Tax Controversy Management

The first step is to identify the type of notice and its deadline, since each carries a different obligation and time limit. A notice may be an intimation after routine processing, an inquiry seeking information, a scrutiny notice, a reassessment notice, a penalty notice, or a demand. Verifying the notice on the e-filing portal confirms that it is genuine and records the response window. A measured, documented reply within the deadline usually prevents the matter from escalating. We read the notice against the assessment record, quantify the exposure, and prepare the response, rather than treating the notice in isolation.

A scrutiny assessment is a detailed examination of a filed return. It is carried out under Section 143(3) [ITA 2025: s. 270(10)]. Most returns are accepted through automated processing, and only a limited set are selected for scrutiny. The selection is communicated through a notice under Section 143(2) [ITA 2025: s. 270(8)] that must be served within three months from the end of the financial year in which the return was filed [ITA 2025: s. 270(9)]. The notice asks for documents and explanations on specific issues, and the assessment concludes with a written order. We review the notice, assemble the supporting record, and file the responses within the stated timelines.

Faceless assessment removes the in-person interface with a local Assessing Officer. It is governed by Section 144B [ITA 2025: s. 273] and is run by the National Faceless Assessment Centre, which allocates cases electronically to teams across the country. Notices arrive through the e-filing portal under Pending Actions and e-Proceedings, and replies, documents, and video-hearing requests are submitted online. Cases assigned to Central Charges, including search and survey cases, and International Taxation Charges remain outside the faceless route. Failure to respond can lead to a best-judgment assessment under Section 144 [ITA 2025: s. 271]. We monitor the portal, prepare the submissions, and represent the matter through the electronic process.

Reassessment lets the department reopen a past year where it holds information that income escaped assessment. The provisions are governed by Section 147 [ITA 2025: s. 279], Section 148 [ITA 2025: s. 280] and Section 148A [ITA 2025: s. 281], with notice time limits in Section 149 [ITA 2025: s. 282]. Before issuing a reassessment notice, the officer must follow the show-cause procedure under Section 148A [ITA 2025: s. 281], giving the taxpayer a chance to respond. For a year governed by the 2025 Act, a show-cause notice is generally limited to four years, or six years where the alleged escaped income is Rs 50 lakh or more; the ensuing reassessment-notice limits are four years and three months or six years and three months, respectively. For a year governed by the 1961 Act, the corresponding limits are three or five years for show cause, and three years and three months or five years and three months for the reassessment notice. We examine the validity of the reopening before drafting the reply, since procedural defects are often the first line of defence.

The Dispute Resolution Panel is an optional route that lets an eligible taxpayer challenge a proposed variation before the assessment is finalised. Under Section 144C [ITA 2025: s. 275], an eligible taxpayer includes a person for whom a prejudicial variation arises from a Transfer Pricing Officer's order, and also a foreign company or a non-resident who is not a company, subject to the statutory exclusions. The officer first issues a draft order; the taxpayer may file objections with the Panel and the officer within thirty days, and the Panel's directions bind the officer. The Panel route can settle issues earlier than the regular appeal. We assess whether the Panel or the standard appeal path is better suited to the facts before electing the route.

A survey and a search are different. A survey, under Section 133A [ITA 2025: s. 253], permits entry into a business, professional or charitable-activity premises during business hours, inspection of books and electronic records, verification of stock, and impounding of books, documents or computers after reasons are recorded; it does not permit removal of cash, stock or another valuable article through the survey power. A search, under Section 132 [ITA 2025: s. 247], is broader: on statutory authorisation it permits entry and search, compelled access to electronic records and access codes, breaking or overriding locks and codes, and seizure of specified books, documents, computers and assets, while stock-in-trade is inventoried rather than seized. Under Rule 112 [ITR 2026: r. 148], the authority must be produced on demand, the search is conducted in the presence of witnesses, and the occupant or a person on the occupant's behalf must be permitted to attend. Search and Central Charge cases are handled outside the faceless system. We assist with documentation, recorded statements, and the assessment that follows.

A demand notice sets out the tax, interest, or penalty payable after an order. It is issued under Section 156 [ITA 2025: s. 289], and the amount is generally payable within thirty days of service. The options are to pay, to seek rectification under Section 154 [ITA 2025: s. 287], where the demand rests on an apparent error, to file an appeal, or to request payment in instalments. Ignoring the notice can lead to the taxpayer being treated as in default and to recovery action. We review how the demand was computed before advising on the appropriate response.

Filing an appeal does not, by itself, stop recovery of the disputed demand. A taxpayer may apply for a stay of recovery while the first appeal is pending. CBDT guidance uses 20% as a standard benchmark for stay pending the first appeal, but it is not mandatory; the authority must exercise case-specific discretion and may require less or more. The recovery and default provisions are in Section 220 [ITA 2025: s. 411]. Where the demand rests on a clear error, a rectification application can be filed alongside the stay request. We prepare the stay application with submissions on the merits and on financial hardship.

Rectification corrects a mistake apparent from the record, such as a tax credit not given or an arithmetical error, without reopening the whole matter. It is provided under Section 154 [ITA 2025: s. 287]. It is faster and narrower than an appeal, and is the right remedy where the error is plain rather than a question of interpretation or fresh facts. An application can be made within four years from the end of the year in which the order was passed. Where a demand rests on such an error, a rectification request is often filed alongside a stay application. We identify whether rectification or appeal fits the issue.

If a business disagrees with an assessment, penalty, or similar order, the first appeal lies with the Commissioner (Appeals) or the Joint Commissioner (Appeals). The relevant appeal provisions are Section 246 [ITA 2025: s. 356] and Section 246A [ITA 2025: s. 357], Section 249 [ITA 2025: s. 358], Section 250 [ITA 2025: s. 359], and Section 251 [ITA 2025: s. 360]. The appeal is filed electronically in Form 35 [ITR 2026: Form 99] under Rule 45 [ITR 2026: r. 167], within thirty days of service of the order or demand notice. A statutory fee between Rs 250 and Rs 1,000, based on the assessed income, is payable to the department. Most first appeals are now heard through the faceless appeal system. We prepare the grounds of appeal, the statement of facts, and the written submissions.

If the first appeal does not resolve the matter, the next stage is the Income Tax Appellate Tribunal, the final fact-finding authority. The Tribunal provisions are governed by Section 253 [ITA 2025: s. 362], Section 254 [ITA 2025: s. 363] and Section 255 [ITA 2025: s. 364], and the appeal is filed in Form 36 [ITR 2026: Form 115], within sixty days of the first-appeal order being communicated. A further appeal lies to the High Court on a substantial question of law, and then to the Supreme Court, under Section 260A [ITA 2025: s. 365], Section 260B [ITA 2025: s. 366], Section 261 [ITA 2025: s. 367] and Section 262 [ITA 2025: s. 368]. We coordinate Tribunal representation and brief legal counsel for the higher courts.

A penalty for under-reporting or misreporting income is levied under Section 270A [ITA 2025: s. 439]. Under-reporting attracts a penalty of 50% of the tax on the under-reported amount; misreporting attracts 200%. Section 270AA [ITA 2025: s. 440], as amended for the new regime, permits an application for waiver of penalty and immunity from related prosecution where the taxpayer pays the tax and interest within the demand period, does not appeal, and applies within one month from the end of the month in which the order is received. For specified misreporting grounds, additional income-tax of 100% or 120% of the tax on under-reported income, as applicable, must also be paid in lieu of penalty. Relief is unavailable where a Chapter XXII [ITA 2025: Ch. XXII] prosecution proceeding has already been initiated. We assess the applicable ground and relief conditions before responding to the penalty notice.

Prosecution is the criminal side of tax enforcement, separate from civil penalties. The offences in Sections 275A–278A [ITA 2025: ss. 473–485] cover obstruction of a search, failure to deposit tax deducted at source, wilful attempt to evade tax under Section 276C [ITA 2025: s. 478], failure to file returns, and false statements. Mens rea depends on the offence. Section 276C [ITA 2025: s. 478] requires a wilful attempt to evade, while Section 276CC [ITA 2025: s. 479] addresses wilful non-filing and applies the statutory presumption in Section 278E [ITA 2025: s. 490]; delay or later compliance is therefore not a universal bar to prosecution. We prepare responses to show-cause notices and coordinate the defence with counsel where a complaint is filed.

The Income Tax Act 2025 applies from 1 April 2026, but it does not erase the past. Section 297 [ITA 2025: s. 536] preserves the 1961 Act for proceedings relating to a tax year beginning before 1 April 2026, whether the proceeding was pending on that date or is initiated afterwards, subject to the section's detailed savings. Proceedings for Tax Year 2026-27 onwards use the 2025 Act. Live disputes may therefore straddle both sets of numbers, and we cite each matter under the law that governs it.