Section 246A

Section 246A — the law in short

What the courts have decided on section 246A, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Collector, Land Acquisition, Anantnag v Mst. Katiji Supreme CourtCuts both ways
  Your appeal is late. How strictly will 'sufficient cause' be read?
  Liberally. A litigant gains nothing by filing late, refusal can destroy a meritorious cause at the threshold, and where substantial justice and technical considerations clash, substantial justice must win.
• CIT v Kanpur Coal Syndicate Supreme CourtCuts both ways
  How wide are the first appellate authority's powers when it disposes of an appeal?
  An association of persons was assessed as a single unit; it argued the members should have been assessed individually. The Supreme Court held that the first appellate authority has plenary powers in disposing of an appeal, coterminous with those of the Assessing Officer, and can direct the officer to do what he has failed to do. This is the foundation of every later statement about the CIT(A)'s powers under s.251.
• P. S. Srijan Height Developers v ACIT High CourtCuts both waysValidity unconfirmed
  The CPC gave me a section 245 intimation saying I had 21 days to respond, then adjusted my whole refund the very next day against a demand for a year that is under appeal. What do I actually get back, and do I get interest?
  You get back everything adjusted in excess of 20 per cent of the disputed demand, but on these facts you get no interest on it. The Calcutta High Court held that adjusting the refund one day after issuing a 21-day section 245 intimation was a clear breach of the power to adjust and an abject violation of the law governing section 245, and directed refund of the excess over 20 per cent within eight weeks — but refused interest because the assessee had waited about two years before coming to court, and refused to touch an earlier adjustment made three years before the writ petition on the ground of laches.
• Saurav Chachra v CBDT High CourtHelps taxpayerValidity unconfirmed
  I have a stay on my demand and they still adjusted my refund against it. Can they do that?
  No. The Orissa High Court held that adjustment is a mode of recovery, so setting a refund off against a demand whose recovery is stayed under s.220(6) does indirectly what the stay forbids directly. The refund was ordered released with s.244A interest within four weeks.
• Raj Kumar Bothra v DCIT High CourtHelps taxpayerValidity unconfirmed
  CPC disallowed my late-deposited PF and ESI under 143(1)(a). Was a summary adjustment even open to them?
  No, not for an intimation issued in December 2021. The Chhattisgarh High Court held the issue was genuinely debatable on that date, with conflicting High Court authority and the matter pending in the Supreme Court, so the officer had to take scrutiny under s.143(3) rather than adjust summarily.
• Rajendra Kumar v ACIT High CourtHelps taxpayer
  The CPC has adjusted my entire refund against a demand that is under appeal. Do I have to file a separate stay application before I can complain?
  No. The Rajasthan High Court held that nowhere in section 220(6) is it specified that a stay application has to be filed; once an appeal under section 246A has been filed within time and in the prescribed form, the assessee is not to be treated as an assessee in default. Adjusting the whole refund suo motu, without the intimation and opportunity that section 245 requires, was held to be de hors sections 245 and 220(6) and outside the recovery machinery of sections 222 and 223. The Court directed refund, with statutory interest, of everything adjusted beyond twenty per cent of the disputed demand.
• Aafreen Fatima Fazal Abbas Sayed v ACIT High CourtHelps taxpayer
  I let the 30 days to appeal my 143(1) intimation lapse. Can I still go to the PCIT under s.264?
  Yes. Section 264(4) bars revision only in the situations it lists, essentially where an appeal is pending or has been decided; letting the appeal period run out without filing is not one of them. The revision application had to be decided on merits, and no formal waiver of the right of appeal could be demanded, because a right not exercised does not need to be waived.
• Bhupendra Murji Shah v DCIT High CourtHelps taxpayerValidity unconfirmed
  Must you pay 20% while your first appeal is still undecided?
  On this decision, no. During the pendency of the appeal the petitioner was not to be called upon to pay any sum, much less 20%, and the bank attachment was directed to be raised — because a statutory right of appeal should not be rendered illusory.
• Flipkart India Private Limited v ACIT High CourtHelps taxpayerValidity unconfirmed
  Did the 2016 Office Memorandum wipe out Instruction No. 1914 and its hardship tests?
  No. The 2016 memorandum only partially modifies Instruction No. 1914; both must be read together. The tests of an unreasonably high-pitched assessment and of genuine hardship survive, and a mechanical demand for a percentage without reasons will not stand.
• Utanka Roy v Director of Income Tax High CourtHelps taxpayerValidity unconfirmed
  I am a non-resident. I worked on a foreign employer's ship outside India for most of the year and was paid by that foreign company. The department says the salary is taxable in India. Where does salary accrue?
  Where the services are rendered. The Calcutta High Court held that for a non-resident, whose total income is governed by s.5(2), the place of accrual has to be found, and for that purpose the place where the services were rendered is what matters; the source of the income is not relevant. A marine engineer who had rendered services outside India for 286 days and had received his remuneration from a foreign company had received income outside India, and both the s.143(1) intimation and the s.264 order were set aside.
• CIT v Premkumar Arjundas Luthra (HUF) High CourtHelps taxpayer
  You did not appear before the CIT(A). Can the appeal simply be dismissed for non-prosecution?
  No. Once an appeal is filed the CIT(A) must dispose of it on merits by a written order stating the points for determination, the decision and the reasons. There is no power to dismiss for non-prosecution — and no right to withdraw either.
• Sony India Pvt Ltd v Additional CIT (Delhi) High CourtHelps taxpayerValidity unconfirmed
  The AO rejected my stay application and issued a garnishee notice to my bank the same day. Is that permissible?
  The Delhi High Court held that issuing a notice under s.226(3) on the very day the stay application was rejected, and emptying the bank account two days later, carried an element of impropriety and arbitrariness, even though it could not be said to be illegal. The Court ordered the money reversed to the account and restrained coercive steps until the Tribunal decided the stay application.
• Maheshwari Agro Industries v Union of India High CourtHelps taxpayerValidity unconfirmed
  My assessment is many times my returned income, the Assessing Officer has refused stay and attached my bank account. Can the Commissioner (Appeals) stay the demand while my appeal is pending?
  Yes. The Rajasthan High Court held that the first appellate authority - the Commissioner (Appeals) or Deputy Commissioner (Appeals) - has inherent, implied and ancillary power to stay recovery of a disputed demand while an appeal under section 246 or 246A is pending, even though the Act confers no express power. It followed ITO v. M.K. Mohammed Kunhi. It also held that section 220(6) is not a stay power at all but a discretion not to treat the assessee as in default, and that on a high-pitched assessment - in the spirit of CBDT Instruction No.95 of 1969, where the assessed income is twice the returned income or more - that discretion should ordinarily be exercised in the assessee's favour.
• Purnima Das v Union of India High CourtHelps taxpayerValidity unconfirmed
  Your bank account was attached while the stay application was still pending. Was that lawful?
  On this reasoning, no. Section 226(3)(iii) uses 'shall', so notice to you before attachment is mandatory, and where a stay application is on file with an appeal pending the officer should decide it before attaching.
• Chhatmull Agarwal v CIT High CourtCuts both ways
  Can an assessee appeal against an addition he agreed to during the assessment?
  The Punjab & Haryana High Court held that an assessee's agreement to an addition recorded in the assessment order does not take away the statutory right of appeal. The remedy of appeal can be availed of notwithstanding the recital of consent, because the Act contains no bar founded on agreement.
• Mohd. Farooque Mohd. Rafique Bagban v ITO ITATHelps taxpayerValidity unconfirmed
  Your first appeal is more than a year late because of illness. Is it too late?
  Not necessarily. Illness during the pandemic was accepted as sufficient cause, a delay of about thirteen to fourteen months was condoned, and all three appeals were sent back to the CIT(A) to be decided on merits.
• Orient Craft Ltd v DCIT ITATHelps department
  I withdrew my appeal against the section 143(1) intimation because the case went into scrutiny. Can the Assessing Officer now rectify under section 154 to bring back the intimation addition the scrutiny order left out?
  Yes, on these facts. The Delhi Bench of the Tribunal held that there was no merger of the section 143(1) intimation into the section 143(3) assessment, because the two orders proceeded on different issues, and that the intimation stood final once the assessee withdrew its appeal against it. The scrutiny order had started from the returned income instead of the income determined by the intimation, leaving the intimation's addition of Rs 12,82,64,760 out of the assessed figure. That, the Tribunal held, was a mistake apparent from the record, and the Assessing Officer was entitled to correct it under section 154.
• Dixit Rice Mill v DCIT (CPC) ITATCuts both ways
  Must an assessee first apply for rectification to CPC before appealing against a s.143(1) intimation?
  CPC made adjustments in a s.143(1) intimation without giving the assessee an opportunity, and the CIT(A) dismissed the appeal on the footing that the assessee should have applied online for rectification first. The Tribunal held that an appeal lies to the CIT(A) against a s.143(1) intimation and that there is no requirement in law to approach CPC for rectification before appealing.
• Marmo Home v DCIT ITATCuts both ways
  If I did not appeal the s.143(1) intimation, can I attack the same adjustment in the appeal against the s.143(3) order?
  The Tribunal rejected the argument that a s.143(1) intimation merges into the later s.143(3) assessment order. It held that the appealable orders listed together are independent of each other, so an adjustment made at the processing stage had to be challenged in an appeal against the intimation and could not be revived in the appeal against the scrutiny assessment.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.