Tax Litigation in India Overview

Tax litigation in India: overview, Practical Law Country Q&A 5-624-5046
Tax litigation in India: overview

by Mukesh Butani and Shreyash Shah, BMR Legal
Law stated as at 01 Mar 2018 • India
A Q&A guide to civil and criminal tax litigation in India.
This Q&A provides a high level overview of the key practical issues in civil and criminal tax litigation,
including: pre-court/pre-tribunal process, trial process, documentary evidence, witness evidence,
expert evidence, closing the case in civil and criminal trials, decision, judgment or order, costs,
appeals, and recent developments and proposals for reform.
To compare answers across multiple jurisdictions, visit the Tax Litigation: Country Q&A tool.
The Q&A is part of the global guide to tax litigation. For a full list of jurisdictional Q&As visit
www.practicallaw.com/taxlitigation-guide.
Overview of tax litigation

Pre-court/pre-tribunal process
Trial process
Documentary evidence
Witness evidence
Expert evidence
Closing the case in civil trials
Closing the case in criminal trials
Decision, judgment or order
Costs
Appeals
Recent civil law developments and proposals for reform
Recent criminal law developments and proposals for reform
Online resources
Contributor profiles
Shreyash Shah
© 2021 Thomson Reuters. No claim to original U.S. Government Works. 1

Overview of tax litigation
Issues subject to tax litigation
1. What are the most common issues subject to tax litigation in your jurisdiction?
Tax litigation under the Indian judicial system occupies a large portion of judicial time. The adjudicating and quasi-judicial
appellate authorities, which act as fact-finding bodies under the Income Tax Act 1961, Central Excise Act 1944, Customs
Act 1962, Good & Service Tax Law. The key statutes on the Goods & Service Tax Law are the:
• Central Goods and Services Act 2017.
• Union Territory Goods and Services Act 2017.
• Integrated Goods and Services Act 2017.
The Constitutional Courts (made up of 24 High Courts and the Supreme Court of India), have also set out several judicial
precedents for resolving tax disputes in the country.
As per the recent Economic Survey 2017-2018, the pending cases were as follows:
• Before the Supreme Court, up to 9,300 cases amounting to nearly US$45 billion.
• Before the High Courts, up to 52,622 cases amounting to nearly US$500 billion.
• Before the Appellate Tribunals, up to 175,676 cases amounting to nearly US$625 billion.
• Tax disputes often arise in the following areas:
• Individual and partnership matters.
• Charitable and other forms of not-for-profit organisations.
• Cross-border tax matters on permanent establishment and attribution.

• Transfer pricing matters (such as marketing intangibles, management cross charges, compensation for captive
service providers and development centres, royalty payments, location savings, selection of transfer pricing
methods and comparable companies).
• General Anti Avoidance Rule (GAAR).
• Matters relating to withholding tax.
• Matters relating to allowance of exemptions/deductions.
• Corporate restructuring.
• Taxation of royalty income.
• Reassessments/reopening of an assessment.
• "Black money" that is, undisclosed foreign income and assets.
• Penalties.
• Search and seizure.
• Classification matters relating to indirect tax on excise and service tax.
• Valuation issues under the Customs Act 1962.
• Various issues under the Goods and Service Tax Law.
Legislative framework
2. Outline the legislative framework and principal pieces of legislation governing both civil and criminal tax litigation.
Civil tax litigation
Civil tax litigation is regulated by the following principal pieces of legislation:
• Income Tax Act 1961 (Chapters XIX-A, XIX-B and XX).

• Income Tax Rules 1962.
• The Constitution of India 1950.
• Double taxation avoidance agreements.
• Income Tax (Dispute Resolution Panel) Rules 2009.
• Income Tax (Appellate Tribunal) Rules 1963.
• Authority for Advance Rulings (Procedure) Rules 1993.
• Income Tax Settlement Commission (Procedure) Rules 1997.
• Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015
• Benami Transactions (Prohibition) Amendment Act 2016
• Good & Service Tax Law.
• Code of Civil Procedure 1908.
• Central Excise Act 1944.
• Customs Act 1962.
• Finance Act 1994 (Service Tax).
• State-level value added tax, sales tax, entry tax, luxury tax and advertisement tax legislation.
Criminal tax litigation
Criminal tax litigation is regulated by the following principal pieces of legislation:
• Income Tax Act 1961 (Chapter XXII).
• Income Tax Rules 1962.
• Code of Criminal Procedure 1973.
• Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015

• Benami Transactions (Prohibition) Amendment Act, 2016
• Good & Service Tax Law
• Central Excise Act 1944.
• Customs Act 1962.
• Finance Act 1994 (Service Tax)
• State-level value added tax, sales tax, entry tax, luxury tax and advertisement tax legislation.
Tax evasion and other criminal tax offences
3. What are the key elements that constitute tax evasion and other main criminal tax offences in your jurisdiction?
Tax evasion is a criminal offence. There is a fine line between tax avoidance and tax evasion, which can be judged from
the facts of the case. Tax evasion is illegal under Indian law and is actively prosecuted. Prime examples of tax evasion and
other criminal tax offences are:
• Undisclosed income detected in search and seizure operations.
• The removal, concealment, transfer or delivery of property to thwart tax recovery.
• The failure to pay to the treasury taxes withheld.
• Wilful attempts to evade payment of any tax.
• Making false statements or accounts.
• Smuggling of goods.
• Clandestine removal of manufactured goods.
• The collection and retention of service tax (VAT on services)
• Anti-profiteering under GST Law.

Pre-court/pre-tribunal process
Assessment, re-assessments and administrative determinations in civil law
4. Outline the procedure for tax assessments, re-assessments and administrative determinations in civil law.
The income tax authority and persons that can administer the civil tax laws are the:
• Central Board of Direct Taxes, constituted under the Central Boards of Revenue Act 1963.
• Principal Chief Commissioners of Income Tax (PCCIT).
• Chief Commissioners of Income Tax (CCITs).
• Principal Commissioners of Income Tax (PCITs).
• Commissioners of Income Tax (CITs).
• Commissioners of Income Tax (Appeals) (CIT(A)).
• Additional / Joint / Deputy / Assistant Commissioners of Income Tax.
Tax assessments
A tax assessment is a procedure adopted to determine the income disclosed by the taxpayer and the tax payable on that
income. India has a self-reporting tax system. Taxpayers must file tax returns (for example, income tax and value added
tax returns) each year. The Income Tax Act 1961 (Income Tax Act) outlines the detailed procedure for the assessment of
income and also governs the:
• Redress of disputes arising from assessments.
• Levy of penalties.
• Commencement of prosecution proceedings.
Civil tax disputes can arise in relation to the decisions of the Assessing Officers (AOs) and Transfer Pricing Officers. Under
the Income Tax Act, there are five types of assessments:

• Summary assessments (section 143(1), Income Tax Act).
• Audit assessments (section 143(3), Income Tax Act).
• Best judgment assessments (section 144, Income Tax Act).
• Re-assessment for income that has not been assessed (section 147, Income Tax Act).
• Assessment pursuant to a search (section 153A and 153C, Income Tax Act). Following an amendment by the
Finance Act 2017, there can be non-disclosure of the reasons that gave rise to a search. Previously, the reasons
to believe or suspect a search should be conducted could be disclosed when the assessment proceedings have
commenced. A retrospective amendment has been made (to section 132 /132A, Income Tax Act, with effect from 1
April 1961) to provide that such reasons will not be disclosed to any person or tribunal.
The procedure for tax assessments is as follows:
• The AO issues a draft assessment order (see below for assessments where a draft assessment order is issued)
If the taxpayer accepts the draft order:
• the final assessment order is passed by the AO within one month from the end of the month in which
acceptance is received;
• the taxpayer can appeal the decision either to the Commissioner of Income Tax(Appeals) (CIT(A)), within 30
days;
• the CIT(A) can confirm, reduce, enhance or annul the assessment. Although there is no time limit for
adjudication of the appeal, guidance suggests up to one year;
• the decision can be further appealed to the Income Tax Appellate Tribunal (ITAT) within 60 days and
subsequently to the High Court within 120 days. However, an appeal to the Supreme Court under the Income
Tax Act can be made within 90 days subject to grant of a certificate by the High Court. Alternatively, a Special
Leave Petition (SLP) can be moved before the Supreme Court in cases where there is no certificate received
from the High Court.
• If the taxpayer does not accept the draft order:
• it can file an objection with the Dispute Resolution Panel (DRP) (a form of alternate dispute resolution
introduced by the Finance Act 2009 consisting of three CITs) within 30 days;
• the DRP will issue directions to the AO within nine months from the filing of objections and the AO will pass a
final assessment to conform with the DRP's directions;

• if the taxpayer is still unsatisfied, the decision can be appealed to first before the ITAT. If the taxpayer is still
unsatisfied with the decision of ITAT, it can appeal first before the High Court and then before the Supreme
Court, as outlined above.
Draft assessment orders are issued only in assessments relating to transfer pricing audits or for non-residents taxpayers to
enable the taxpayer to decide on the type of authority (that is, DRP or CIT(A)). In all other cases, only a final assessment
order is passed. If the taxpayer is aggrieved, the route to appeal that applies after acceptance of a draft assessment order
can be adopted to resolve disputes.
Tax re-assessment
The Revenue Department can assess, re-assess or recalculate income and turnover that escaped assessment or was
previously assessed by AOs but the income/turnover was (sections 147 and 148, Income Tax Act):
• Under assessed.
• Assessed at too low a rate.
• Made the subject of excessive relief under the Income Tax Act.
• Allowed excessive loss of depreciation allowance or any other allowance under this Act.
The conditions for tax re-assessment are:
• The AO must have reason to believe that any income chargeable to tax has not been assessed and must record
these reasons in writing.
• The AO must obtain permission for tax assessment from the PCCIT / CCIT / PCIT / CIT (if notice is issued after four
years) and from the Additional CIT or the Joint CIT (if notice is issued within four years).
• The AO must issue a notice of assessment or re-assessment to commence assessment or re-assessment

proceedings under section 147 of the Income Tax Act within a prescribed time limit (normally between four and six
years). However, the income from "foreign assets" can be reassessed until 16 years have passed from the end of
the assessment year following the recent amendment to the finance Act 2012.
• The AO must provide the taxpayer with a copy of the reasons for tax re-assessment within a reasonable time (GKN
Driveshafts (India) Ltd v DCIT (2003) 259 ITR 19 (SC)).
• The taxpayer can file objections and the AO must deal with the objections raised by taxpayer and amend the re-
assessment order accordingly.
• The taxpayer can challenge the re-assessment order.

The Revenue Department can also re-assess indirect tax assessments. The state indirect tax legislation provides time
periods for assessment (normally between one and eight years).
Resolving disputes before commencing court proceedings
5. What are the main procedures used to resolve disputes before commencing proceedings in a civil court/tribunal?
Under the administrative procedure (which is in the remit of the Commissioner of Income Tax (CIT) and the Commissioner
of Income Tax (Appeals) (CIT(A)), the main procedures used to resolve disputes before commencing proceedings are:
• Filing objections with the Dispute Resolution Panel (DRP). The taxpayer must file objections to the draft
order proposed by the Assessing Officer (AO) within 30 days of the receipt of the draft order (see Question 4,
Tax assessments). Taxpayers are not obliged to guarantee the payment of the tax assessed until the final order
is passed by the AO in accordance with DRP directions. The DRP has nine months to consider the AO's and the
taxpayer's facts and arguments and issue directions to the AO. Directions issued by the DRP are binding on the AO
and the AO must issue the final order in accordance with these directions within 30 days of receipt. The DRP can
confirm, reduce or enhance the additions proposed by AO. However, it cannot remand the matter back to the AO. If
the taxpayer is unsatisfied with the decision, he can file an appeal with the Income Tax Appellate Tribunal.
• Filing an appeal with the CIT(A). The taxpayer can file an appeal (even for transfer pricing cases as well as cases
of foreign companies and non-residents) with the CIT(A) within 30 days of receipt of the final order. Taxpayers are
not obliged to guarantee the payment of the tax assessed. However, they must pay additional taxes, unless the
demand is stayed by administrative authorities. The CIT(A) can confirm, reduce, enhance or annul the assessment.
In addition, a taxpayer can ask the Principal Commissioner of Income Tax (PCIT) / Commissioners of Income Tax
(CIT) to grant immunity from prosecution if he has made an application for settlement under the Income Tax Act
1961 (Income Tax Act) and the proceedings for settlement have abated (section 278AB, Income tax Act).
• Resolving a dispute under the jurisdiction of the Income Tax Settlement Commission (ITSC). The ITSC
provides a mechanism for a one-time settlement of taxes to evaders or taxpayers who default unintentionally. The
ITSC has wide powers to settle tax disputes on facts and circumstances of the case. Orders passed by the ITSC are
final and cannot be appealed, except by way of writ before the High Court only on points of law. The ITSC also has
powers to grant immunity from penalty and prosecution.
• Payment of taxes, surcharge and penalty on declaration of undisclosed income (The Income Declaration Scheme,
2016).
• Pradhan Mantri Garib Kalyan Deposit Scheme 2016 to provide an opportunity to persons to declare their
undisclosed income by paying tax at the rate of 30%, surcharge at the rate of 33% and penalty at the rate of 10% of
this undisclosed income.

• Resolving a dispute under the jurisdiction of the Authority for Advance Rulings (AAR). The AAR is an
independent adjudicatory body, which issues binding rulings in relation to civil tax disputes. The scheme of advance
rulings was introduced by the Finance Act 1993 (effective from 1 June 1993). Accordingly, a high-level body
headed by a retired judge of the Supreme Court has been set-up which is empowered to issue rulings, which are
binding both on the Income Tax Department and the applicant. Advance rulings are written opinions or authoritative
decisions such as determinations:
• on a transaction by a non-resident applicant or by a resident applicant with a non-resident;
• in relation to the tax liability of a resident applicant, arising out of a transaction or proposed transaction;
• in respect of an issue relating to computation of total income which is pending before any income-tax authority
or the Appellate Tribunal;
• whether an arrangement, which is proposed to be undertaken by resident or non-resident person, is an

impermissible avoidance arrangement as referred to in Chapter X-A pertaining to General Anti Avoidance
Rules.
• Resolving a dispute by advance pricing agreements (APA). The APA mechanism was introduced in 2013
to determine the arm's length price and the method of determination of arm's length price of an international
transaction between two associated enterprises. An APA is valid for five years with provision for four years' rollback.
The progress of the APA scheme strengthens the government's resolve to foster a non-adversarial tax regime.
The Indian APA programme has been appreciated nationally and internationally for being able to address complex
transfer pricing issues in a fair and transparent manner.
Elements of the offence in criminal law
6. What are the elements of the main criminal law offences in tax litigation?
Chapter XXII of the Income Tax Act 1961 governs criminal offences and prosecutions. The main element for the prosecution
of a taxpayer in criminal law is the presumption of mens rea, (that is, culpable mental state on the part of the taxpayer). The
taxpayer must then prove that he did not have the requisite mens rea, which can also be a strong defence to such a claim.
Key elements in relation to the criminal law offences under tax legislation (for both direct and indirect taxes) are:
• The concealment of income.
• Knowingly providing inaccurate particulars of income.

• The detection of undisclosed income during search and seizure operations.
• The removal, concealment, transfer or delivery of property to thwart tax recovery.
• Failing to pay tax deducted/collected at source to the Revenue Department.
• Wilful attempts to evade the payment of any tax.
• Making a false statements or accounts.
• The smuggling of goods.
• The clandestine removal of manufactured goods.
• The collection and retention of service tax (VAT on services).
Early resolution
7. What are the main procedures used for the early resolution of criminal law offences before trial?
Where proceedings are commenced, the accused can defend the case by:
• Filing a compounding petition (in certain circumstances, prior to or after commencing prosecution proceedings,
the accused and the prosecutor can reach an amicable settlement for the purposes of avoiding prosecution
proceedings).
• Pleading not guilty and facing trial.
• Discharging the burden of proof by stating that there is an absence of mens rea for the crime alleged.
• Demonstrating that no case can be made out on the facts presented.
• Filing a petition to quash the proceedings under section 482 of the Code of Criminal Procedure 1973.
Section 279(2) of the Income Tax Act 1961 provides that any offence under chapter XXII can, either before or after the
commencement of proceedings, be compounded by the Chief Commissioner of Income Tax or the Director General of
Income tax, in light of certain factors (such as the conduct of the person and the nature and magnitude of the offence).

Trial process
Format of the hearing/trial
8. What format does the hearing/trial take?
Hearings before the Assessment Officer, Commissioner of Income Tax (Appeals) (CIT(A)), Dispute Resolution Panel,
Authority for Advance Rulings and the Settlement Commission are private hearings. However, hearings before the Income
Tax Appellate Tribunal, High Court and Supreme Court are open to the public.
The taxpayer can appear at the hearing before all of the above forums either in person or through an authorised
representative. The relevant forum will hear both sides' arguments and can either allow the appeal or dispose of the appeal.
If either party fails to attend the hearing, the hearing can go ahead with only the other party providing their arguments and
a decision can be made on the merits (ex parte). However, ex parte hearings are rare in practice, and will usually only be
conducted where the petitioner for the ex parte hearing can show that the non-attending party is in default.
Role of the judge/arbitrator/tribunal members
9. What is the role of the judge/arbitrator/tribunal members in both civil and criminal tax litigation?
Civil tax litigation
Generally, the Revenue Department is made up of departmental officers who are responsible for adjudicating tax disputes
and making a decision on the case. Appeals on these decisions are considered by the Income Tax Appellate Tribunal
(ITAT), which consists of tax experts with a background in law and/or accounting. The ITAT exercises quasi-judicial powers.
Although it is the last fact-finding authority, it also provides an opinion on the legal position, which is binding on the Revenue
Department. Appeals from the ITAT come before the High Court and Supreme Court, but only on substantial points of law.
Judges sitting in the ITAT, High Court and Supreme Court play an important role in the adjudication of disputes by:
• Interpreting the law.
• Assessing the evidence presented before them.

• Protecting civil rights.
• Controlling how hearings and trials unfold in the courtrooms.
• Deciding on the case.
• Acting as a custodian of fundamental rights and a guardian of the constitution.
Criminal tax litigation
Criminal tax cases follow the Code of Criminal Procedure 1973. The Code does not prescribe any special procedure/
treatment but follows the general procedure applicable in respect of civil offences. The judges must hear both sides of the
case and pass a reasoned order.
Commencement of proceedings: civil law
10. What is the procedure for commencing tax litigation proceedings in civil law and/or a taxpayer appealing a
decision of the tax authority?
First appeal: appeal to the Commissioner of Income Tax (Appeal) (CIT(A))
The appeal to the CIT(A) must be made within 30 days of one of the following (section 249(2), Income Tax Act 1961(Income
Tax Act)):
• The date of payment of the tax, where the appeal is made under section 248 of the Income Tax Act.
• The date of service of the notice of demand relating to the assessment or penalty, where the appeal relates to any
assessment or penalty.
• In any other case, the date on which the order sought to be appealed against is served.
The fees for making an appeal to the CIT(A) are specified under section 249 of the Income Tax.
Taxpayers who are e-filing the return of income have to mandatorily file an appeal electronically (Rule 45, Income Tax Rules
1962).
Under section 250 of the Income Tax Act, the CIT(A) fixes a date and location for the hearing and gives notice to the
appellant and the assessing officer. The appellant and the assessing officer can be heard in person or through their authorised

representative. If necessary, the CIT(A) can either adjourn the proceedings to make further inquiries or direct the assessing
officer to make further inquiries and report the results.
The CIT(A) will attempt to render a decision within one year from the end of the financial year in which the appeal is filed
(section 250(6A), Income Tax Act).
Second appeal: trial before the Income Tax Appellate Tribunal (ITAT)
An appeal must be made within 60 days of the date on which the order sought to be appealed against is communicated to
the taxpayer or to the PCCIT/CIT (section 253(3), Income Tax Act). The fees for making an appeal to the ITAT are specified
under section 253(6) of the Income Tax Act.
A notice is served to the opposing party, informing them of the appeal. The appellant and the respondent are given the
opportunity to submit written and oral submissions as well as evidence (section 254, Income Tax Act).
The ITAT will attempt to render a decision within four years from the end of the financial year in which the appeal is filed
(section 254(2A), Income Tax Act).
Third appeal: before the High Court against the order of the ITAT
An appeal must be made within 120 days of the date on which the order sought to be appealed against is communicated
to the taxpayer or to the PCCIT/CCIT/PCIT/CIT (section 260A(2), Income Tax Act). Fees payable for filing an appeal with
the High Court are specified in the High Court Rules.
Under sections 260A(3) and 260A(4) of the Income Tax Act, the appeal is listed for admission. After hearing the appellant,
the High Court must issue a notice to the opposing party, informing them of the appeal and giving them an opportunity to
show why the appeal should not be admitted. On the date fixed by the Court, the appeal is either admitted and the High Court
frames the questions of law to be decided in the final hearing, or is dismissed at the threshold. If the appeal is admitted, the
appellant and the respondent can submit written and oral submissions.
There is no time prescribed for disposal, which depends on the capacity of the High Court (section 260A (5), Income Tax
Act). If an appeal is admitted, it generally takes at least ten years until the final hearing and disposal.
Fourth appeal: before the Supreme Court against the order of the High Court
There are two ways to approach the Supreme Court for direct tax cases.
The first route is to file the appeal can be only filed before the Supreme Court if the High Court has certified the case as fit
for appeal before the Supreme Court (Income Tax Act, section 261).
The second route is under Article 136 of the Constitution (there is no statutory right to an appeal before the Supreme
Court). However, either party can file a Special Leave Petition (SLP) within 90 days of the date on which the order sought
to be appealed against is communicated to the taxpayer or to the CIT(A). Fees payable for filing a SLP are specified in
the Supreme Court Rules.

The Supreme Court, on hearing the parties, can either grant leave or refuse to hear the case on the merits and dismiss
the case immediately. If leave is granted, a date will be fixed for a final hearing, depending on the Court's timetable. The
petitioner and the respondent can submit written and oral submissions as well as evidence before the final decision is made.
The time limit for a decision depends on the capacity of the Supreme Court.
11. Must a taxpayer pay the disputed tax before leave to appeal the tax authority's decision is granted?
Although it is not compulsory to pay the disputed amount before filing an appeal, the amount specified as payable in the
notice of demand is statutorily payable to the Revenue Department within 30 days. However, this amount can be reduced if
agreed by the Assessment Officer, with the approval of his superior, or the taxpayer can obtain a stay of demand.
At the first appeal stage, the taxpayer has two options, either to:
• File objections with the Dispute Resolution Panel.
• File an appeal with the Commissioner of Income Tax (Appeal) (see Question 4).
With respect to the former, the taxpayer can defer the payment of disputed tax temporarily by filing objections against the
draft assessment order.
In terms of the Commissioners of Income Tax (Appeals) (CIT(A)), the taxpayer can apply for stay of demand until the disposal
of appeal by the CIT(A). Under the Revenue Department's recent guidelines, an Assessing Officer can grant a stay if a pre-
deposit of 20% of the disputed demand has been paid.
If the taxpayer loses the appeal, it can file an appeal with the Income Tax Appellate Tribunal and can also apply for a
suspension of demand and penalty. The levy of penalty is an arguable matter, and the final levy depends on the facts of
the case and whether it was a deliberate or wilful attempt to evade taxes or merely a difference of opinion, where a penalty
may not be ordered.
If a notice of demand is issued by the Assessing Officer post the CIT(A) stage, the taxpayer can make an application for
stay of demand before the ITAT. This is applicable if there is an appeal filed before the ITAT against the order of the CIT(A).
Commencement of proceedings: criminal law
12. What is the procedure for commencing tax litigation proceedings in criminal law?

The procedure for commencing criminal proceedings is as follows:
• Issuance of instructions. Proceedings for an offence under chapter XXII of the Income Tax Act 1961 (Income Tax
Act) can only be commenced by the PCIT or CIT or CIT(A) (section 279, Income Tax Act). In addition, the Principal
Chief Commissioners of Income Tax (PCCIT) or Chief Commissioner of Income Tax (CCIT) or Principal Director
General of Income Tax or Director General of Income Tax can issue instructions to initiate such proceedings. The
offences must then be tried in a criminal court under the Code of Criminal Procedure.
• Trial by court. A court not inferior to a Presidency Magistrate or a Magistrate of the First Class can try any offence
under the Income Tax Act (section 292, Income Tax Act).
Each state must have a Court of Session, Judicial Magistrate of First Class (or metropolitan magistrates), Judicial Magistrates
of Second Class, and Executive Magistrates. A person convicted by a Presidency Magistrate can appeal to the Court of
Session. The PCCIT or the CIT can grant a taxpayer immunity from prosecution for any offence committed under the Income
Tax Act if he is satisfied that the person has, after abatement of the proceedings before the Settlement Commission, co-
operated and has made full and true disclosure (section 278AB, Income Tax Act). The procedure is similar for indirect taxes
cases.
Under section 281B of the Income Tax Act, the Assessing Officer, in order to protect the interest of the Revenue, can make
a provisional attachment of assets belonging to the taxpayer as per the prescribed procedure (Second Schedule). The
provisional attachment will expire after six months unless a suitable extension is sought, so that the total period of attachment
does not extend for more than two years.
Further, section 226(3) provides for a mode of recovery of tax by which the Assessing Officer can demand from any person
from whom money is due or may become due to the taxpayer by issuing appropriate orders. This is typically resorted to
by issuing such orders to the taxpayer's bank.
The above two provisions under the Income Tax Act are illustrative of the tax administration's right to assert recovery/
attachment of assets before commencing criminal proceedings.
There are similar provisions under the indirect tax law.
Government response
13. How has the government responded to recent civil and criminal law cases to improve the court procedure?
Civil law
The government has responded to recent civil law cases to improve the civil court procedure by introducing:

• Safe harbour rules and advance pricing agreements with rollback options to reduce transfer pricing litigation.
• The Constitution of Tribunal Benches, which is solely dedicated to deal with transfer pricing and international tax
matters.
• A non-adversarial tax regime (Office Memorandum No. 279/Misc/52/2014-15, dated 7 November 2014) to make the
conduct of administration taxpayer-friendly.
• The enhancement of monetary limits for filing appeals to reduce the number of pending tax litigation cases (Circular
No. 21/2015, dated 10 December 2015).
• Legal committees to mitigate the grievances suffered by taxpayers due to high pitched assessments (Instruction No.
17/2015, dated 9 November 2015).
• E-courts to facilitate the hearing of cases by video-conferencing in order to speed up the civil procedure.
• Additional benches to address the large number of cases (Office Order No. 198 of 2015, dated 13 October 2015).
• Guidelines to ensure that judgments are delivered within a reasonable time frame. Judgments governed by
the Code of Civil Procedure 1908 must be rendered within two months of the close of the hearing of the case
(guidelines as prescribed by the Supreme Court in Anil Rai v State of Bihar (2001) 7 SCC 318).
• A collegiate system to withdraw frivolous appeals and a directive for paperless assessment proceedings (Office
Memorandum, dated 10 December 2015).
• The Central Board of Direct Taxes'' directive to encourage officers not to file appeals/withdraw appeals in cases
where the government has accepted High Court's decision (Circular No. 24/2015, dated 31 December 2015,
Circular No. 23/2015, dated 28 December 2015, Instruction 2/2015 dated 29 January, 2015, Circular No. 37/2016
dated 2 November 2016).
• A ten-member committee headed by Justice RV Easwar (retired) to investigate and identify the provisions in the
Income Tax Act 1961 (Income Tax Act) which are leading to litigation caused by misinterpretation.
• The Central Board of Direct Taxes' directive, which allows Assessment Officers to grant stay of demand until the
disposal of the first appeal on payment of 20% of the disputed demand.
• Dispute Resolution Scheme (DRS) that stipulates no imposition of penalty in respect of cases with disputed tax
up to INR1 million. The DRS scheme also applies to tax disputes due to retrospective amendment or validation of
domestic tax laws. Tax arrears disputes can be settled by:
• payment of tax;
• interest until assessment; and

• 25% penalty if the tax is more than INR1 million.
• Proposal to set up a High Level Committee chaired by the Revenue Secretary to oversee fresh cases where the
Assessing Officer applies retrospective amendments.
• The Finance Act of 2015 inserted a new Chapter IVA prescribing a procedure for appeals by the Revenue on
identical questions of law before the High Court/the Supreme Court. The amendment was aimed at curtailing
repetitive appeals before various appellate forums.
• Guidelines in relation to the place of effective management of a company to determine its residential status in India
(Circular No. 06 of 2017 dated 24 January 2017).]
• Revision of the safe harbour rules limits and type of transactions for transfer pricing cases.
• Clarifications issued under the General Anti-Avoidance Rules and its applicability. (Circular No. 7 of 2017 dated 27
January 2017).
Criminal law
The government has responded to recent criminal law cases to improve the criminal court procedure by:
• Revising monetary limits upwards in order to trigger arrests or prosecution in cases of duty evasion or wrongful
availing of input credits (Central Board of Excise and Customs Circular, dated 23 October 2015).
• Designating one or more Courts of Magistrates of First Class as ''special courts'' for hearing trials concerning
offences punishable under Chapter XXII of the Income Tax Act.
Burden of proof
14. What is the burden of proof in both civil and criminal tax litigation proceedings?
Civil law
The Indian courts have interpreted the provisions of the Indian Evidence Act 1872, drawing an artificial line of distinction
between the burden of proof and the onus of proof. For the burden of proof, the person must prove a fact and this burden
never shifts, but the onus of proof can shift to the other party. The burden of proof can rest on either the taxpayer or the tax
authorities, depending on the facts. Supreme Court landmark cases that have interpreted the burden of proof include:

• The burden of proving that the taxpayer stated a lesser amount in the return of income filed, as an attempt to evade
tax, lies on the Revenue Department (CIT v Sati Oil Udyog [2015] 372 ITR 746 (SC)).
• The burden of proving that a receipt is taxable rests with the Revenue Department (Janki Ram Bahadur Ram v CIT
[1965] 57 ITR 21 (SC)).
• If the taxpayer disputes liability for tax, he bears the burden of proof to either prove that the receipt was not income,
or that if it was, it was exempt from taxation. In the absence of this proof, the tax authorities can treat this as taxable
income (Kale Khan Mohammad Hanif v CIT [1963] 50 ITR 1 (SC)).
• The burden of proof generally lies with the tax authority, but can shift to the taxpayer. For example, if the tax
authority produces sufficient evidence in support of its contention (either direct or circumstantial), an adverse
inference can be drawn if the taxpayer failed to provide the tax authority with material which was in his exclusive
possession. In these circumstances, the onus of proof shifts to the taxpayer (CIT v Chari & Chari Ltd [1965] 57 ITR
400 (SC)).
• In cases relating to transfer pricing and the determination of the arm's length price of an international transaction
between associated enterprises, the primary burden of proof to prove that the international transaction undertaken
by the taxpayer with its associated enterprise is at arm's length is on the taxpayer. The taxpayer must maintain
documentation in accordance with sections 92 to 92F of the Income Tax Act 1961 and Rules 10A to 10E of the
Income Tax Rules 1962.
• In cases relating to the General Anti-Avoidance Rules, the burden of proof is on the Income Tax Department to
prove that the transaction was effected with the main purpose to obtain a tax benefit.
Criminal law
Under criminal law, the underlying presumption is that a person is innocent unless proven guilty. In a criminal trial, it is the
state that prosecutes an accused and the burden is on the state to prove that the offence, with requisite mens rea, has
been committed by the accused, beyond reasonable doubt. However, there are circumstances when the onus shifts on the
accused to prove that his case falls under an exception. The accused is not required to strictly prove his case, but only that
the facts and circumstances lead to a reasonable doubt.
Under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015, there is a presumption
that the accused has the culpable mental state for an offence under the Act. The burden of proof is on the accused to prove
non-culpability beyond reasonable doubt.
Under the Benami Transactions (Prohibition) Amendment Act 2016, the burden of proof regarding benami (that is, a
transaction where the real beneficiary is not the one in whose name the property is purchased) is on the party that alleges
benami. This issue was considered by the Supreme Court in Valliammal (D) By Lrs v Subramaniam and others [2004] 7
SCC 233.
Main stages

15. What are the main stages of typical court proceedings for tax disputes?
Civil law
The main stages of typical court proceedings for civil tax disputes are:
• Filing of memorandum of appeal and memorandum of cross-objections.
• Filing of supporting documents, evidence or written submissions with the court and the Departmental
Representative (before the tribunal, these are revenue officers or external counsel and before the High Court and
Supreme Court, these are advocates of the Revenue Department panel who represent the matter with assistance
from Revenue Officers).
• Hearings before the court.
• Rendering of the decision.
Criminal law
The main stages of typical court proceedings for criminal tax disputes are the:
• Filing a complaint before the appropriate court.
• Trial by the court.
• Prosecution proceedings.
Documentary evidence
Disclosure of documents in civil proceedings
16. What documents must the parties disclose to the other parties and/or the court in civil proceedings? Are there
any detailed rules governing this procedure?

Appeal to the Commissioner of Income Tax (Appeal) (CIT(A))
During an appeal before the CIT(A), the taxpayer files copies of the memorandum of appeal, statement of facts and the
grounds of appeal, which must be served on the assessing officer against whom the appeal has been filed. On the date fixed,
the appellant or the authorised representative can also file detailed written submissions along with documentary evidence in
support of the grounds raised in appeal. The CIT(A) can also admit additional evidence. The restrictions contained in Rule
46A of the Income Tax Rules 1962, which deal with the admission of additional evidence, do not affect the powers of CIT(A)
to order the production of documents in order to form a decision.
Appeal to the Income Tax Appellate Tribunal (ITAT)
During an appeal before the ITAT, a copy of the appeal, the memorandum of appeal and other supporting documents must
be served to the opposing party before the trial begins. All documents filed with the ITAT during the course of proceedings
must be disclosed to the opposing party. The admission of additional evidence before the ITAT is not an inherent right and
is subject to the ITAT's discretion (Rule 29, Income Tax (Appellate Tribunal) Rules 1963).
Appeal to the High Court and the Supreme Court
During an appeal before the High Court or the Supreme Court, a copy of the appeal, the memorandum of appeal and other
supporting documents must be served to the opposing party before the trial begins. Each party must serve a copy on the
opposing party of every document or statement that he proposes to refer to or rely on. The parties to an appeal must not
produce additional evidence, whether oral or documentary, except in the following circumstances (Rule 27, Order 41, Code
of Civil Procedure 1973):
• Where the previous court has refused to admit evidence, which ought to have been admitted.
• Where the appellate court requires additional evidence for itself, either to enable it to pronounce the judgment or for
any other substantial cause. The court must record the reason for its admission.
Special rules/considerations
17. Are there any special rules or considerations concerning the disclosure or discovery of documents in civil
tax litigation?
The Income Tax Act 1961 does not recognise privileged communication. However, the Indian Evidence Act 1872
governs legal advice privilege (privilege that attaches to professional communication between a legal adviser (including

the interpreters, clerks or servants of legal advisers) and the client). Legal advice privilege can be waived in certain
circumstances.
Disclosure in criminal proceedings
18. What documents must the parties disclose to the other parties and/or the court in criminal proceedings? Are
there any detailed rules governing this procedure?
The accused has the right to be supplied with all documents or evidence, which lead to him being accused of an offence
under Chapter XXII of the Income Tax Act 1961 (section 207, Code of Criminal Procedure 1973).
In addition, the accused can present his evidence and defend his case (section 243(1), Code of Criminal Procedure 1973).
The judge must record written statements made by the accused.
Special rules/considerations
19. Are there any special rules or considerations concerning the disclosure of documents in criminal tax litigation?
The rules on legal privilege contained in the Indian Evidence Act 1872 do not extend to litigation under the Code of Criminal
Procedure.
The Right to Information Act 2005 (RTI Act) enables citizens to seek information from governmental departments. However,
section 8 of the RTI Act provides exceptional circumstances under which a government department cannot divulge
information in the public domain. In addition, the Delhi High Court in the case of Naresh Trehan v Rakesh Kumar Gupta
ruled that the income tax returns and other information provided to income tax authorities during the course of assessment
is exempt from disclosure under the RTI Act.
Witness evidence
Trial considerations

20. Do witnesses of fact give oral evidence or do they just submit written evidence? Is there a right to cross-
examine witnesses of fact?
Civil law
Witnesses can give written and/or oral evidence. All documents (including witness statements) which are presented to the
court for inspection constitute evidence (section 3, Indian Evidence Act 1872 (Indian Evidence Act)). In addition, all oral
statements which the court permits or expects the witnesses to make in its presence regarding the truth of the facts constitute
(section 60, Indian Evidence Act).
Witnesses must be examined-in-chief, cross-examined and then re-examined. The examination-in-chief and cross-
examination must relate to relevant facts of the case, but the cross-examination does not need to be confined to the facts
that the witness testified to in his examination-in-chief. The re-examination must be directed to the explanation of matters
referred to in cross-examination. If a new matter is introduced in re-examination, by permission of the court, the adverse
party can further cross-examine on that matter. In cases tried by jury or with assessors, the jury or assessors, with the judge's
permission, can put any question to the witnesses.
Taxpayers can file affidavits to substantiate any fact, which cannot be borne out of any physical evidence. Statements made
in these affidavits only become evidence when corroborated by a statement recorded during the course of the hearing
(Income Tax Act 1961 (Income Tax Act)).
Income tax authorities can conduct inquiries (section 131, Income Tax Act) by:
• Summoning witnesses.
• Examining witnesses under oath.
• Compelling the production of books of account and documents.
• Issuing commissions.
In addition, income tax authorities can compel banks and other authorities to provide information relating to a pending
proceeding or enquiry (section 133(6), Income Tax Act).
The authorised officer can record statements on oath from persons found to be in possession or control of relevant articles
(section 132(4), Income Tax Act). However, the Bombay High Court in the case of Gavit (RR) v Sherbanoo Hasan Daga
[1986] 161 ITR 793 held that this power to interrogate on oath is not for the purposes of general investigation of the assets,
but for the limited purpose of seeking an explanation or information in respect of the documents, articles or things found
during the search.
A statement recorded under compulsion, where it is retracted, is not valid in the eyes of the law and confessions, if not based
on credible evidence, are retracted by taxpayers. Therefore, confessions during the course of search, seizure and survey
operations do not serve any useful purpose.

The Central Board of Direct Taxation released a Manual on Exchange of Information under the Tax Treaties. Where taxpayers
operate globally, the tax administrators remain confined to their respective jurisdictions and therefore they cannot get
information available in other jurisdictions (as taxation is a sovereign function of the State and manner to collect information
is restricted to the respective State). Therefore, it is imperative that tax administrators co-operate by sharing information to
effectively tackle tax evasion/avoidance and for the proper administration and enforcement of domestic laws (especially in
light of recent leaks such as the Panama Papers, Luxembourg Leaks, Paradise Papers and so on). Such international co-
operation in tax matters is done through exchange of information mechanism under double taxation avoidance agreement,
tax information exchange agreements and multilateral agreements for exchanging information.
Criminal law
See above, Civil law.
Witness preparation
21. Provide a brief outline of the procedure for preparing witnesses in both civil and criminal cases. Are there any
special or unique features to consider for witness evidence in criminal cases?
Civil law
Under the Evidence Act 1872, the procedure for preparing witnesses in both civil and criminal cases is as follows:
• Discuss the case with the client or other witnesses. Explain how their testimony advances the case and refutes the
opposing party's version of events.
• Prepare the client and other witnesses for examination-in-chief and cross-examination.
• Prepare questions for both examination-in-chief and cross-examination. Begin with broader, more general questions
at first and more specific, detailed questions as the examination proceeds. Save the strongest points for the end of
the examination.
• Role-play with the client or other witnesses. Prepare them for the opposing party's tone, questions the opposing
party will ask and evidence the opposing party will use.
• Advise the client or other witnesses to listen carefully to the questions asked.
• Advise the client or other witnesses that if they do not know the answer to a question, they should not guess or
speculate.

• Reassure the client or other witnesses that they will have the opportunity to clarify any matters that require
clarification during re-examination.
Criminal law
See above, Civil law.
Hearsay evidence in civil and criminal trials
22. Are there any rules concerning the introduction of hearsay evidence in civil and criminal trials?
Civil trials
Hearsay evidence is evidence that is based on information given by a third person. Hearsay evidence is inadmissible in court
because information given by a third person cannot be relied on. In the case of Saktar Singh v State of Haryana AIR 2004
SC 2570, the Supreme Court held that hearsay evidence (the statement of a witness not based on his personal knowledge
but on what he heard from others) is not admissible. Statements made in the courts of law are under oath and every person
making a statement is personally liable for that statement. A person giving hearsay is considered a non-witness.
However, there are exceptional circumstances under which hearsay evidence is admissible. Under the Indian Evidence Act
1872 (Evidence Act), statements by non-witnesses are admissible where the material factor is the making of the statements
and not its accuracy, such as:
• Statements that are part of the doctrine of res-gestae (when a statement of a person can be proved by a witness
if the fact stated by such person surrounds the relevant facts), whether as actually constituting a fact in issue or
accompanying it (sections 5 and 8, Evidence Act).
• Statements amounting to acts of ownership, such as leases, licences and grants (section 13, Evidence Act).
• Statements which corroborate or contradict the testimony of a witness (sections 155, 157 and 158, Evidence Act)
are admissible even though they are statements by a non-witness.
Criminal trials
See above, Civil trials.

Expert evidence
Expert reports in civil trials
23. What are the rules concerning the introduction of expert reports in civil trials?
The Income Tax Act 1961 does not contain specific provisions regarding the use of expert reports. However, the Indian
Evidence Act 1872 provides for expert opinions to be taken into consideration for the purpose of reaching a sound conclusion.
The Supreme Court has emphasised the use of expert evidence in the case of CIT v Bharti Cellular Ltd [(2011) 330 ITR 239
(SC). In this case, the Supreme Court directed the Central Board of Direct Taxes to issue directions to all its officers that in
cases involving the determination of taxability of cellular service providers/other technical service providers, the department
need not proceed only by the contracts placed before the officers. With the emergence of India as one of the BRIC countries
and with the technological advancements in this area, the department should appoint technical experts to assist it and the
courts in understanding the factual basis of cases and therefore disposing of them expeditiously.
In addition, the Supreme Court in the cases of Malay Kumar Ganguly v Dr Sukumar Mukherjee and Ors (2009) 9 SCC 221
and Ramesh Chandra Agarwal v Regency Hospital Limited and Ors (2009) 9 SCC 709 placed reliance on section 45 of the
Evidence Act 1872. They held that if there is a matter which is outside the knowledge and experience of a layperson, and
there is a need to hear an expert, the opinion of that expert should be relied on, provided that the:
• Expert is within a recognised field of expertise.
• Evidence is based on reliable principles.
• Expert is qualified in that discipline.
The courts have the discretion and authority to admit or refuse an expert report and decide how much weight should be
given to it.
Expert evidence in civil trials
24. What are the rules concerning the introduction of expert evidence in civil trials?
A major amendment in the Draft Income Tax Appellate Tribunal Rules 2017 has made depositions of experts as permissible
additional evidence.

Expert evidence in criminal trials
25. What are the rules concerning the introduction of expert evidence in criminal trials? Is it possible to introduce
expert reports?
Expert evidence
In a case where the court must form an opinion on a point of foreign law or of science or art, or must identity handwriting or
finger impressions, it can rely on the opinions of experts (persons specifically skilled in the relevant foreign law, science or
art, or in questions as to the identity of handwriting or finger impressions) (section 45, Indian Evidence Act 1872).
Expert reports
See above, Expert evidence.
Special considerations
26. Are there any special considerations for introducing expert evidence/reports in both civil and criminal trials?
Civil trials
The Supreme Court in the case of State of Maharashtra v Damu s/o Gopinath Shinde and others AIR 2000 SC 1691 held
that no reliance can be placed on an expert opinion alone without examining the expert as a witness in court. Mere assertion,
without mentioning the data or basis, is not evidence, even if it comes from an expert.
Criminal trials
See above, Civil trials.
Closing the case in civil trials

27. What are the rules governing the submission of both written and oral argument in closing a civil trial?
There are no rules governing the submission of written and oral arguments in closing a civil trial. However, the following
has been accepted in practice:
• Commissioner of Income Tax (Appeals) (CIT(A)). The appellant must make written submissions. In addition, the
appellant must orally present his arguments before the CIT(A).
• The Income Tax Appellate Tribunal. The appellant must present its closing submissions orally. However, in
practice written submissions are also made to demonstrate, before a higher forum, the arguments and issues raised
before the lower authorities.
• The High Court. Typically, only oral closing submissions are made before the Court. However, written closing
submissions can be submitted if directed by the Court at the conclusion of the hearing.
• The Supreme Court. There are no specific rules on closing submissions. Typically, oral submissions are made
before the Court. Rejoinders (reply to the counter affidavit filed by the respondent/defendant) are filed before the
Supreme Court with the permission of the Court and on the Court's initiative, if writ jurisdiction is invoked.
Closing the case in criminal trials
28. What are the rules governing the submission of both written and oral argument in closing a criminal trial?
The judge must explain the particulars of the offence (section 251, Code of Criminal Procedure 1973). If the accused pleads
guilty, the magistrate must record his plea verbatim (section 252, Code of Criminal Procedure 1973).
Decision, judgment or order
Civil law cases
29. What are the rules governing the issuance of a decision in civil cases?

There are no special considerations for the issuance of a decision by the Commissioner of Income Tax (Appeals) (CIT(A))
or the Income Tax Appellate Tribunal (ITAT). However, the decision must be spoken out loud in court and set out all the facts
relied on and the reasons for arriving at a particular conclusion on the facts of a case. The courts have repeatedly held that
an order which is not well-reasoned and a speaking order is liable to be quashed (Lalit Wadhwa v CIT and another 82 DTR
130 (P&H)) and the aggrieved party can file a review petition or can appeal to the higher forum for a redress of grievances.
Orders by the High Court or Supreme Court must contain (Order XX, Rule 4(1), Sub-Rule (2), Code of Civil Procedure 1908
(Code of Civil Procedure)):
• A concise statement of the case.
• The points for determination.
• The decision and the reasons behind the decision.
The court must state its decision and the reasons for the decision, on each separate issue, unless the decision on any one
or more of the issues is sufficient for the decision of the whole case (Order XX, Rule 5, Code of Civil Procedure).
The Code of Civil Procedure provides sufficient (non-exhaustive) guidelines for writing judgments. The judgment is in the
form of a written order and reasons are accorded for reaching such a decision. However, judges have a wide discretion to
choose their style of writing, language, manner of statement of facts, discussion of evidence and reasons for the decision.
In addition, the court can reserve its decision for a later date.
The time limitations for reaching a decision are:
• Tax assessment. The tax assessment must be completed and a written order issued within twenty-one months of
the assessment year (three years in the case of a transfer pricing assessment).It is proposed that the time limit is
reduced to eighteen months for Assessment Year (AY) 2018-19 and to twelve months for AYs 2019-20 and onwards
(Finance Act 2017).
• CIT(A). The CIT(A) must pass an order within one year from the end of the financial year in which the appeal was
filed. However, this time limit is not mandatory.
• ITAT. The ITAT must pass an order within four years from the end of the financial year in which the appeal was filed.
However, this time limit is not mandatory.
• High Court and Supreme Court. The Income Tax Act 1961 does not prescribe time limits for High Court and
Supreme Court decisions. However, Order XX of the Code states that in a case where the judgment is not given
immediately, the Court must make every attempt to do so within 30 days from the date on which the hearing of the
case was concluded. Where it is not practicable to do so, the judgment must be given within two months of the close
of the hearing.
Similar guidance is also provided for cases in relation to indirect taxes.

Criminal law cases
30. What are the rules governing the issuance of a decision in criminal cases?
The judgment must be made in open court immediately after the termination of the trial, or at some subsequent time of which
notice must be given to the parties or their representatives (section 353, Chapter XXVII of the Code of Criminal Procedure
1973 (Criminal Code)). The judgment must (section 354, Criminal Code):
• Be written in the language of the court.
• Contain the point or points for determination, the decision made and the reasons for the decision.
• Specify the offence (if any) of which, and the section of the law under which the accused is convicted, and the
punishment to which he is sentenced.
The Supreme Court in the case of Anil Rai v State of Bihar (supra) held that judgments that are governed by the Criminal
Procedure Code 1973 must be pronounced within six weeks of the close of the hearing of the case.
Costs
31. How is the issue of costs determined in both civil and criminal cases?
Civil law
The Income Tax Appellate Tribunal and the courts can impose costs against parties who abuse the judicial process by:
• Filing frivolous applications.
• Adopting delaying tactics by seeking multiple adjournments.
• Pleading contradictory statements before the court.

• Failing to pay costs imposed by the court.
• Pleading contrary to settled legal positions.
Parties can apply for a cost order but it is at the discretion of courts whether to award costs or not. Generally, in tax matters
the courts cannot award interest on the amount payable. Recently, the High Courts have started imposing costs on the
Revenue Department for filing frivolous appeals.
Criminal law
The court can order the prosecution to pay the costs of an accused who is accused of a non-cognisable offence (an
offence relating to an arrest made without a warrant and without the permission of the court). These costs can include
any expenses incurred in respect of process fees, witnesses and representative's fees and any other costs that the court
considers reasonable.
Appeals
Right to appeal in civil law
32. What are the main grounds for appealing a civil law decision?
The main grounds for appealing a civil law decision are as follows:
• An appeal to the Commissioner of Income Tax (Appeals). An appeal can be made against points of law or
against findings of fact.
• An appeal to the Income Tax Appellate Tribunal (ITAT). An appeal can be made against points of law or against
findings of fact.
• An appeal to the High Court. An appeal can be filed against points of law, against findings of fact or if the order
of the ITAT is unreasonable or unacceptable. The applicant can file a writ petition with the High Court if a public
authority or any other person violates fundamental or constitutional rights. However, the High Court may be moved
under Article 226 only if no other alternative remedies exist.
• An appeal to the Supreme Court. A petitioner can file a Special Leave Petition either against points of law,
findings of fact or if the order of the ITAT is unreasonable or unacceptable. On hearing the parties, the Supreme

Court can either grant leave, refuse to hear the case on the merits or dismiss the appeal immediately. Some
decisions relating to indirect tax issues can be appealed directly from the ITAT to the Supreme Court.
Procedure to appeal in civil law
33. What is the procedure for appealing a civil law decision?
Permission is not required for filing an appeal with the Commissioner of Income Tax (Appeals) (CIT(A)), the Income Tax
Appellate Tribunal (ITAT) and the High Court. However, at the time of filing an appeal, requisite appeal fees are payable and
evidence of payment must also be attached to the appeal memo. The fees for filing:
• An appeal with CIT(A) are contained in section 249 of the Income Tax Act 1961 (Income Tax Act).
• An appeal with the ITAT are contained in section 253(6) of the Income Tax Act.
• An appeal with the High Court and the Supreme Court are respectively contained in the High Court Rules and
Supreme Court Rules.
• For the procedure for appealing civil law decisions, see Question 4 and Question 5.
Right to appeal in criminal law
34. What are the main grounds for appealing a criminal law decision?
The main grounds for filing an appeal against a criminal law decision are when:
• There has been a violation of the principles of natural justice.
• Due process of law has not been followed.
• The lower court has made serious error(s) of law.

• There has been improper admission or exclusion of evidence.
• There is lack of sufficient evidence to support a guilty verdict.
Procedure to appeal in criminal law
35. What is the procedure for appealing a criminal law decision?
An appeal is a process by which a judgment of a subordinate court is challenged before its superior court. An appeal can
be filed only by a person who has been a party to the case before the subordinate court. However, a party does not have
an automatic right of appeal.
The procedure for appealing a criminal law decision is as follows (Chapter XXIX, Code of Criminal Procedure 1973 (Code
of Criminal Procedure)):
• No appeal can be filed unless it is specifically allowed by any law and must be filed in the specified manner in the
specified courts (section 372, Code of Criminal Procedure).
• Any person who has been ordered to give security for keeping the peace or for good behaviour can appeal against
such order to the Court of Session (section 373, Code of Criminal Procedure).
• Any person convicted on a trial held by a Sessions Judge or an Additional Sessions Judge or on a trial held by any
other court in which a sentence of imprisonment for more than seven years can appeal to the High Court (section
374, Code of Criminal Procedure).
• Any person convicted on a trial held by a High Court in its original criminal jurisdiction can appeal to the Supreme
Court (section 374, Code of Criminal Procedure).
• Where an accused person has pleaded guilty and has been convicted on such plea, there is no appeal possible
(section 375, Code of Criminal Procedure).
A party can appeal a decision to the High Court by filing a petition outlining the merits of their case (Article 226, Constitution
of India; section 482, Code of Criminal Procedure).
Recent civil law developments and proposals for reform

36. Outline the main recent civil law developments in tax litigation in your jurisdiction. Are there any proposals
to reform civil law tax litigation?
Recent developments in civil tax litigation include the:
• Introduction of roll-back provisions (Finance Act 2014) with respect to advance pricing agreements (APAs). The roll-
back mechanism relates to transactions entered four years prior to the APA filing.
• Increase in the number of benches of the Authority of Advance Rulings in February 2015 to speed up the disposal of
applications.
• Introduction of a ten-member committee headed by Justice R V Easwar (retired) to study and identify the provisions
in the Income Tax Act 1961 which have led to litigation based on misinterpretation.
• Setup of a committee to draft a new Income Tax Code (which will be presented in the first half of 2018).
Proposals for reform
Proposals to reform civil tax litigation include the following:
• General Anti-Avoidance Rules, which allow the tax department to scrutinise transactions structured to deliberately
avoid tax, are proposed to be implemented from April 2017.
• Proposal to merge the Authority of Advance Ruling (AAR) for income-tax, central excise and service tax to promote
ease of business (Finance Bill 2017).
• Monetary limit for deciding an appeal by a single member Bench of the Income Tax Appellate Tribunal enhanced
from INR1.5 million to INR5 million.
Recent criminal law developments and proposals for reform
37. Outline the main recent criminal law developments in tax litigation in your jurisdiction. Are there any proposals
to reform criminal law tax litigation?
Recent developments in criminal tax litigation include the:

• Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 and the Benami
Transactions (Prohibition) Amendment Act 2016. They were enacted to prevent tax evasion and to monitor black
money both within and outside India.
• Reporting of foreign assets in the income tax return.
• If a person is required but fails to collect or deposit with the government tax deducted at source (TDS) on a
payment, this may result in penalties and prosecution.
• Amendments to the Prevention of Money Laundering Act 2002, to include income tax evasion on foreign assets as a
money laundering offence.
• The Benami Transactions (Prohibition) Amendment Act 2016 was introduced and it:
• amended the definition of benami transactions The Act before the amendment defined a benami transaction
as a transaction where a property is held by or transferred to a person, but has been provided for or paid by
another person. The amended definition adds other transactions which qualify as benami, such as property
transactions where the transaction is made in a fictitious name, the owner is not aware of denies knowledge of
the ownership of the property, or the person providing the consideration for the property is not traceable.
• established authorities the Initiating Officer; the Approving Authority; the Administrator; and the Adjudicating
Authority and an Appellate Tribunal to deal with benami transactions; and
• specified the penalty for entering into benami transactions Holding Benami property can result in a prison
sentence of seven years or a fine of up to 25% of the fair market value the property, or both.
• Foreign Exchange Management Act, which states that if any foreign exchange, foreign security or any immovable
property situated outside India is held in contravention of the provisions of the Act, action can be taken for seizure
and eventual confiscation of assets of equivalent value situated in India. Penalties include a levy and prosecution
with a penalty of up to five years' imprisonment.
Online resources
Supreme Court of India
W www.supremecourtofindia.nic.in
Description. The website of the Supreme Court of India is updated on a daily basis. It provides case status
information and copies of judgments.
Delhi High Court

W www.delhihighcourt.nic.in
Description. This is the website of the Delhi High Court that is updated on a daily basis. It provides case status
information and copies of judgments.
SCC Online
W www.scconline.com
Description. This is the website of the reputed journal reporting all Supreme Court Cases and major High Court
and Tribunal Cases.
Taxmann.com
W https://www.taxmann.com/
Description. This is the website of the reputed tax journal Taxmann. This website contains recent case law and
judgments pertaining to taxation matters.
Contributor profiles
Mukesh Butani, Managing Partner
BMR Legal
T +91 11 6678 3010

F +91 11 6678 3001
E Mukesh.Butani@bmrlegal.in
Professional qualifications. India, Advocate, 2010; India, Chartered Accountant, 1985

Areas of practice. Corporate international tax; transfer pricing; FDI policy; business reorganisations; cross-border
tax structuring; tax controversy and regulatory policy.
Non-professional qualifications. Commerce, University of Mumbai
Recent transactions
• Acted as a briefing counsel for Shell India Markets Pvt Ltd on share issuances, on whether these qualify as
''international transactions'' and on the validity of imputing notional interest in respect of alleged short receipt
of capital.
• Acted as a counsel before the Delhi High Court tax on dispute related to marketing intangibles.
• Acted as counsel before Mumbai ITAT for Syngenta India Ltd on the issue of location savings.
Languages. English
Professional associations/memberships.
• International Chamber of Commerce, Paris (ICC).
• Indian Ministry of Finance (MoF) committee (2000) on e-commerce taxation (former member).
• Expert task force on international tax and transfer pricing (former member).
• Business Industry Advisory Committee to the OECD.
• Permanent Scientific Committee of IFA (2012 – 2016).
• Vice Chairman of Taxation Commission of ICC (2011 onwards).
• Focus Group on Administrative practices on tax disputes under the Tax Administration Reform Commission.
• International Tax Research and Analysis Foundation.
Publications.
• Transfer Pricing: An Indian Perspective, Lexis Nexis Butterworths.
• Managing Tax Disputes in India, Lexis Nexis Butterworths (co-authored).
• Transfer Pricing Dispute Resolution, Cambridge University Press.

• Wolters Kluwer CCH online guide to Transfer Pricing in Asia.
• Business Restructuring and Customs Valuation, International Bureau of Fiscal Documentation.
Shreyash Shah
BMR Legal
T +91 11 6678 3018
F +91 11 6678 3001
E shreyash.shah@bmrlegal.in
Professional qualifications. Advocate
Areas of practice. Tax litigation and advisory.

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Tax Litigation in India Overview

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Tax litigation in India: overview, Practical Law Country Q&A 5-624-5046

Tax litigation in India: overview

A Q&A guide to civil and criminal tax litigation in India.

Overview of tax litigation

© 2021 Thomson Reuters. No claim to original U.S. Government Works. 1

Overview of tax litigation

Issues subject to tax litigation

• Central Goods and Services Act 2017.

• Union Territory Goods and Services Act 2017.

• Integrated Goods and Services Act 2017.

• Tax disputes often arise in the following areas:

• Individual and partnership matters.

• Charitable and other forms of not-for-profit organisations.

• Cross-border tax matters on permanent establishment and attribution.

© 2021 Thomson Reuters. No claim to original U.S. Government Works. 2

• General Anti Avoidance Rule (GAAR).

• Matters relating to withholding tax.

• Matters relating to allowance of exemptions/deductions.

• Taxation of royalty income.

• "Black money" that is, undisclosed foreign income and assets.

• Search and seizure.

• Classification matters relating to indirect tax on excise and service tax.

• Valuation issues under the Customs Act 1962.

• Various issues under the Goods and Service Tax Law.

Civil tax litigation

Civil tax litigation is regulated by the following principal pieces of legislation:

• Income Tax Act 1961 (Chapters XIX-A, XIX-B and XX).

© 2021 Thomson Reuters. No claim to original U.S. Government Works. 3

• Income Tax Rules 1962.

• The Constitution of India 1950.

• Double taxation avoidance agreements.

• Income Tax (Dispute Resolution Panel) Rules 2009.

• Income Tax (Appellate Tribunal) Rules 1963.

• Authority for Advance Rulings (Procedure) Rules 1993.

• Income Tax Settlement Commission (Procedure) Rules 1997.

• Benami Transactions (Prohibition) Amendment Act 2016

• Good & Service Tax Law.

• Code of Civil Procedure 1908.

• Central Excise Act 1944.

• Customs Act 1962.

• Finance Act 1994 (Service Tax).

Criminal tax litigation

Criminal tax litigation is regulated by the following principal pieces of legislation:

• Income Tax Act 1961 (Chapter XXII).

• Income Tax Rules 1962.

• Code of Criminal Procedure 1973.

© 2021 Thomson Reuters. No claim to original U.S. Government Works. 4

• Benami Transactions (Prohibition) Amendment Act, 2016

• Good & Service Tax Law

• Central Excise Act 1944.

• Customs Act 1962.

• Finance Act 1994 (Service Tax)

Tax evasion and other criminal tax offences

• Undisclosed income detected in search and seizure operations.

• The removal, concealment, transfer or delivery of property to thwart tax recovery.

• The failure to pay to the treasury taxes withheld.

• Wilful attempts to evade payment of any tax.

• Making false statements or accounts.

• Clandestine removal of manufactured goods.