Income Tax Notices and Appeals: Complete Stage-by-Stage Guide
Updated: 14 hours ago
Quick answer: An income tax dispute usually moves through six stages: notice, assessment or reassessment, penalty, first appeal to the CIT(A) in Form 35 within 30 days, second appeal to the ITAT in Form 36 within two months from the end of the month the order is received, and then the High Court (120 days, only on a substantial question of law) and the Supreme Court. Stay of demand and rectification under section 154 run alongside. Missing a time limit is the most common way a good case is lost.
Contents
Which law applies: 1961 Act or 2025 Act
The Income-tax Act, 2025 came into force on 1 April 2026 and renumbers most of these provisions. Notices, assessments and appeals for earlier years are still largely run under the procedure of the Income-tax Act, 1961, so this guide uses the 1961 section numbers. The section mapping is covered in Income-tax appeals under the 2025 Act vs the 1961 Act and reassessment under the 2025 Act vs 1961.
Stage 1: Notice received
Identify the section on the notice first, because the section decides the deadline and the reply.
Section 143(1) intimation: a CPC adjustment or demand after processing the return. The CPC first proposes prima facie adjustments and gives 30 days to respond. Errors apparent from the record are corrected through rectification under section 154.
Section 143(2) notice: selection for scrutiny. It must be served within three months from the end of the financial year in which the return was filed.
Section 142(1) notice: a call for documents, accounts or a return, with the date given in the notice. Non-compliance can lead to a best judgment assessment under section 144.
Section 148A notice: a show-cause notice before reopening a past year, with the information relied on. The reply window is stated in the notice.
Mismatch and verification notices: AIS/TIS mismatches and e-verification letters are often the first sign of a later scrutiny or reopening.
Read next: Section 143(1) intimation, 143(1)(a) prima facie adjustments, income tax notice types, AIS/TIS mismatch.
Living outside India? See income tax notice to an NRI: why it comes and how to reply from abroad.
Practice guide for professionals
For a clause-by-clause working reference with worked examples, see the Amended Form 3CD Practical Guide (PDF, ₹299).
Stage 2: Assessment and reassessment
Scrutiny assessment. Assessments under section 143(3) are made in faceless mode under section 144B through the e-filing portal, with a show-cause notice and draft order before any variation. Under section 153 the assessment generally has to be completed within 12 months from the end of the assessment year, with longer periods in specified cases.
Reassessment. For notices issued from 1 September 2024 (Finance (No. 2) Act, 2024), a section 148 notice can generally be issued within 3 years and 3 months from the end of the relevant assessment year, and up to 5 years and 3 months only where the escaped income is ₹50 lakh or more. The section 148A show-cause notice comes first, and the order under section 148A(3) decides whether the case is reopened. Prior approval of the specified authority under section 151 is required.
Read next: scrutiny assessment explained, faceless assessment under section 144B, 148A vs 148 for AY 2026-27, 148A limitation windows, section 148 reassessment framework, section 68 cash credits.
Stage 3: Penalty
Penalty proceedings are separate from the assessment and start with a notice under section 274. Under section 270A the penalty is 50% of the tax on under-reported income and 200% where it arises from misreporting (such as suppression of facts or false entries). Section 270AA gives immunity from the 270A penalty, other than for misreporting, if the tax and interest are paid within the time in the demand notice and no appeal is filed; the application is due within one month from the end of the month in which the assessment order is received. Other penalties include section 271B (tax audit), 271AAC (income under sections 68 to 69D) and 271D/271E (cash loans and repayments).
Before appealing a penalty, check whether the waiver route fits: section 270AA immunity and the section 440 waiver (Form 161).
Stage 4: First appeal before CIT(A)
Who hears it: the Commissioner (Appeals) under section 246A, or the Joint Commissioner (Appeals) under section 246 for specified smaller cases. First appeals are handled under the faceless appeal scheme.
Form and time: Form 35, filed online within 30 days from the date of service of the order or demand notice (section 249(2)). Delay can be condoned for sufficient cause.
Fee (section 249(1)): ₹250 where assessed income is ₹1 lakh or less, ₹500 where it is above ₹1 lakh up to ₹2 lakh, ₹1,000 where it is above ₹2 lakh, and ₹250 for other matters.
Condition: where no return was filed, the advance tax due must be paid before the appeal is admitted (section 249(4)). Admitted tax on a filed return must also be paid.
New evidence: admitted only within the limits of Rule 46A.
Missed the 30-day limit? Read condonation of delay in income tax appeals (CIT(A) and ITAT).
Need to file documents the AO never saw? Read additional evidence under Rule 46A (now Rule 192) and ITAT Rule 29.
Read next: rectification or appeal for a demand, income tax appeals: first appeal and ITAT, faceless appeal scheme, CBDT Notification 133/2026 on appeal jurisdiction.
Stage 5: Appeal to the ITAT
Form and time: Form 36 under section 253. For orders from 1 October 2024 the limit is two months from the end of the month in which the order is communicated. The respondent can file cross-objections in Form 36A within 30 days of receiving notice of the appeal.
Fee (section 253(6)): ₹500 where assessed income is ₹1 lakh or less; 1% of assessed income where it is above ₹1 lakh, capped at ₹10,000; ₹500 for other matters and for a stay application.
Scope: the ITAT is the final fact-finding authority. Grounds, a paper book and any additional evidence request under Rule 29 of the ITAT Rules are prepared at this stage.
Departmental appeals: under CBDT Circular 5/2024 the Department generally does not appeal to the ITAT where the tax effect is ₹60 lakh or less, subject to listed exceptions.
Read next: ITAT procedure, section 148 reassessment at ITAT Ahmedabad, section 68 at ITAT Ahmedabad, search assessments at ITAT.
Stage 6: High Court and Supreme Court
An appeal from the ITAT lies to the High Court under section 260A within 120 days of receipt of the order, and only on a substantial question of law. Further appeal lies to the Supreme Court under section 261 or by special leave petition under Article 136. Writ petitions under Article 226 are used where there is lack of jurisdiction or a breach of natural justice, for example a reopening without the required approval. Under Circular 5/2024 the Department's monetary limits are ₹2 crore for the High Court and ₹5 crore for the Supreme Court.
Running alongside: stay of demand
Filing an appeal does not stop recovery. Under the CBDT office memorandum of 29 February 2016, as modified on 31 July 2017, the Assessing Officer can generally grant a stay of the disputed demand while the CIT(A) appeal is pending on payment of 20% of it, and can ask for more or less in specified situations. Before the ITAT, a stay under section 254(2A) can be granted on deposit of at least 20% or security, for up to 180 days, extendable to a total of 365 days. For the full procedure, see stay of demand in income tax: the 20% rule, section 220(6) and ITAT stay.
Running alongside: rectification and revision
Section 154 rectification: for mistakes apparent from the record, within four years from the end of the financial year in which the order was passed. A 143(1) demand driven by a processing error is usually corrected here rather than in appeal.
Section 263 revision: the Principal Commissioner can revise an order that is erroneous and prejudicial to the revenue within two years from the end of the financial year in which it was passed. The order is appealable to the ITAT.
Section 264 revision: the taxpayer can apply to the Principal Commissioner within one year, where no appeal has been filed, with a ₹500 fee.
Missed a claim in the return and thinking of a revision petition? Read section 264 revision after the 2026 Supreme Court rulings.
Read next: section 263 revision at ITAT Ahmedabad.
Settlement schemes and DRP
For eligible assessees, mainly in transfer pricing cases and for foreign companies, section 144C provides a draft order and a choice: file objections with the Dispute Resolution Panel within 30 days, or accept the draft and appeal to the CIT(A). The DRP must issue directions within nine months. Settlement schemes such as the Direct Tax Vivad se Vishwas Scheme, 2024 allow pending appeals to be closed on payment of the disputed tax; check whether a scheme is open for declarations before relying on one.
Read next: DRP vs CIT(A), Vivad se Vishwas 2.0.
Related reading
Sources
Income-tax Act, 1961: sections 142, 143, 144, 144B, 144C, 147, 148, 148A, 151, 153, 154, 246, 246A, 249, 250, 253, 254, 260A, 261, 263, 264, 270A, 270AA, 274; Income-tax Rules 1962, Rule 45 and 46A, Forms 35 and 36; ITAT Rules 1963; Finance (No. 2) Act, 2024; CBDT Circular 5/2024; CBDT office memoranda of 29 February 2016 and 31 July 2017; Income-tax Act, 2025. Verify the current text and any new notification before relying on a time limit.
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