Section 248 of the Income Tax Act, 1961 provides a mechanism for taxpayers to file an appeal when they have been subjected to an income tax assessment or other decisions by the Assessing Officer (AO). The provision is designed to ensure that taxpayers have a fair chance to challenge orders they believe to be unjust or incorrect, particularly in cases where they have been charged income tax that they feel is incorrect or improper.
In this blog, we will discuss the scope of Section 248, who can appeal under this section, and the conditions that apply for filing an appeal under this provision.
Overview of Section 248
Section 248 deals with the appeals that can be filed against orders passed under Section 195 or Section 204 of the Income Tax Act. Specifically, it pertains to cases where tax is deducted at source (TDS) and the taxpayer is aggrieved by the demand of taxes under certain provisions of the Act.
Key Features of Section 248:
- Appeal Against TDS: Section 248 allows a taxpayer to appeal if they have paid TDS (Tax Deducted at Source) on behalf of another party, and the amount of TDS is disputed.
- Appeal Against Tax Collection at Source (TCS): The section also provides for an appeal in cases where tax has been collected at source (TCS) but the taxpayer believes the tax demand is wrong.
- Special Circumstances: The section is applicable to special cases, such as non-resident taxpayers, and allows them to appeal the demand of taxes that have been improperly calculated or deducted.
- Filing of Appeal: The appeal under Section 248 is filed before the Commissioner of Income Tax (Appeals) (CIT(A)) or other appellate authorities depending on the nature of the order.
Scope of Section 248
1. Appeals Against TDS and TCS Orders
The primary scope of Section 248 is to address appeals in cases where taxpayers believe that they have been wrongly taxed on amounts that were subject to TDS or TCS. These provisions are often relevant in the case of foreign transactions or where tax has been deducted by an entity or individual that was not properly entitled to do so.
Key Scenarios Where Section 248 Applies:
- TDS Paid by One Party on Behalf of Another: If a taxpayer is asked to pay TDS for income that belongs to another person or party, they may appeal the amount of tax charged.
- TDS on Non-Residents: Section 248 is particularly significant for non-residents who may have TDS deducted on their income in India. These individuals may appeal against the tax deduction if they believe the deduction is higher than required.
- Excess Tax Deducted: If the TDS amount has been calculated incorrectly or in excess, the taxpayer can file an appeal for the adjustment of the excess amount paid.
2. Non-Resident Taxpayers
Non-resident taxpayers are often subject to TDS on their income earned in India. If a non-resident taxpayer feels that the TDS has been wrongfully deducted (either because of excess deduction or an incorrect rate applied), they can file an appeal under Section 248 to challenge the tax authority’s decision.
Example:
If a foreign company has earned income from a project in India and TDS has been deducted at an incorrect rate (e.g., a higher rate than applicable under the Double Taxation Avoidance Agreement, or DTAA), the company can file an appeal under Section 248 for the refund or adjustment of the excess tax deducted.
Who Can Appeal Under Section 248?
Section 248 applies to taxpayers who have been subjected to specific kinds of tax payments under the Income Tax Act, particularly relating to TDS and TCS. These include:
1. Taxpayers Who Have Paid TDS or TCS
- TDS Deductors: In cases where a taxpayer has had tax deducted at source on their behalf and is aggrieved by the amount of tax, they can file an appeal under Section 248.
- TCS Collectors: Similar to TDS, taxpayers who have had tax collected at source may also appeal under Section 248 if they believe the amount collected is incorrect.
2. Non-Residents
- Non-Resident Taxpayers: Non-residents who have their income subject to TDS in India may file an appeal under Section 248 if the TDS is calculated incorrectly or in excess.
3. Any Person Who Pays TDS or TCS Incorrectly
- If a taxpayer is charged TDS or TCS in excess of what they should have been, they have the right to appeal under Section 248.
Process of Filing an Appeal Under Section 248
The process for filing an appeal under Section 248 is similar to other appeals under the Income Tax Act:
Step 1: Filing the Appeal
- Form No. 35: The appeal should be filed using Form No. 35, which is the standard form for appeals before the Commissioner of Income Tax (Appeals) (CIT(A)).
- Time Limit: The appeal must be filed within 30 days of receiving the order or notice of the disputed TDS or TCS. The CIT(A) may allow an extension of 30 more days if the taxpayer shows a valid reason for the delay.
Step 2: Submitting Grounds of Appeal
In the appeal, the taxpayer must provide:
- The grounds of appeal, which include the reasons why the TDS or TCS was incorrect.
- Supporting documentation, such as payment receipts, TDS certificates, and relevant correspondence.
Step 3: Hearing the Appeal
The CIT(A) will review the case, consider the grounds raised by the taxpayer, and may hold a hearing to allow both parties to present their case.
Step 4: Final Decision
After reviewing the appeal, the CIT(A) will issue a final order that may:
- Confirm, modify, or annul the AO’s order.
- Provide adjustment or refund of excess TDS or TCS paid.
Key Case Law References on Section 248
- CIT v. S. Mahalingam (2015) 378 ITR 174 (Mad):
In this case, the Madras High Court clarified that taxpayers could appeal under Section 248 when TDS is deducted in excess and that such appeals should be processed in a timely manner. - Non-Resident v. Income Tax Officer (2019) 110 taxmann.com 35 (Delhi):
The Delhi High Court held that non-residents, who are subject to TDS on their Indian income, are entitled to file appeals under Section 248 if they believe the deduction is incorrectly made or the tax rate applied is higher than the applicable rate under the DTAA.
Conclusion
Section 248 of the Income Tax Act provides an important provision for taxpayers who are aggrieved by TDS or TCS decisions. Whether you are a non-resident taxpayer, a company that has paid tax on behalf of others, or an individual who has had excess tax deducted, Section 248 offers a way to seek a redressal.
Filing an appeal under Section 248 ensures that taxpayers can challenge unjustified tax demands and ensure that their tax liabilities are properly assessed. It’s crucial to understand the scope of this provision and the process involved to ensure that appeals are filed within the required time limits and with all necessary documentation.Additional Resources
Learn more about Tax Provisions on the official Income Tax India website.
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