Income Tax 2025

Appearance

3.—Appeals to High Court

Appeal to High Court. ​

365(1) ​

An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law.

365(2) ​

The Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be—

  • (a) filed within one hundred twenty days from the date on which the order appealed against is received by the assessee or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner;
  • (b) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.

365(3) ​

Where the High Court is satisfied that there was sufficient cause for not filing the appeal within one hundred twenty days, it may admit an appeal after the said period.

365(4) ​

Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.

365(5) ​

The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question.

365(6) ​

The provisions of sub-section (5) shall not take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.

365(7) ​

The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.

365(8) ​

The High Court may determine any issue which the Appellate Tribunal,––

  • (a) has not determined; or
  • (b) has wrongly determined, by reason of a decision on such question of law as is referred to in sub-section (1).

365(9) ​

Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908, relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.

365(10) ​

Where the High Court delivers a judgment in an appeal filed before it under this section, effect shall be given to such order by the Assessing Officer, on the basis of a certified copy of the judgment.

Explanation

Section Summary: ​

Section 365 of the new income tax law outlines the process for filing appeals to the High Court against orders passed by the Appellate Tribunal. It specifies the conditions under which an appeal can be made, the timeline for filing, and the procedural requirements. The section ensures that only cases involving substantial questions of law are considered by the High Court, maintaining a focus on legal clarity and consistency in tax matters.

Key Changes: ​

  1. Focus on Substantial Questions of Law: The section emphasizes that appeals to the High Court must involve a "substantial question of law," narrowing the scope of cases that can be appealed.
  2. Timeline for Filing Appeals: The appeal must be filed within 120 days from the date the order is received, with provisions for extensions if sufficient cause is shown.
  3. Formulation of Questions by High Court: The High Court is required to explicitly formulate the substantial question of law involved in the case before hearing the appeal.
  4. Flexibility in Hearing Additional Questions: While the appeal is primarily heard on the formulated question, the High Court retains the power to consider other substantial questions of law if deemed necessary.
  5. Binding Nature of High Court Judgments: The Assessing Officer is mandated to implement the High Court's judgment based on a certified copy of the order.

Practical Implications: ​

  1. For Taxpayers and Authorities:
    • Taxpayers or tax authorities dissatisfied with the Appellate Tribunal's decision can appeal to the High Court, but only if the case involves a substantial question of law.
    • The 120-day filing deadline requires prompt action, though extensions are possible with valid reasons.
  2. For High Courts:
    • The High Court must ensure that appeals are focused on significant legal issues, reducing frivolous or repetitive appeals.
    • The court has the authority to address issues not previously determined or incorrectly decided by the Appellate Tribunal.
  3. For Compliance Processes:
    • Appeals must be filed in the form of a memorandum, clearly stating the substantial question of law involved.
    • The Assessing Officer must act on the High Court's judgment, ensuring timely implementation of decisions.

Critical Concepts: ​

  1. Substantial Question of Law: This refers to a significant legal issue that requires interpretation or clarification, rather than a factual dispute. It ensures that only cases with broader legal implications are escalated to the High Court.
  2. Memorandum of Appeal: A formal document filed with the High Court, outlining the specific legal question(s) being appealed.
  3. Code of Civil Procedure, 1908: The procedural rules governing civil appeals apply to tax appeals under this section, ensuring consistency in legal processes.

Compliance Steps: ​

  1. Identify Substantial Question of Law: Determine if the Appellate Tribunal's order involves a significant legal issue that warrants an appeal.
  2. Prepare Memorandum of Appeal: Draft a concise document stating the substantial question of law and the grounds for appeal.
  3. File Within 120 Days: Submit the appeal to the High Court within 120 days of receiving the Appellate Tribunal's order. If delayed, provide a valid reason for the delay.
  4. Await High Court's Formulation of Question: The High Court will define the legal question(s) to be addressed during the appeal.
  5. Implement Judgment: If the High Court delivers a judgment, ensure the Assessing Officer acts on it based on a certified copy of the order.

Examples: ​

  1. Scenario 1: A taxpayer disputes the interpretation of a specific provision in the income tax law by the Appellate Tribunal. The taxpayer believes the Tribunal's decision misapplied the law. They file an appeal to the High Court, clearly stating the legal question involved. The High Court formulates the question and hears the appeal, ultimately ruling in favor of the taxpayer. The Assessing Officer then adjusts the taxpayer's liability based on the High Court's judgment.

  2. Scenario 2: A tax authority disagrees with the Appellate Tribunal's decision on the applicability of a tax exemption. They file an appeal within 120 days, but due to administrative delays, the appeal is filed after the deadline. The High Court accepts the appeal after being satisfied with the reasons for the delay and proceeds to hear the case on the formulated legal question.

This section ensures that appeals to the High Court are focused on resolving significant legal ambiguities, promoting consistency and fairness in tax administration.