforcement agencies such as CBI/ ED/ DRI/ SFIO/ Directorate General of
GST Intelligence (DGGI).
§
Cases
where prosecution has been filed by the Department and is pending in the
Court.”
Time-barred
appeals
(i)
If
appeals are time barred by limitation, an application for condonation of delay
along with the affidavit explaining the delay should be attached.
(ii)
In
cases of extraordinary delay, a detailed affidavit explaining each day of delay
should be attached.
Appeal
title
(i)
The
Appeal title should show specific Pr. CIT or CIT in case
the Appeal before the High Court. For example CIT-III Chennai or CIT-XII
Delhi or DIT (Exemption), Ahmedabad or CIT(C)-II, Mumbai etc. The Appeal title
should show ITO or Assistant Commissioner of Income Tax or Deputy Commissioner
of Income Tax as the case may be in case the Appeal before the ITAT.
(ii)
The
ITA number, that is, the appeal number given by the Appellate Tribunal should
be correctly mentioned in appeal title in the memo of appeal.
(iii)
The
relevant section under which appeal is filed should be mentioned in the title.
Appeal
Register & CSR module of the ITBA
ITBA-Appeal
Register & CSR Instruction No. 1 [F. No. System/ITBA/Instruction/Appeal
Register & CSR/185/2016-17/] Dated: 03.02.2017
Subject: Launch of
Appeal Register & CSR module of Income Tax Business Application (ITBA) –
Reg.
The
Appeal Register & CSR module of the ITBA can be accessed by entering the
following URL in the browser: https://itba.incometax.gov.in
Path
for the module is: ITBA Portal à Login Ã
Modules à Appeal Register & CSR
The
CSR module has been designed primarily based on the CBDT’s Instructions No.
4/2011,7/2011 & 8/2011.
Following
functionalities shall be available through ITBA – Appeal Register & CSR
Module:
A.
Appeal Receipt Register
On
receipt of an appellate order1 the PCIT/CIT or HQ & Staff of PCIT/CIT shall
enter the basic details of such order in the Appeal Receipt Register,
maintained in the office of the PCIT/CIT. The period of limitation for filing
of further appeal will be based on date of receipt of the Appellate order in
the office of the PCIT/CIT.
Following
functions can be performed in the Appeal Receipt Register:
§
PCIT/CIT
/HQ of PCIT/Staff of PCIT/CIT can select the receipt date, Appellate authority
and enter other particulars of the Appeal order and Save. Such entry would then
be visible to the concerned range Head and the AO, so as to enable the AO to
initiate the CSR workflow.
§
If
required, the AO/ Staff can also edit details of an Appellate order entered by
the office of PCIT and save such details (except date of receipt of Appellate
order).
§
On
completion of various appeal filing processes, details of new appeals filed
will keep getting updated so that User can monitor the same, for the purpose of
scrutiny selection, keeping penalty in abeyance, recovery of demand etc.
B.
CSR on CIT(A) Order:
Following
are the steps to prepare CSR on CIT(A) Order:
§
AO
will enter Appeal order details and then proceed to analyse the order of CIT(A)
as per the proforma. After completing analysis, AO will submit the request to
Range.
§
Range
Head will discuss the issues involved and wherever applicable, enter the draft
grounds of appeal with his recommendation for filing appeal. Range will there
after submit the request to PCIT.
§
PCIT
will record the decision whether appeal is to be filed or not and transfer the
work item to AO with the directions on filing of appeal. PCIT will also be able
to issue Authorisation letter to the AO for filing of appeal.
§
In
case appeal is to be filed, AO will generate Form 36 and enter the details of
filing of appeal with ITAT. Once details are saved AO will close the workflow.
On closure status of the request will be updated in Appeal Receipt Register as
well.
§
Facility
to submit, delegate and send back the workitem is available to the users.
§
Facility
to download and print the content of CSR is also available to the user. A
printout can be generated at any stage by clicking on Print button. A pdf file
will get download and the User can then print the downloaded file
C.
CSR on ITAT Order:
Following
are the steps to prepare CSR on ITAT Order:
§
AO
will record various aspects of the ITAT’s order and provide necessary analysis
of the appellate order. After doing the analysis AO will submit the request to
Range.
§
Range
Head will record the issues involved and will enter the draft grounds of appeal
with recommendation for filing appeal, wherever applicable. Range will there
after submit the request to PCIT/CIT.
§
PCIT/CIT
will record his recommendation whether appeal has to be filed or not and draft
Substantial Question of Law. He will then submit the request to CIT(Judicial).
§
CIT(Judicial)
will view the recommendation on filing appeal and then submit the request to
CCIT with his observations.
§
CCIT
will make the decision whether appeal has to be filed or not. Once decision is
taken by CCIT, the workflow will be sent to PCIT.
§
PCIT/CIT
will then issue necessary directions to AO by clicking on Direction on filing,
and the workitem will then flow to AO for filing of appeal.
§
Facility
to download and print the content of CSR is also available to the user. A
printout can be generated at any stage by clicking on Print button. A pdf file
will get download and the User can then print the downloaded file
§
After
filing the appeal, AO will update the details in Filing of Appeal Tab and
thereafter will close the workflow. Once workflow is closed status will be
updated in Appeal Receipt Register.
§
Facility
to submit, delegate and send back the workitem is available to the users.
D. CSR on High Court Order:
Following
are the steps to prepare CSR on High Court Order, where appeal is proposed to
be filed by preparing Proforma B:
§ PCIT will enter the following
details:
Ø
Details
of high court judgment along with limitation date for filing SLP in Supreme
Court.
Ø
Facts
of the case in brief.
Ø
Substantial
question of law to be proposed in the SLP.
Ø
Details
of respondent as well as his own communication details.
Ø
Thereafter,
he will submit the request to CCIT.
§
CCIT
will record his comments/recommendation and assign the workflow to PCIT.
§
PCIT
will record the comments of CCIT in Performa B and thereafter physically sent
the Proforma B report to the Directorate of L&R alongwith necessary
annexures.
§
In
case appeal is not to be filed, PCIT will close the workflow.
§
Facility
to download and print the content of CSR is also available to the user. A
printout can be generated at any stage by clicking on Print button. A pdf file
will get download and the User can then print the downloaded file
§
Once
appeal is filed, AO will enter and save the details of filing of appeal and
close the workflow.
§
Once
workflow is closed status will be updated in Appeal Receipt Register.
§ Facility to submit, delegate and
send back the workitem is available to the users.
Relevant
CBDT Circulars & Instructions
§ CBDT Circular No. 23 of 2019, Dated
06.09.2019
Subject:
Exception to monetary limits for filing appeals specified in any Circular
issued under Section 268A of the Income-tax Act, 1961 - Regarding
§
CBDT
Circular No. 17/2019, Dated : 08.08.2019
Subject:
Further Enhancement of Monetary limits for filing of appeals by the Department
before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before
Supreme Court – Amendment to Circular 3 of 2018 – Measures for reducing
litigation
§
CBDT
Circular No. 5/2019, Dated 05.02.2019
Subject
: Monetary limits for filing/withdrawal of Wealth Tax appeals by the Department
before ITAT, HCs and SLPs/appeals before SC through extending the scope of
Circular 3 of 2018 – Measures for reducing litigation
§
CBDT
issues directions on filing of Appeal on merit on 7 Issues - F. No.
279/Misc/M-93/2018-ITJ, dated : 11.12.2018
Subject: Clarification w.r.t. para 10
of Circular 3 of 2018 - Regarding
Proforma
for ‘Scrutiny Report’ on ITAT’s order
Limitation to file appeal under section 253(2) expires on……………………(Parts 1
to 4 are to be filled in by the Assessing Officer and 5 to 6 by Range Head.)
1. TO BE FILLED IN ALL THE CASES OF ORDERS OF
CIT(A)
Particulars from the order under scrutiny
|
S.No. |
Points |
Particulars |
|
|
i. |
Appellate Authority whose order
is under Scrutiny ITA No. and date of the order. |
|
|
|
ii. |
Name and address of the assessee |
|
|
|
iii. |
PAN |
|
|
|
iv. |
Assessment Year |
|
|
|
v |
Date of receipt of the order |
|
|
|
vi |
Date of giving appeal effect |
|
|
|
vii |
Details of giving appeal effect |
|
|
|
viii |
Overall Tax effect of the order |
|
|
|
ix |
Despite low tax effect do you
suggest appeal? |
|
|
2. TO BE
FILLED IN ONLY IN THE CASES OF ORDERS OF CIT(A) ADVERSE TO REVENUE
Information
relevant to decision making for filing further appeal by the CIT, wherever
applicable
|
S. No. |
Points |
Particulars |
|
i. |
Whether it is combined order for
more than one assessment years |
|
|
ii. |
If yes, specify assessment years
involved and identify specific issues related to different assessment years
for filing separate appeals. Use
Annexure, if required. |
|
|
iii. |
Whether it is combined order for
more than one assessee. |
|
|
iv |
If yes, whether jurisdiction of
all assesses falls in the same Range? |
|
|
v |
If reply to (iv) above is no,
identify the Assessing Officer/Range having jurisdiction over other assesses
for communication of stand taken on common issues? |
|
|
vi |
If the proceedings of order under
scrutiny was dependent on some other proceedings, specify the present
appellate status of the other proceedings along with ITA No./W.P. No. etc. |
|
3.
DETAILS OF ISSUES ON WHICH RELIEF
ALLOWED BY CIT(A)
|
i. |
For each issue on which relief is allowed by the CIT(A) specify:- |
Relevant
page / Para No. of
|
i(a) |
Issue involved before CIT(A) |
Scrutiny report of AO(As mentioned below as per annexure ‘A’) |
|||||
|
ii |
Tax effect in respect of each issue on which relief is allowed by CIT(A) |
Aggregate tax effect |
|||||
|
|
As per order |
|
|
|
|
|
|
|
iii. |
Whether any factual finding given by CIT(A) is contrary to material on
record? If yes, specify in detail indicating specific para of order under
scrutiny & material on record contradicting such a finding. |
|
|||||
|
iv. |
Whether similar issue involved in the case of assessee in earlier
year(s)? If yes, then mention the year and present status of appeal. |
|
|||||
|
v |
If same issue is involved in subsequent years in the case of assessee,
stand taken by the Assessing Officer/Status of appeal, if any. |
|
|||||
|
vi |
Has CIT(A) relief upon any judicial decision? If yes, has a copy been
annexed or citation given in case of reported decisions? (Note: Whether the
relied upon decision has been challenged in further appeal? If so, the present status may be given?. |
|
|||||
|
vii |
Whether notice of hearing was received by AO? |
|
|||||
|
viii |
Whether additional evidence was produced by the assessee at the
appellate stage? |
|
|||||
|
ix |
Whether on additional evidence the AO was given opportunity as required
under rule 45A? |
|
|||||
|
x |
Whether any of the CBDT Instruction/Circular/ notification is subject
matter of adverse order? |
|
|||||
|
xi |
Whether constitutionality of any provisions of the Act is under
challenge? |
|
|||||
|
xii |
Whether any question of law of recurring nature is involved? |
|
|||||
|
xiii |
Whether the issue arises out of audit objection? |
|
|||||
|
xiv |
If yes, whether audit objection is included in Draft Para? Also state
whether Audit objection has been accepted by the department or not? |
|
|||||
|
xv |
Is any prosecution proceeding pending or contemplated in the case on
the issue on which the appeal is sought to be filed? |
|
|||||
*Item (iv) is extremely important, if applicable,
(the involvement of issue in earlier year(s) may already be indicated in
assessment order or CIT(A)’s order)
4. GENERAL
|
i |
If aggregate tax effect in 3(ii) above is below the limit prescribed
for filing of appeal in CBDT Instruction No.5/2014? Whether the case falls in any of the exception laid down in the said
Instruction? If so, specify clause No. |
|
|
ii |
Due date for submission of report to Range head |
- |
ANNEXURE
‘A’
Brief Facts :-
Income
Tax Officer, ….
…………………….
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