CENTRAL UNIVERSITY OF SOUTH BIHAR

SCHOOL OF LAW & GOVERNANCE

Taxation Law - II
PROJECT

Procedure of appeal to the commissioner of Income Tax

Submitted By:- Submitted to:-

RAJEEV RAJ Mr. Mani Pratap

B.A.LL.B Assistant Professor

9th Semester

Enrolment- CUSB1513125033

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 ACKNOWLEDGEMENT

I am very grateful to my teacher who gave me very important and interesting project work.
My project work is on 'Procedure of Appeal to the commissioner of Income Tax'. I started
and did this project work under the supervision and guidelines of Mr.Mani Pratap Without his
suggestions and guidelines it would have been very difficult to complete the task within
prescribed period of time.
He suggested me the topic of project and the steps that should be followed while making the
project. The other very important is that he suggested me the object of making research work.
So I acknowledged him for this gratuitous work who provided time and help from his busy
schedule. At the same time I acknowledge to my family members who provided me various
kind of helps in kinds of time as well various type of resources to complete the project.
I am also thankful to library staffs who provided me books when required to me to complete
the research work.
Other thing from which I came to know the practical approaches is that he gave opportunity
to sit in the various classes.

RAJEEV RAJ

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 Table of Contents
Research Title…………………………………………………………4

Research Methodology……………………………………………….4

Introduction………………………………………………………....…5

Hierarchy of Appeals………………………………………………….5

Procedure of the Appeal…………………………………………….6-12

 Appealability of order…………………………………………6-10
 Filing of appeal……………………….……………………….11
 Grounds of appeal…………………………………………….11
 Time limit…………………………………...…………………12
 Condonation…………………………………...………………13
 Filing fees……………………………………………………….13

Power of Commissioner of Income Tax…………………….………..13

Powers of enhancement……………………………………………….14

Order of commissioner of Income Tax……………………………….15

Conclusion ……………………………………………………………...16

Bibliography……………………………………………………………..17

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RESEARCH TITLE
An Analysis of: Procedure of Appeal to the Commissioner of Income Tax

RESEARCH METHODOLOGY
This Research Work is basically based upon Doctrinal Method of research, basing upon the
research through Primary sources including contemporary literature review, Books,
Journals, Digests and Secondary Sources including websites, online articles and the data
collected from World Wide Web.

Method of Writing
The research paper is in theoretical in nature.

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Introduction
Income tax liability is primarily determined at the level of Assessing Officer. Where the
Income Tax department (the government) disagrees with the tax computed by the taxpayer,
they can levy an additional tax. In such a situation, as per Income Tax Act, 1961 the liability
is determined at the level of Assessing Officer. Where a taxpayer is aggrieved certain action
of Assessing Officer, he can move an appeal. Appeals and revisions of the assessment of
income is an integral part of the administrative machinery under the Income-tax Act, 1961
(hereinafter the Act’). The present Chapter evaluates the procedure of appeals and revisions
under the Act.

Mozley and Whiteley’s Law Dictionary defines an ‘Appeal’ as being “a complaint to superior
court of an injustice, done by an inferior one”. The party complaining, or going in appeal, is
referred to as “the appellant” and the party opposite is referred to as “the respondent”.

The act devoted the two forum of appeal as under:-

A. Appeals to Deputy Commissioner (Appeals) and Commissioner (Appeals),(containing

There is no inherent right of appeal under this act. If no right of appeal is provided under the
act the no appeal would lie.

HEIRARCHY OF APPEALS
1. First Appeal can be preferred by the assessee only to the Commissioner of Income-tax
(Appeals) aggrieved by the order of the Assessing Officer;
2. Second Appeal can be preferred either by the assessee or the Commissioner to the
Appellate Tribunal aggrieved by the order of the Commissioner
3. An appeal to the High Court can be preferred either by the assessee or the Commissioner
on the question of law arising out of the Tribunal’s order;
4. An appeal to the Supreme Court can be preferred either by the assessee or the
Commissioner against the judgment of the High Court.

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Procedure

 Appealability of orders1

The powers of the Commissioner of Income Tax Authorities however wide, have to be
exercised in respect of the matters specifically made appealable. Section 246(A) gives a right
of appeal to any aggrieved assessee on any of the orders expressly specified in that Section.
In respect of other orders, it is not open to the appellate authority to entertain a plea about the
correctness, propriety or validity of such an order, unless it falls within the ambit of the
phrase ‘denial of liability to be assessed to tax’. Such denial may be whole or partial;
however, a plea that denial of liability would include a contention that the Act does not apply
to him, would not be valid.

Apart from the orders specified in S. 246A, a person liable to deduct tax u/s.195, having paid
such tax under section 200, can file an appeal, if he "denies his liability to make such
deduction".

Hence, whereas in respect of a payment where tax is deductible u/s.195, the assessee fails to
deduct it or having deducted tax, fails to pay it, and is treated as ‘an assessee in default’
u/s.201, he can file an appeal u/s.246A (1), if he "denies his liability to make such
deduction". On the other hand, if tax has been deducted and paid, but such person denies the
liability, he can file an appeal under section 248.

Section 246 the act provides the list of the order from which the appeal lies.
246. Appealable orders: Section 246 reads as follows
(1) Subject to the provisions of sub-section (2), any assessee aggrieved by any of the
following orders of an Assessing Officer (other than the Joint Commissioner) may appeal to
the Deputy Commissioner (Appeals) against such order -
(a) An order against the assessee, where the assessee denies his liability to be assessed under
this Act or an intimation under sub-section (1) or subsection (1-B) 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 tea determined or to the amount of loss computed, or to the
status under which he is assessed;

1
www.ipleaders.com

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(b) An order of assessment, reassessment or recomputation under Section 147 or Section 150;
(c) an order under Section 154 or Section 155 having the effect of enhancing the assessment
or reducing a refund or an order refusing to allow the claim made by the assessee under either
of the said Sections;
(d) An order made under Section 163 treating the assessee as the agent of a non-resident;
(e) An order under sub-section (2) or sub-section (3) of Section 170;
(f) An order under Section 171;
(g) Any order under clause (b) of sub-section (1) or under sub-section (2) or sub-section (3)
or sub-section (5) of Section 185; in respect of any Assessment for the assessment year
commencing on or before the 1st day of April, 1992;
(h) An order cancelling the registration of a firm under sub-section (1) or under subsection
(2) of Section 186; in respect ofany assessment for the assessment year commencing on or
before the 1st day of April, 1992
(i) An order under Section 201;
(j) An order under Section 216 in respect of any assessment for the assessment year
commencing on the 1st day of April, 1988, or any earlier assessment year;
(k) An order under Section 237;
(l) An order imposing a penalty under -
(i) Section 221, or
(ii) Section 271, Section 271-A, Section 271-Bf Section 272-A, Section 272-AA or
Section 272-BB;
(ii) Section 272, Section 272-B, or Section 273, as they stood immediately before the 1st
day of April, 1989, in respect of my assessment for the assessment year commencing on the
1st day of April, 1988, or any earlier assessment year;
(l-A) Notwithstanding anything contained in sub-section (1), every appeal filed, on or after
the 1st day of October, 1998, but before the 1st day of June, 2000, before the Deputy
Commissioner (Appeals) and any matter arising out of or connected with such appeal and
which is so pending shall stand transferred to the Commissioner (Appeals) and the
Commissioner (Appeals) may proceed with such appeal or matter from the stage at which it
was on that day.
(2) Notwithstanding anything contained in sub-section (1), any assessee aggrieved by any of
the following orders (whether made before or after the appointed day) may appeal to the
Commissioner Appeals) before jhe 1st day of June, 2000, against such order.
(a) an intimation or order specified in sub-section (1) where such intimation is sent or such
order is made by the Joint Commissioner in exercise of the powers or junctions conferred on
or assigned to him under Section, 120 or Section 124.

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 (b) an order specified in clauses (a) to (e) (both inclusive) and clauses (i) to ti (l) (both
inclusive) of sub-section (1) or an order under Section 104, as it stood immediately before the
1st day of April, 1988, in respect of any- assessment for the assessment year commencing on
the 1st day ofApril, 1987, or any earlier assessment year, made against the assessee being a
company.
(c) An order of assessment made after the 30th day ofSeptember, 1984, on the basis of the
directions issued by the Joint Commissioner unfier Section 144-A.
(d) An order made by the Joint Commissioner under Section 154.
(d-a) an order of assessment made by an Assessing Officer under clause (c) of Section 15 8-
BC, in respect of search initiated under Section 132 or books of account, other documents or
any assets requisitioned under Section 132-A.
(d-b) an order imposing a penalty under sub-section of Section 158-BFA.
(e) An order imposing a penalty under'Section 271-1^ or Section 27J-BB.
(ee) An order made by a Joint Commissioner imposing a penalty under Section271-C,
Section 271-D or Section 271-E.
(f) An order made by a Joint Commissioner or a Joint Director imposing a penalty under
Section 272-A.
(ff) An order made by a Joint Commissioner imposing a penalty under Section 272-AA.
(g) an order imposing a penalty under Chapter XXI by the Income Tax Officer or the
Assistant Commissioner or Deputy Commissioner, where such penalty has been imposed
with the previous approval of the Joint Commissioner under sub-section (2) of Section 274.
(h) An order mack by an Assessing Officer (other than Joint Commissioner) under the
provisions of this Act in the case of such persons or classes of persons as the Board may,
having regard to the nature of the cases, the complexities involved and other relevant
considerations, direct.
(3) Notwithstanding anything contained in sub-section (1), the Board or the Director General,
or Chief Commissioner or Commissioner if so authorized by the Board, may, by order in
writing, transfer any appeal which is pending before a Deputy Commissioner of Appeals)
and any matter arising out of or connected with such appeal and which is so pending, to the
Commissioner (Appeals) if the Board or,as the: case may be, the Director-General, or Chief
Commissioner orCommissioner (at the request of the appellant or otherwise) is satisfied that
it s if it is " necessary or expedient so to do having regard to the nature of the case, the
'complexities involved and other relevant considerations and the Commissioner S; "
(Appeals) nary proceed with such appeal or matter from the stage at which it was before it
was so transferred.
Provided that the appellant may demand that before proceeding further with the appeal or
matter, the previous proceeding or any part thereof be reopened or that he be reheard.
Explanation. - For the purpose of this Section.

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(a) “appointed day ” means the 1Oth day of July, 1978, being the day appointed under
Section 39 of the Finance (No. 2) Act, 1977 (29 of1 977).
(b) “status means the category under which the assessee is assessed as “individual”, “Hindu
undivided family”, and so on.
The main highlights of this section are that it:
(a) Does not provide for an appeal against an assessment under Section 143(1);
(b) Expressly gives a right of appeal on the question of the status under which an assessee is
assessed, that is, whether under Section 143(3) or 144.
(c) Grants a right of appeal against.
(i) An order of rectification or amendment under Sections 154 or 155.
(ii) An order levying interest under Section 216 in cases where the earlier instalments of
advance tax are under-estimated or payment of advance tax is wrongly deferred.
(d) Permits an appeal, even before the assessment is made, against an order under Section
163 treating the assessee as the agent of a non-resident; and.
(e) Permits an appeal against an order imposing a penalty under Section 221for non-payment
of tax without requiring the tax to be paid first.
EXPLANATION
Appeal against the order of the Assessing Officer lies with the Commissioner. Alternatively,
the assessee can file revision petition with the Commissioner. Appeal against the order of the
Commissioner (Appeals) can be preferred-by the assessee or the income-tax department and
such appeal lies with the Appellate-Tribunal. The assessee or the Commissioner of Income-
tax may prefer an appeal against the order of the Appellate Tribunal to the High Court on any
question of law arising out of the order of the Appellate Tribunal. The order of the High
Court tan be challenged either by the assessee or by the income-tax department by preferring
an appeal to the Supreme Court which is the final appellate authority under the Act.
If an appeal does not lie against an order under a particular Section, the mere fact that the
order purports to have been made under that Section does not shut out the appeal; it must be
shown that the circumstances of the case bring it within the scope of that Section. 2If an order
is appealable under this Section, an appeal would lie to the Commissioner Appeals even if in
the circumstances of a case the Assessing Officer had no jurisdiction to pass that order 3.
Clause (a) of the Section firstly gives the right of appeal to an assessee who “denies his
liability to be assessed under this Act” even if he had not denied his liability before the
Assessing Officer,4 but only after the assessment is made. For example, a person treated as a
partner in the assessment of a firm may appeal if he denies his liability to be assessed as a
partner. Mere filling of a return of income is not tantamount to an admission by the person
submitting the return that he is liable to assessment under this Act. The expression ‘denial of
liability’ covers-not only the total denial of liability but also the denial of liability under
2
CIT vs. Khemchand Ramdas 6 ITR 414 (PC);
3
CIT v. Bfaikaji Dadabhai 42 ITR 123 (SC)
4
Anand Kumar v. CIT 8 ITR 126.

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Particular cirumstances, for example, the denial by an association of persons to be assessed as
a unit, on the ground that judicial exercise of the Department’s option require that the
members should be individually assessed. Clause (a) of the Section then gives the right of
appeal to an assessee “who objects to the making of adjustments” of the assessment. An
appeal lies against any assessment made under Sections 143(3) or 144, but not against an
assessment under Section 143(1) accepting the return as correct and complete (subject to the
permitted adjustments) without calling for any evidence5. If the assessment has not been
made under Section 143(1), the assessee may appeal against the assessment of an income
which he himself had wrongly returned as part of his taxable income 6,or he may claim a
deduction or exemption in appeal which he had not claimed in the return or before the
Assessing Officer. Where in order to give effect to the directions of an appellate authority,
the Assessing Officer passes an order modifying or amending the original assessment, such
an order is virtually a fresh assessment order is appealable under this Section. The right of
appeal is restricted to the amount of income or loss assessed or the amount of tax or status
determined. The Assessing Officer’s notings such as “not assessed” or “not assessable” or
“no proceeding” or “filed” would ordinarily amount to a final order lawfully terminating the
assessment proceedings and would be appealable at the instance of the assessee filing a return
of loss which he desires to carry forward. The Assessing Officer’s order refusing to compute
loss on the ground that the return of loss was filed out of time is appealable, because an act of
an authority which is made appealable should (An appeal may lie against the classification of
the loss into speculation loss and non-speculation loss) be held to include his refusal to do
that act. Refusal of the Assessing Officer to consent to a change of the ‘previous year’ under
Section 3(4), however, is not appealable.
Where a best judgment assessment has been made under Section 144 (otherwise than for non-
compliance with the Assessing Officer’s directions under Section 142(2-A) to furnish an
audit report) and the assessee objects to the validity of the assessment and wants to have the
assessment cancelled on the ground that he was prevented by sufficient cause from
complying with the notice, the non- compliance with which has resulted in the best judgment
assessment, such a contention cannot be considered by the Commissioner (Appeals) in an
appeal under this clause. In such a case, the proper course for the assessee is to apply to the
Assessing Officer to cancel the best judgment assessment and make a fresh assessment, and,
if his application is rejected, to appeal against the order of rejection. However, in an appeal
against the best judgment assessment, it would be open to the assessee to deny his liability to
be assessed at all, as distinct from his liability to be assessed under Section 144.

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  Filing of appeal 

The appeal has to be filed, in duplicate, in the prescribed Form 35 being Memorandum of
Appeal and should be accompanied by grounds of appeal, statement of facts, the copy of
order appealed against and the notice of demand in original. However, as the filing of the
documents other than the grounds of appeal are neither provided in the Act nor in the rules,
any omission in filing them is only an irregularity, which is not fatal.

The Form is to be verified and signed by a person who is otherwise authorised to sign the
return of income (refer Section 140).

 Grounds of appeal :

(i) The contents thereof should be specific, indicating the issue on which relief is sought.

(ii) Common or basic ground, such as on violation of principle of natural justice etc. that is
material to the validity of the order itself, should be taken up first.

(iii) In respect of each issue, there can be one or more grounds; however, in case they are
more than one, they should be taken up sequentially one after the other.

(iv) Separate and independent ground should be taken for different issues to facilitate its
disposal by the appellate authority in the manner provided in S. 250(6).

(v) It is desirable and convenient if the issues are incorporated in the Grounds of appeal in the
same chronological order, as these are dealt with in the order appealed against.

 Time limit 

A memorandum of appeal is to be filed within a period of 30 days from-:

(i) The date of service of notice of demand, where the order appealed against relates to an
assessment or penalty;

(ii) The date of intimation of the order sought to be appealed against;

(iii) In case of appeal relating to tax deducted at source u/s.195(1) of the Act, from the date of
payment of such tax.

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  Condonation

The Commissioner of Income Tax Authorities has the powers to condone the delay in filing
the appeal and admit the appeal if he is satisfied that there exists sufficient cause for the
delay. The discretionary powers vested with the appellate authority should be exercised
judiciously and not arbitrarily. The Courts have held that the powers should be also exercised
liberally, considering that,

(i) Ordinarily, a litigant does not stand to benefit by lodging an appeal late;

(ii) Refusing to condone the delay may result in a matter being thrown out at the very
threshold leading to cause of justice being defeated.

However, the existence of sufficient cause is sine qua non to such a condonation.

Further, since the admission of a belated appeal is a condition precedent, the CIT(A) has to
adjudicate on the issue of condonation before dealing with the issues in appeal. Where the
request for condonation is refused, a speaking order that is an order giving reasons for not
cordoning the delay, is to be passed.

 Filing fees 

The appellant has to pay an appeal fee and enclose evidence of payment along with the
Memorandum of Appeal. Such fee payable ranges from Rs.250 to Rs.1000, depending upon
the total income determined by the Assessing Officer. It is Rs.250 in all other cases.

 Rs. 250, where the assessed income is Rs 1lakh or less

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Powers of Commissioner of Income (Appeals) 

While disposing of an appeal, the Commissioner of Income Tax Authority is vested with the
powers of:

(i) In the case of assessment order:

(a) To confirm

(b) To reduce

(c) To enhance

(d) To annul the order that is passed without jurisdiction and the defect is not curable;

(ii) In the case of order of penalty:

(a) To confirm

(b) To cancel

(c) To vary so as to either enhance or reduce it

(iii) In respect of any other order, as he may consider or deem fit.

Powers of enhancement 

The powers conferred upon the first appellate authority by the Income-tax Act are much
wider than the powers of an ordinary Court of appeal. The first appellate authority is not an
ordinary Court of appeal, considering that only one party to the original decision taken is
entitled to appeal. It is on account of this peculiar position that the statute has conferred wide
powers to the first appellate authority.

Once the assessment comes before the Commissioner of Income Tax Authorities his
jurisdiction is not restricted to examining only those issues that have been taken up by the
appellant in appeal, but ranges over the whole assessment and it is open to him to correct the
assessment order not only in regard to the matters taken in appeal, but also with regard to
maters which were considered by the Assessing Officer in the assessment proceedings. He
can examine every process which results in ultimate computation and assessment of income,
even if his decision leads to enhancement of income.

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However, in the area of powers of enhancement, there are contrary decisions : while one view
relying upon the decisions in the cases of : CIT v. Shapoorji Pallonji Mistry7 and CIT v. Rai
Bahadur Hardut Roy Motilal Chamaria 8 is that the power of enhancement is restricted to only
those areas and sources of income which were considered by the Assessing Officer at the
assessment stage, and hence, such enhancement should not lead to a new source of income.

The other view relying upon the decisions in the cases of CIT v. Kanpur Syndicate Ltd9 and
CIT v. Nirbheram Daluram10 is that such power of enhancement can even lead to an addition
in respect of a new source of income.

In CIT v. Nirbheram Daluram11 the Apex Court relied upon the three judges Bench decisions
in the cases of Jute Corporation of India v. CIT12 and CIT v. Kanpur Coal Syndicate, 53 ITR
229 (SC) to hold that the Commissioner of Income Tax Authorities (or AAC as in that case)
has plenary powers in disposing of an appeal. The scope of his power is coterminous with
that of the Assessing Officer. He can do what the Income-tax Officer can do and can also
direct him to do what he has failed to do.

The ratio of the decision in the case of Nirbheram Daluram should prevail considering that it
was pronounced in the context of S. 251 of the Act, while the earlier decision was in the
context of the corresponding provision of 1922 Act.

On the other hand, it is also argued that the decision in the case of Rai Bahadur Hardut Roy
Motilal Chamania was a decision of a three-Member Bench, while that in the case of
Nirbheram Daluram, the decision was by a Division Bench and therefore, the former should
prevail over the latter.

It has to be noted that in the case of Nirbheram Daluram, the issue of enhancement in respect
of a new source of income was never under consideration. Hence, wherever such a situation
arises, the proper course of action is to take remedial action u/s.147 or S. 263 of the Act, as
the case may be CIT v. Sardari Lal & Co13.

Needless to add, where the Commissioner of Income Tax Authority proposes to enhance the
income or penalty, he has to issue a show-cause notice giving the appellant a reason-able

7
44 ITR 891 (SC)
8
66 ITR 445 (SC)
9
53 ITR 610 (SC)
10
224 ITR 610 (SC)
11
Ibd.
12
187 ITR 688 (SC)
13
251 ITR 864 (DEL – FD)

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opportunity to explain his case. In view of the wide powers of the Commissioner of Income
Tax Authorities, proceeding before the Commissioner of Income Tax should be conducted
after adequate preparation and care.

Further, as far as possible, all legal issues should be taken before the Commissioner of
Income Tax (Appeals), as at times, the Tribunal takes the view that the issue had not been
agitated before the Commissioner of Income Tax Authorities and does not arise out of his
order.

Order of Commissioner Tax

After hearing the case/arguments, the Commissioner of Income-tax passes his order, and the
same is recorded in writing. Where the order passed is that for disposal of the appeal and the
Commissioner must supply reasons for the same. While disposing of an appeal, the
Commissioner of Income-tax may consider and decide any matter arising out of the
proceedings in which order appealed against was passed, even if such matter was not raised
by the taxpayer before the Commissioner of Income-tax. The order should be issued within
15 days of last hearing.14

At the conclusion of the hearing, the Commissioner of Income Tax Authorities has to pass an
order in writing giving reasons for his decision on the issues in appeal section 250(7). This is
to ensure that the party in appeal knows the reasons for deciding in his, favour or against him
enabling the appellant to decide on the further course of action in case the decision is against
him. A copy of the order has to be communicated to the authority officer and also to the
Commissioner of Income Tax [refer S. 250(7)].

In respect of passing of the appellate order, the Act prescribes an advisory time limit, for
appeals instituted on or after 1 October1998, [refer S. 250(6A) w.e.f. 1 June 1999 to decide
the appeal, as far as possible, within one year from the end of the financial year in which the
appeal is filed.

14
www.paisabazar.com

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Conclusion

Appeal refers to an act of referring the case / matter / situation to a higher authority against
the order passed by a lower authority in respect of that case or matter. It implies a complaint
to a higher authority against the order or judgement (alleged to be erroneous) of an
administrative. The complex nature of Income Tax Act and the various rules often, create a
situation where there is difference of opinion among the assesse and the assessing officer (i.e.
income tax department). Quite often, an assesse is not satisfied by an assessment order / any
other order issued by an income tax authority and such an aggrieved assesse can present his
case before specified authorities prescribed under income tax Act. Such prescribed authorities
constitute appellate authority.

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 BIBILOGRPHY
Books

 Law of Taxation, Dr.S.R. Myneni, Allahabad Law Agency,(2006)

Websites

 https://cleartax.in/s/tax-collected-source.

 http://www.simpletaxindia.net/2008/12/tax-collected-atsourcetc-provisions.html.
 http://www.taxmann.com/blogpost/2000000154/what-is-tds-tax-collected source.

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