Special Provisions for Avoiding Repetitive Appeals by Revenue [Section 158AA]

Section 158AA of the Income Tax Act, 1961 (inserted via Finance Act, 2015) provides a mechanism to prevent redundant appeals by the Income Tax Department when an identical question of law is already pending before the Supreme Court in another case involving the same assessee.

1. Objective of Section 158AA

• To reduce litigationby avoiding repetitive appeals on the same legal issue.
• Ensures judicial efficiencyby deferring appeals until the Supreme Court decides the lead case.
• Applies only when the revenue (Department)is in appeal before the Supreme Court .

2. Key Conditions for Application

✔ Identical Question of Law: The legal issue in the current case must be identical to one pending before the Supreme Court in another appeal by the revenue.

✔ Pending Supreme Court Case: The appeal must be filed under:

• Section 261(regular appeal), or
• Article 136(Special Leave Petition) .
  ✔ Assessee’s Acceptance: The assessee must agree in writing that the question of law is identical .

3. Procedure Under Section 158AA

(A) Step 1: Commissioner’s Direction

• The Principal Commissioner/Commissioner (PCIT/CIT)identifies the identical legal issue.
• Instead of filing an immediate appeal to ITAT, they direct the Assessing Officer (AO)to:
  • Submit an application to ITAT(in prescribed form).
  • Request that the appeal be filed only after the Supreme Court’s decision.

(B) Step 2: Assessee’s Consent

• The assessee must acceptin writing that the question is identical.
• If the assessee refuses, the Department can proceed with a regular appealunder Section 253(2)/(2A) .

(C) Step 3: Post-Supreme Court Decision

• If the Supreme Court rules in favor of the revenue, the Department can file an appeal before ITAT within 60 daysof the judgment.
• If the Supreme Court rules in favor of the assessee, no further appeal is filed .

4. Time Limits

5. Key Features

✅ Avoids Multiple Appeals: Prevents the Department from filing appeals year after year on the same issue.

✅ Reduces Litigation Burden: Saves judicial time and resources.

✅ Assessee Protection: Ensures fairness by requiring assessee’s consent before deferring the appeal.

6. Practical Implications

1. For the Revenue:

• • Section 158AA reduces the burden of filing repetitive appeals, saving departmental resources and judicial time.
  • It is particularly useful in cases involving widely contested legal issues, such as the interpretation of tax provisions (e.g., taxability of capital gains, eligibility for exemptions, or transfer pricing disputes).
  • The department must carefully evaluate the pending Supreme Court case to ensure the question of law is identical, as incorrect invocation could lead to missed appeal deadlines.

2. For Assessees:

• • The provision benefits assessees by reducing prolonged litigation and uncertainty, as the department defers appeals pending the Supreme Court’s ruling.
  • The assessee is informed of the department’s decision to defer the appeal, ensuring transparency.

3. Example:

• • Suppose the ITAT rules in favor of an assessee, Mr. Gupta, allowing a deduction under Section 54F for the assessment year 2022-23. The Income Tax Department believes the ITAT’s interpretation of Section 54F is erroneous and considers appealing to the High Court under Section 260A. However, an identical question of law (eligibility for Section 54F) is pending before the Supreme Court in another case (involving a different assessee).
  • The Commissioner invokes Section 158AA, directs the ITAT to defer the appeal, and agrees to abide by the Supreme Court’s decision. Once the Supreme Court rules, the department applies the decision to Mr. Gupta’s case, either accepting the ITAT’s order or pursuing further action based on the ruling.

4. Grievance Redressal:

• • If the assessee believes the department’s invocation of Section 158AA is incorrect (e.g., the questions of law are not identical), they can raise the issue with the Commissioner or seek clarification through the Income Tax Department’s grievance mechanism (e.g., faceless.appeal@incometax.gov.in for faceless processes).
  • In faceless appeal scenarios, communications are handled via the e-filing portal, aligning with the department’s digital initiatives.

7. Key Notes

• Section 158AA mirrors Section 158A but applies to the revenue, ensuring symmetry in avoiding repetitive litigation for both assessees and the department.
• It applies only to questions of law, not facts, and the department must clearly establish the identity of the legal issue.
• Unlike Section 158A, which requires a formal application (Form No. 8), Section 158AA is initiated by the Commissioner’s discretion, with no prescribed form or fee.
• The provision aligns with the faceless appeal and faceless revision frameworks under Sections 250, 264A, and 264B, as directions and communications can be processed electronically via the e-Proceedings platform.
• The Income Tax Bill, 2025 (Clause 532) emphasizes broader digital tax administration, which may further streamline processes like those under Section 158AA by integrating them into the faceless ecosystem.
• For procedural details, refer to notifications on https://incometaxindia.gov.in or contact the Income Tax Department’s grievance redressal channels.

8.  Comparison with Section 158A (Assessee’s Benefit)