Litigation in income tax refers to the legal process that arises when a taxpayer disputes a decision or assessment made by the Income Tax Department. It generally begins after an assessment order is passed by the Assessing Officer (AO), either following a scrutiny or reassessment. If the taxpayer believes that the order is incorrect or unjust, they have the right to challenge it by filing an appeal. The first level of appeal lies with the Commissioner of Income Tax (Appeals), commonly known as CIT(A). This appeal must be filed within 30 days from the date of receiving the assessment order, and the taxpayer is required to state the grounds of objection along with necessary documentation
If the taxpayer is not satisfied with the decision of the CIT(A), they can escalate the matter to the Income Tax Appellate Tribunal (ITAT). The ITAT is the second appellate authority and serves as the final fact-finding body in income tax matters. Its orders are binding unless overturned by a higher court on a point of law. The ITAT has benches across the country and allows taxpayers to argue their case either personally or through authorized representatives such as tax consultants, chartered accountants, or advocates.
Further appeals can be made to the High Court and subsequently to the Supreme Court of India, but only on substantial questions of law. These stages involve more formal and structured legal proceedings, and cases at this level can take considerable time for resolution. Apart from the appellate route, taxpayers also have the option to file a revision petition under Section 264 before the Principal Commissioner of Income Tax to
seek relief against certain orders passed by lower authorities. In exceptional circumstances involving violations of natural justice or procedural lapses, writ petitions can also be filed directly in the High Court.
With the introduction of faceless assessments and faceless appeals, the income tax litigation process is being transformed to reduce physical interface, improve transparency, and ensure uniformity in decision-making. All submissions, hearings, and communication now happen electronically, and cases are randomly allotted to officers in different locations. Despite these technological advancements, income tax litigation remains a complex area, often involving nuanced interpretations of law, facts, and
precedent. Therefore, timely action, accurate documentation, and expert representation are crucial to navigating the litigation process effectively.