The Income-tax Act, 2025, which came into effect from 1 April 2026, marks one of the most significant legislative reforms in India’s direct tax framework in decades. Although the new law extensively restructures, renumbers, and simplifies the legislation, it does not radically alter the taxpayer’s appellate rights.

One of the most important areas reorganized under the new Act is the appeal mechanism, now contained in Sections 356 to 374. While these provisions replace the earlier appellate framework spread across Sections 246 to 269 of the Income-tax Act, 1961, the overall hierarchy of appeals, powers of appellate authorities, procedural safeguards, and judicial remedies remain substantially intact.

The objective of the new legislation is not to redesign the appellate system but to make it easier to understand, improve administrative efficiency, and support digital tax administration through greater integration of faceless proceedings.

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This article examines the appellate structure under the Income-tax Act, 2025, compares it with the earlier law, and explains every important provision in detail.

Evolution of the Appeal Framework

Appeals are a fundamental component of every taxation system. They provide taxpayers with an opportunity to challenge assessments, penalties, or other decisions that they believe are legally or factually incorrect.

The Income-tax Act, 2025 retains India’s multi-level appellate hierarchy consisting of:

• Joint Commissioner (Appeals)
• Commissioner (Appeals)
• Income Tax Appellate Tribunal (ITAT)
• High Court
• Supreme Court

Rather than creating a new appellate mechanism, Parliament has focused on:

• improving legislative drafting,
• consolidating related provisions,
• eliminating unnecessary repetition,
• encouraging digital proceedings, and
• making appellate provisions easier to navigate.

Comparison of Appeal Provisions

The comparison clearly indicates that while section numbers have changed significantly, the substantive legal framework remains largely consistent with the earlier law. 

Section 356 – Appealable Orders before the Joint Commissioner (Appeals)

Section 356 establishes the jurisdiction of the Joint Commissioner (Appeals) by identifying the categories of orders that can be challenged before this appellate authority.

An assessee who is dissatisfied with certain orders passed by an Assessing Officer below the rank of Joint Commissioner can invoke this appellate remedy. These disputes commonly relate to:

• assessment orders,
• reassessment proceedings,
• rectification orders,
• intimations,
• penalty orders, and
• other specified determinations affecting tax liability.

The provision enables taxpayers to contest various aspects of the assessment process, including:

• computation of taxable income,
• determination of tax liability,
• calculation of losses,
• denial of exemptions or deductions,
• incorrect classification of status, and
• similar issues affecting assessment.

However, the law places an important limitation on this appellate jurisdiction. Where an assessment has been made by, or with the approval of, a higher-ranking income-tax authority, the appeal cannot ordinarily be filed before the Joint Commissioner (Appeals).

Another noteworthy feature of Section 356 is the administrative flexibility it provides. The Central Board of Direct Taxes (CBDT) or an authorized authority may transfer appeals between the Joint Commissioner (Appeals) and the Commissioner (Appeals) whenever necessary for efficient administration.

The provision also lays the foundation for faceless appellate proceedings, allowing appeals to be processed electronically with minimal physical interaction. This reflects the Government’s continuing emphasis on transparency, technology-driven governance, and reduction of discretionary interface between taxpayers and tax officials. 

Section 357 – Appealable Orders before the Commissioner (Appeals)

Section 357 serves as the principal first appellate provision under the Income-tax Act, 2025.

It specifies the broad range of orders that may be challenged before the Commissioner (Appeals) by an assessee, deductor, or tax collector.

These include appeals against:

• regular assessments,
• reassessments,
• rectification orders,
• penalty orders,
• orders denying tax liability,
• TDS and TCS-related determinations,
• orders treating a person as an agent of a non-resident,
• enhancement of assessments, and
• reduction or denial of refunds.

The Commissioner (Appeals) functions as an independent quasi-judicial authority responsible for reviewing decisions made by Assessing Officers.

This appellate stage serves multiple objectives:

• protecting taxpayers against arbitrary assessments,
• correcting legal or factual errors,
• ensuring adherence to statutory procedures,
• reinforcing the principles of natural justice, and
• reducing unnecessary litigation before higher judicial forums.

Although Section 357 has been reorganized and redrafted for better readability, its substantive legal scope remains largely consistent with the earlier Section 246A of the Income-tax Act, 1961. 

Section 358 – Form of Appeal and Time Limits

Every appellate process must follow prescribed procedural requirements, and Section 358 provides this procedural framework.

An appeal must:

• be filed in the prescribed format,
• contain the required verification,
• be accompanied by the applicable statutory fee, and
• comply with the prescribed filing conditions.

The legislation continues the existing system of differential appeal fees depending upon the income involved in the dispute.

A significant feature retained under the new law is the 30-day limitation period, generally calculated from the date on which the taxpayer receives the relevant assessment order or demand notice.

Recognizing that genuine difficulties may prevent timely filing, the appellate authority retains the power to condone delay where the appellant demonstrates sufficient cause.

Section 358 also continues the principle that, before an appeal is ordinarily admitted, the taxpayer should have discharged the tax liability relating to the returned income or complied with advance tax requirements. Nevertheless, appellate authorities retain discretion to relax these conditions in deserving cases to ensure that procedural requirements do not become instruments of injustice.

Accordingly, the provision strikes an appropriate balance between procedural discipline and equitable access to appellate remedies. 

Section 359 – Procedure in Appeal

Section 359 lays down the procedural safeguards governing appellate hearings before both the Commissioner (Appeals) and the Joint Commissioner (Appeals).

Once an appeal is instituted, the appellate authority is required to:

• issue notices to both parties,
• fix a date and venue for hearing,
• provide reasonable opportunity of representation,
• consider submissions from both sides, and
• decide the dispute through a reasoned order.

The authority possesses wide procedural powers, including:

• granting adjournments,
• conducting independent inquiries,
• directing the Assessing Officer to undertake further investigation,
• calling for remand reports, and
• admitting additional grounds where justified.

One of the most important safeguards retained is the requirement that every appellate decision must be a speaking order.

This means the order must clearly record:

• the issues involved,
• the findings reached,
• the reasoning supporting those findings, and
• the final decision.

The Act also continues to encourage expeditious disposal by providing that appeals should ordinarily be concluded within one year from the end of the financial year in which they were filed.

The incorporation of faceless appeal procedures within this section further strengthens transparency while reducing administrative delays and personal interface between taxpayers and tax officials. 

Section 360 – Powers of the Appellate Authorities

Section 360 defines the substantive powers exercised by the Joint Commissioner (Appeals) and the Commissioner (Appeals).

These powers are deliberately broad to enable effective correction of assessment errors.

Depending upon the nature of the dispute, the appellate authority may:

• confirm an assessment,
• reduce the assessed income,
• enhance the assessment,
• annul the assessment entirely,
• confirm or cancel penalties,
• increase or reduce penalties, or
• modify refunds.

An important safeguard accompanies these extensive powers.

Before passing any order that adversely affects the taxpayer—such as enhancing an assessment or increasing a penalty—the appellate authority must provide the assessee with a reasonable opportunity of being heard.

Section 360 also authorizes appellate authorities to examine issues arising from assessment proceedings even where such issues were not specifically raised by the appellant, provided they are connected with the subject matter of the appeal.

This broad jurisdiction reinforces the appellate authority’s role as an independent quasi-judicial institution entrusted with ensuring both legality and fairness in tax administration.

The Income Tax Appellate Tribunal: India’s Premier Tax Appellate Forum

After the first appeal before the Joint Commissioner (Appeals) or Commissioner (Appeals), taxpayers who remain dissatisfied can approach the Income Tax Appellate Tribunal (ITAT). The Tribunal occupies a unique position in India’s tax dispute resolution system, serving as the country’s final fact-finding authority. While the High Courts and the Supreme Court primarily examine questions of law, the ITAT evaluates both facts and law, making it a crucial institution in ensuring fair tax administration.

The Income-tax Act, 2025 retains the Tribunal’s pivotal role while reorganising and consolidating the statutory provisions for improved readability and administrative clarity.

Section 361 – Constitution of the Income Tax Appellate Tribunal

Section 361 provides the legal foundation for the establishment and functioning of the Income Tax Appellate Tribunal (ITAT). Although the provision has been renumbered and simplified, the institutional framework remains substantially similar to that under the Income-tax Act, 1961.

The Tribunal continues to comprise two categories of members:

• Judicial Members, possessing extensive legal and judicial expertise; and
• Accountant Members, bringing specialised knowledge in taxation, finance, and accountancy.

The combination of judicial and technical expertise enables the Tribunal to adjudicate complex tax disputes involving intricate legal principles and accounting issues.

A notable feature of the new provision is the consolidation of provisions that were previously scattered across multiple sections of the 1961 Act. Matters relating to the constitution, administration, appointment of members, and functioning of the Tribunal are now presented in a more coherent manner, making the legislation easier to interpret.

The section also incorporates the framework introduced under the Tribunals Reforms Act, 2021, governing the qualifications, appointment process, tenure, and service conditions of Tribunal members.

The Tribunal is headed by a President, who may be a sitting or retired High Court Judge or an eligible Vice-President of the Tribunal. Vice-Presidents may also be appointed to oversee the administration of different benches across the country.

By consolidating these provisions, the Income-tax Act, 2025 enhances legislative clarity without altering the Tribunal’s constitutional role or jurisdiction. 

Section 362 – Appeals before the Income Tax Appellate Tribunal

Section 362 governs the appellate jurisdiction of the ITAT and specifies the categories of orders that may be challenged before it.

The Tribunal primarily hears appeals against orders passed by:

• the Commissioner (Appeals),
• the Joint Commissioner (Appeals),
• the Principal Commissioner,
• the Commissioner of Income Tax, and
• certain orders passed pursuant to the directions of the Dispute Resolution Panel (DRP).

Unlike the first appellate stage, which focuses on reviewing the actions of the Assessing Officer, proceedings before the Tribunal involve an independent judicial examination of both factual and legal issues.

Limitation Period

The provision retains the existing limitation period, requiring appeals to be filed within two months from the date on which the order is communicated to the aggrieved party.

Recognising that genuine difficulties may prevent timely filing, the Tribunal continues to possess discretionary powers to condone delays where the appellant demonstrates sufficient cause.

Cross-Objections

One of the distinctive features of Tribunal proceedings is the facility for cross-objections.

Where one party files an appeal, the opposite party may file cross-objections within thirty days from the receipt of notice of the appeal.

This mechanism allows respondents to challenge adverse findings without filing a separate appeal, thereby reducing multiplicity of proceedings and ensuring comprehensive adjudication of all disputed issues.

Appeal Fees

Section 362 also continues the existing framework relating to:

• prescribed appeal fees,
• fees for filing stay applications, and
• procedural requirements for instituting appeals.

Overall, the provision preserves the existing appellate structure while presenting the statutory requirements in a more organised format. 

Section 363 – Powers and Orders of the Appellate Tribunal

Section 363 defines the extensive powers exercised by the ITAT while deciding appeals.

After providing both parties with an opportunity of being heard, the Tribunal may:

• affirm the order under appeal,
• modify the decision,
• reverse the findings,
• grant appropriate relief, or
• issue directions necessary for proper adjudication.

The Tribunal’s decisions represent the final determination of factual disputes. Higher courts generally do not interfere with factual findings unless substantial legal questions arise.

Rectification of Mistakes

The Tribunal retains its power to correct mistakes apparent from the record.

Applications for rectification may be entertained within six months from the end of the month in which the Tribunal’s order was passed.

This limited power enables the Tribunal to correct obvious clerical or patent errors without reopening the entire case.

Stay of Demand

One of the most significant aspects of Section 363 concerns the Tribunal’s power to grant a stay of tax demand.

The provision broadly continues the earlier legislative framework.

The Tribunal may stay recovery proceedings subject to appropriate conditions, which generally include:

• payment of at least 20% of the disputed tax demand, or
• furnishing equivalent security considered satisfactory.

Where the appeal cannot be disposed of for reasons not attributable to the taxpayer, the Tribunal may extend the stay.

However, the aggregate duration of the stay ordinarily cannot exceed 365 days, thereby balancing the interests of taxpayers with the Government’s objective of timely revenue collection.

This mechanism seeks to protect taxpayers from coercive recovery while ensuring that litigation is not used merely as a means to delay payment of legitimate tax dues.

Finality of Tribunal Orders

Orders passed by the ITAT attain substantial finality.

Further appeal is permissible only before the High Court and only where the case involves a substantial question of law.

Thus, the Tribunal remains the highest authority for determination of factual controversies under the Income-tax Act.

Section 364 – Procedure and Functioning of the Appellate Tribunal

Section 364 governs the internal administration and procedural functioning of the Tribunal.

The President of the Tribunal is authorised to constitute different categories of benches depending upon the nature and complexity of disputes.

Regular Benches

Ordinarily, Tribunal benches consist of:

• one Judicial Member, and
• one Accountant Member.

This dual-member composition combines judicial reasoning with technical accounting expertise, ensuring balanced adjudication.

Single-Member Benches

For comparatively smaller matters involving income below the prescribed monetary threshold, the President may constitute single-member benches.

This arrangement enables faster disposal of routine cases while allowing larger and more complex disputes to be heard by regular benches.

Special Benches

For matters involving important legal principles, conflicting precedents, or issues of exceptional complexity, the President may constitute Special Benches consisting of three or more members.

Special Benches play a crucial role in maintaining consistency in Tribunal jurisprudence and resolving divergent interpretations of tax law.

Difference of Opinion

Occasionally, Judicial and Accountant Members may disagree on certain legal or factual issues.

In such situations, the disputed point is referred to another member, and the issue is ultimately decided according to the majority opinion.

This process ensures objective decision-making while preserving institutional consistency.

Powers Comparable to Civil Courts

To discharge its adjudicatory functions effectively, the Tribunal possesses powers comparable to those exercised by civil courts in relation to:

• summoning witnesses,
• compelling production of documents,
• examining evidence,
• issuing commissions, and
• regulating its own procedure.

Proceedings before the Tribunal are treated as judicial proceedings, thereby ensuring procedural fairness and maintaining the integrity of the adjudicatory process.

Section 364 substantially preserves the procedural framework that has governed Tribunal functioning for decades while presenting the provisions in a clearer and more accessible legislative format.

Major Highlights of Sections 361–364

The provisions relating to the Income Tax Appellate Tribunal reflect the overall philosophy of the Income-tax Act, 2025—modernisation without substantive disruption. The Tribunal’s constitution, jurisdiction, powers, and procedural safeguards remain largely unchanged, ensuring continuity in tax dispute resolution.

Key developments include:

• Consolidation of Tribunal-related provisions into a more streamlined statutory framework.
• Retention of the ITAT as the final fact-finding authority, preserving its central role in the appellate hierarchy.
• Continuation of existing timelines, including the two-month appeal period and the thirty-day period for filing cross-objections.
• Preservation of stay and rectification powers, balancing taxpayer protection with efficient revenue collection.
• Clearer legislative drafting, making the Tribunal provisions easier for taxpayers and practitioners to understand without altering their substantive effect.

The Income-tax Act, 2025 thus strengthens accessibility and administrative clarity while maintaining the well-established role of the ITAT in India’s tax litigation framework.

Appeals Beyond the Tribunal: The Final Stages of Tax Litigation

While the Income Tax Appellate Tribunal (ITAT) serves as the final authority on questions of fact, disputes involving significant legal issues may proceed further through the judicial hierarchy. The Income-tax Act, 2025 preserves the well-established appellate route from the ITAT to the High Court and, in appropriate cases, to the Supreme Court.

Unlike the first two appellate stages, these forums primarily examine questions of law rather than factual disputes, thereby ensuring consistency in the interpretation and application of tax statutes across the country.

Section 365 – Appeal to the High Court

Section 365 provides the statutory right to challenge an order of the Income Tax Appellate Tribunal before the jurisdictional High Court. However, this remedy is available only where the appeal involves a substantial question of law.

The legislature intentionally restricts High Court intervention to important legal issues. Pure findings of fact recorded by the Tribunal ordinarily attain finality and cannot be re-examined unless they give rise to a legal question of substantial importance.

Who May File the Appeal?

Both the taxpayer and the Income-tax Department are entitled to approach the High Court if they believe that the Tribunal’s decision suffers from an error involving the interpretation or application of law.

Limitation Period

The appeal must ordinarily be filed within 120 days from the date on which the Tribunal’s order is received by the aggrieved party.

Framing of Substantial Questions of Law

The memorandum of appeal must clearly identify the substantial question(s) of law involved.

Before admitting the appeal, the High Court independently examines whether such questions actually arise. If satisfied, it formally frames the legal questions that will form the basis of the hearing.

Generally, arguments remain confined to these framed questions. Nevertheless, the Court retains discretion to consider additional substantial questions of law if sufficient reasons are recorded.

The High Court may also decide legal issues that the Tribunal failed to determine, provided such issues are necessary for the proper disposal of the appeal.

Thus, Section 365 reinforces the distinction between factual adjudication by the Tribunal and judicial interpretation of law by constitutional courts. 

Section 366 – Hearing by a Division Bench of the High Court

Section 366 ensures that tax appeals before the High Court receive collective judicial consideration.

Every appeal filed under Section 365 must ordinarily be heard by a Bench comprising not less than two Judges.

This requirement promotes consistency and reduces the possibility of conflicting interpretations in complex tax matters.

Difference of Opinion

Where the Judges hearing the matter disagree on any point of law, the disputed issue is referred to one or more additional Judges.

The final decision is then rendered according to the majority opinion, ensuring certainty in judicial outcomes and maintaining uniformity in tax jurisprudence across the country.

Importantly, the Income-tax Act, 2025 retains this long-standing procedural safeguard without introducing any substantive modifications. 

Section 367 – Appeal to the Supreme Court

Section 367 governs appeals from the High Court to the Supreme Court.

Unlike appeals to the High Court, access to the Supreme Court is not automatic.

An appeal ordinarily lies only where the High Court certifies that the case is fit for consideration by the Supreme Court.

Such certification is generally granted where the dispute raises:

• interpretation of important statutory provisions,
• substantial constitutional or legal questions,
• conflicting judicial opinions requiring authoritative resolution, or
• issues having significant nationwide implications.

As the apex judicial institution, the Supreme Court functions as the final authority for resolving legal controversies under the Income-tax Act.

Its judgments are binding on all courts, tribunals, and tax authorities throughout India, thereby ensuring uniform application of tax law. 

Section 368 – Procedure Before the Supreme Court

Section 368 prescribes the procedural framework governing appeals before the Supreme Court.

Proceedings continue to be regulated substantially by the applicable provisions of the Code of Civil Procedure and the Supreme Court Rules.

The Court enjoys broad procedural discretion regarding:

• admission of appeals,
• conduct of hearings,
• award of litigation costs,
• issuance of consequential directions, and
• disposal of connected matters.

Once the Supreme Court pronounces its judgment, the Assessing Officer is legally obligated to implement the decision in accordance with law.

Accordingly, Section 368 ensures that the final judicial determination effectively concludes the tax dispute and is translated into appropriate administrative action. 

Section 369 – Tax Recovery During Pendency of Appeals

A common misconception among taxpayers is that filing an appeal automatically suspends recovery proceedings.

Section 369 clarifies that the mere institution of an appeal does not operate as a stay of demand.

Accordingly, tax determined under the Act continues to remain payable even while appeals are pending before the High Court or the Supreme Court.

The Department is therefore entitled to continue recovery proceedings unless:

• the appellate authority grants a stay,
• the High Court issues an interim order, or
• the Supreme Court specifically restrains recovery.

This provision balances the Government’s interest in safeguarding revenue with the taxpayer’s right to seek judicial review.

Section 370 – Execution of Costs Awarded by the Supreme Court

Litigation before the Supreme Court occasionally results in the award of costs against one of the parties.

Section 370 provides the statutory machinery for enforcing such orders.

Where necessary, the High Court may transmit the Supreme Court’s order relating to costs to an appropriate subordinate court for execution.

The provision ensures that judicial orders relating to litigation expenses are effectively implemented without requiring separate proceedings.

Section 371 – Consequential Amendment of Assessments

Section 371 addresses situations where appellate decisions require corresponding modifications in related assessments.

This provision assumes particular importance in cases involving:

• Associations of Persons (AOPs),
• Bodies of Individuals (BOIs), and
• other entities whose assessments directly affect those of their members.

Where an appellate order changes the tax liability of the entity, the Assessing Officer may be authorised to amend or make fresh assessments in the hands of the individual members.

The objective is to ensure consistency and prevent contradictory assessments arising from the same underlying transaction.

Section 372 – Exclusion of Time Taken for Obtaining Certified Copies

Every appeal under the Income-tax Act must be filed within prescribed limitation periods.

Section 372 protects litigants against delays caused by administrative procedures.

Where a certified copy of the order is required and is not supplied along with the original order, the time reasonably spent in obtaining the certified copy is excluded while computing the limitation period.

This safeguard ensures that taxpayers are not deprived of their statutory right of appeal due to procedural delays beyond their control.

Section 373 – Filing of Departmental Appeals

Section 373 empowers the Central Board of Direct Taxes (CBDT) to prescribe monetary thresholds for filing appeals by the Income-tax Department.

The policy objective is to reduce unnecessary litigation by preventing appeals in matters involving comparatively insignificant tax effect.

The provision also makes it clear that:

• non-filing of an appeal in one case does not amount to acceptance of the legal issue by the Department; and
• the Department remains free to contest the same legal issue in another case involving a higher tax effect or different factual circumstances.

This approach promotes efficient litigation management while enabling the Department to concentrate on matters of wider legal significance. 

Section 374 – Meaning of “High Court”

Section 374 provides the definition of “High Court” for the purposes of the appellate provisions contained in Chapter XVIII.

The section identifies the jurisdictional High Court applicable to different States and Union Territories, including Delhi, Chandigarh, Puducherry, Lakshadweep, Jammu & Kashmir, and Ladakh.

The provision eliminates uncertainty regarding territorial jurisdiction and assists taxpayers in determining the appropriate forum for filing appeals.

Although primarily administrative in nature, this section plays an important role in ensuring procedural certainty within the appellate system.

Appellate Hierarchy Under the Income-tax Act, 2025

Assessment / Order by Assessing Officer

                │

                ▼

Joint Commissioner (Appeals)

           or

Commissioner (Appeals)

                │

                ▼

Income Tax Appellate Tribunal (ITAT)

                │

     (Substantial Question of Law)

                ▼

         High Court

                │

    (Certified Fit for Appeal)

                ▼

       Supreme Court of India

Key Changes Introduced by the Income-tax Act, 2025

Although the appellate framework has undergone comprehensive restructuring, the reforms are primarily legislative rather than substantive.

The notable developments include:

• Complete renumbering of appellate provisions from Sections 356 to 374.
• Consolidation of Tribunal-related provisions into a single, coherent framework.
• Greater emphasis on faceless appellate proceedings and digital administration.
• Simplified statutory drafting to improve readability.
• Preservation of established appellate rights, procedural safeguards, and judicial remedies.
• Continued recognition of the ITAT as the final fact-finding authority.
• Retention of existing principles governing limitation, condonation of delay, enhancement powers, stay of demand, rectification, departmental appeals, and judicial review.

Income-tax Act, 2025 vs. Income-tax Act, 1961 – Overall Assessment

The appellate provisions under the Income-tax Act, 2025 demonstrate that the legislature has opted for evolution rather than transformation.

The rights available to taxpayers, the powers of appellate authorities, the hierarchy of appeals, and the judicial remedies available under the 1961 Act have been substantially preserved. Instead of altering long-established legal principles, the new legislation focuses on improving legislative drafting, reducing fragmentation, and aligning the appellate process with modern digital governance.

The introduction of clearer language, integrated faceless procedures, and consolidated Tribunal provisions makes the appellate framework more accessible to taxpayers, professionals, and administrators alike. At the same time, continuity in procedural safeguards ensures that decades of judicial precedent under the Income-tax Act, 1961 will continue to remain relevant in interpreting the corresponding provisions of the Income-tax Act, 2025.

As India transitions to its new direct tax regime, the appellate system remains a stable and reliable mechanism for resolving tax disputes—preserving the balance between effective revenue administration and the protection of taxpayer rights.

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