Appeal to the Supreme Court [Section 261]

Under Section 261 of the Income Tax Act, 1961, an appeal can be filed before the Supreme Court of India against an order of the High Court in income tax matters. This is the final judicial remedy available in tax litigation.

1. When Can You Appeal to the Supreme Court?

(A) Direct Appeal Under Section 261

✔ The High Court must certify that the case involves a “substantial question of law of general importance”.

✔ The appeal must be filed within 60 days from the High Court’s order.

(B) Special Leave Petition (SLP) Under Article 136 of the Constitution

✔ If the High Court refuses certification, the aggrieved party can file an SLP directly before the Supreme Court.

✔ Must be filed within 90 days from the High Court’s order.

Key Difference:

2. Grounds for Supreme Court Appeal

The Supreme Court only admits appeals in exceptional cases, such as:

✅ Conflict between High Courts – Different High Courts interpreting the same law differently.

✅ Substantial question of law – Issues affecting tax policy or constitutional validity.

✅ Gross injustice – If the High Court’s decision causes severe prejudice.

✅ Violation of natural justice – Denial of a fair hearing or procedural lapses.

Example Cases:

• CIT vs. Sun Engineering (1992)– SC resolved conflicting High Court rulings on depreciation.
• Union of India vs. Azadi Bachao Andolan (2003)– SC decided on the validity of tax treaties.

3. Procedure for Filing Appeal

(A) Section 261 Appeal (If High Court Grants Certificate)

1. File a petition before the High Courtseeking certification.
2. If granted, file the appeal in the Supreme Court within 60 days.
3. Submit:

• • Certified copy of the High Court’s order.
  • Statement of case(facts & legal issues).
  • Proof of tax payment(if applicable).

(B) SLP (If High Court Denies Certificate)

1. File Special Leave Petition (SLP)under Article 136.
2. Must show:

• • Exceptional circumstances(e.g., legal inconsistency).
  • National importance(if the issue affects many taxpayers).

4. Supreme Court’s Powers

✔ Confirm, modify, or set aside the High Court’s order.

✔ Refer the case back to lower authorities for fresh adjudication.

✔ Frame new questions of law if necessary.

Limitations:

❌ Cannot re-examine factual findings (ITAT is the final fact-finding authority).

❌ Will not interfere unless a clear legal error exists.

5. Practical Considerations

✅ Cost & Time: Supreme Court appeals are expensive and time-consuming (may take 2-5 years).

✅ Legal Strategy: Only pursue if the case has broader implications (not for small tax disputes).

✅ Departmental Appeals: Income Tax Department follows monetary limits (e.g., ₹2 crore tax effect for FY 2023-24).

Example:

Suppose an assessee, Ms. Sharma, loses an appeal in the High Court under Section 260A regarding a disputed tax liability. The High Court certifies that the case involves a substantial question of law (e.g., interpretation of a tax provision impacting many taxpayers). Ms. Sharma can file an appeal to the Supreme Court within 60 days of receiving the certificate. If the High Court denies certification, she may seek special leave from the Supreme Court under Article 136. The Supreme Court will focus on the legal question, not re-assess factual findings.