Disputes: Appeals, Penalties and Where a Case Is Actually Won
Two things decide the shape of a tax dispute more than the merits do. The first is what was said at the assessment stage. The second is the monetary limit below which the department does not appeal at all, which means a great many cases end at the first or second level regardless of who is right.
- The hierarchy, and the section numbers under both Acts
- Departmental appeal monetary limits
- The small-case resolution route, and what closed
- Penalties, and the 2026 decriminalisation
Five levels, and where cases actually end
| Level | 1961 Act | 2025 Act | Note |
|---|---|---|---|
| First appeal, Commissioner or Joint Commissioner | Sections 246, 246A and 249 to 251 | Sections 356 to 360 | Appealable orders alone map 246 and 246A to 356 and 357. The Joint Commissioner route was introduced for small cases in 2023. |
| Appellate tribunal | Sections 252 to 255 | Sections 361 to 364 | Orders of the Tribunal specifically are section 254 mapping to section 363. The last fact-finding forum: what is not on the record here is generally not available later. |
| High Court | Section 260A | Section 365 | A substantial question of law only. Section 366 is the composition of the bench, succeeding section 260B, and is not a Supreme Court provision. |
| Supreme Court | Sections 261 and 262 | Sections 367 and 368 | Appeal to, and hearing before, the Court. |
| Revision by the Commissioner | Section 263 against the assessee, section 264 in favour | Sections 377 and 378 | A separate track, not an appeal, and frequently overlooked as an option. |
Where the record is made
The tribunal is the last forum that finds facts. Everything above it decides questions of law on the record the tribunal made. A document not produced, an argument not taken, or a fact not established by that point is generally gone. This is the single most important structural feature of Indian tax litigation and it argues for spending more at the bottom of the hierarchy than most businesses do.
Whether the department appeals at all
Circular No. 9/2024 of 17 September 2024, issued under section 268A of the 1961 Act, raised the tax-effect thresholds for departmental appeals to ₹60 lakh before the tribunal, ₹2 crore before a High Court and ₹5 crore before the Supreme Court. The revised limits apply both to appeals and special leave petitions filed after the circular and to those already pending on its date. No later circular had moved them as at 17 September 2026.
Two things the limits are not. They govern the department litigation policy, not your right of appeal, so a case below the threshold is not one you are barred from taking further. And there are exceptions that override them entirely: challenges to constitutional validity, cases where a Board order or notification is challenged as unlawful or ultra vires, accepted revenue audit objections, undisclosed foreign income or assets, information from law enforcement or investigative agencies, prosecution matters, and certain recurring legal issues. Those go up regardless of amount.
The commercial consequence is direct. Below the limit, a favourable first or second appellate order is usually the end of the matter, which changes the calculation about how much to invest in a dispute and when to settle.
What is open and what has closed
Vivad se Vishwas is closed
The 2024 scheme is closed to new declarations. Notification No. 32/2025, S.O. 1650(E), of 8 April 2025 fixed 30 April 2025 as the final declaration date. Declarations filed by then continued through determination and payment, but no new declaration can be made. As at 17 September 2026 no successor general direct tax litigation settlement scheme has been notified. Any page or adviser suggesting you wait for a settlement window is suggesting you wait for something that does not exist. Permanent remedies are unaffected: appeal, revision, rectification and the statutory dispute resolution mechanisms all remain available on their own conditions, and the Foreign Assets of Small Taxpayers Disclosure Scheme 2026 is live but is a disclosure regularisation scheme rather than a settlement window for pending litigation.
The dispute resolution committee is open, for small cases
Operating under an electronic scheme rolled out in August 2024 and continuing under the 2025 Act, confined to small cases and able to waive penalty and grant immunity from prosecution. The route sits at section 379 of the 2025 Act. The aggregate variation proposed or made in the specified order must not exceed ₹10 lakh, and where a return was furnished for the year, the total income shown must not exceed ₹50 lakh. Both are inclusive: the statute says does not exceed, not less than. On a withholding or collection default the ₹10 lakh test applies to the amount on which tax was not deducted or collected rather than to the resulting demand. Rule 199 of the Income-tax Rules 2026 defines the specified order, conditions and person; the application is made under rule 197 in Form 119 with a ₹1,000 fee. The thresholds are only part of the test: eligibility is lost in specified search, requisition, survey and treaty-information cases and for prescribed excluded persons.
Advance pricing agreements, for the transfer pricing risk
Not a dispute route but the strongest available prevention. During FY 2025-26 the Board signed a record 219 advance pricing agreements, taking the cumulative total since the programme began to 1,034, of which 750 unilateral and 284 bilateral; 84 of the year signings were bilateral. An agreement can cover up to five prospective years and, where the rollback conditions are met, up to four immediately preceding years. The 220 figure that appears in some commentary is a secondary-source error: 219 is the figure the Board itself published.
And the 2026 softening
Penalties sit in Chapter XXI of the 2025 Act. Under-reporting and misreporting, the successor to section 270A with its 50 and 200 per cent tiers, is at section 439; the immunity application at 440; the reasonable cause defence at 470; the hearing requirement at 471; and limitation at 472. Fees are regrouped at sections 427 to 430.
The genuinely new development is decriminalisation. The Finance Act 2026 softened several prosecution provisions with effect from 1 April 2026.
| Offence | Section | Punishment from 1 April 2026 |
|---|---|---|
| Contravention of an order made during search proceedings | 473 | Simple imprisonment up to two years and fine. Previously rigorous imprisonment with a mandatory minimum |
| Failure to provide the facility required for inspection of electronic records during a search | 474 | Simple imprisonment up to six months, or fine, or both |
| Fraudulent removal, concealment, transfer or delivery of property to prevent recovery | 475 | Simple imprisonment up to two years and fine |
| Failure to pay tax deducted, or required to be paid, under Chapter XIX-B | 476 | Graded by the amount: above ₹50 lakh, simple imprisonment up to two years, or fine, or both; above ₹10 lakh but not exceeding ₹50 lakh, simple imprisonment up to six months, or fine, or both; not exceeding ₹10 lakh, fine only |
| Failure to deposit tax collected at source | 477 | The same three monetary bands |
Confirmed against the enacted Finance Act, 2026 by our subject matter expert on 17 September 2026. Note the boundary: an amount of exactly ₹10 lakh falls in the fine-only tier, because the test is not exceeding rather than below.
The presumption of a culpable mental state and the sanction requirement for prosecution both survive, at sections 490 and 491. Decriminalisation of the smaller offences does not make the larger ones easier.
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If a dispute is already running, the useful first question is usually whether the amount at stake sits above or below the departmental appeal limit, because that changes what a win at the next level is actually worth.
Position as at 16 September 2026. Reviewed every six months.
This page is general information, not professional advice. India is operating two income tax statutes at once. The Income-tax Act 1961 governs FY 2025-26 and everything before it, including assessments, appeals and updated returns for those years, which will run into the 2030s. The Income-tax Act 2025 came into force on 1 April 2026 and governs tax year 2026-27 onward, with every section renumbered and every form renumbered with them. A statement about Indian income tax that carries neither a year label nor an Act label is not a statement anyone can act on. Take professional advice before acting on anything on this page. We are happy to be that adviser, but we do not act on a web page, ours or anyone else's, without one.