Got an assessment order with big additions? Here's the full route from demand notice to CIT(A) and ITAT, with time limits, fees, stay rules and what the new 2025 Act changes.
Most assessment orders arrive the same way. A portal alert, usually late in the week, and a long PDF. Picture a trading company that returned ₹2.4 crore for AY 2023-24 and now finds the faceless unit has added ₹1.5 crore, mostly "unexplained" sundry creditors. At the end sits a demand of roughly ₹68 lakh, payable in 30 days.
The first call is usually to the accountant: do we have to pay this? Probably not all of it, and probably not yet, if you act inside the right windows.
We're a CA firm in Gurgaon and have fought these orders for clients since 1987. Here's how we walk a business through income tax dispute resolution, from the order up to the Income Tax Appellate Tribunal (ITAT), as the rules stand in October 2026.
The Income-tax Act, 2025 came into force on 1 April 2026 and renumbered almost everything. Clients keep sending us screenshots asking which section to quote.
Section 536 of the new Act keeps the 1961 Act running for every tax year that began before 1 April 2026, for assessment, rectification, revision and appeals alike. So an order for AY 2026-27 or earlier is still fought under the old law. We've put new section numbers in brackets where useful.
Forms trip people up more. Form 35 (first appeal) is now Form 99, Form 36 (ITAT appeal) is Form 115 and Form 36A (cross-objections) is Form 116. Use whatever the portal offers for your assessment year, and if it looks wrong, check before submitting.
With the order comes a demand notice under Section 156 (Section 289 in the new Act), usually payable in 30 days. Miss that and you're "in default": interest at 1% a month and, eventually, recovery, bank attachment included.
So read the order properly first. List each addition, note the date of service (every deadline runs from it) and rework the tax computation. TDS credit and interest errors turn up far more often than you'd think.
Some errors are plain on the face of the record. TDS credit left out, the wrong rate applied, the same amount added twice. Those can go through a rectification application under Section 154 (Section 287 in the new Act). You have four years from the end of the financial year in which the order was passed, and the officer is meant to decide within six months.
A word of caution, though. Applying for rectification does nothing to the appeal deadline. If you're also disputing additions on merit, file the appeal on time anyway and let both run side by side.
Filing an appeal won't, on its own, stop the department from recovering the demand. For that you need a stay under Section 220(6) (Section 411 in the new Act), which lets the officer treat you as not in default while the first appeal is pending.
In practice officers follow a CBDT office memorandum of 31 July 2017: pay 20% of the disputed demand and you normally get a stay. Budget 2026 proposed cutting this to 10% of the core tax demand, but when we last checked CBDT hadn't issued the revised memorandum, so expect to be asked for 20%. Recheck before applying.
The 20% isn't in the Act, and courts keep saying so. In August 2026 the Telangana High Court set aside stay orders that applied it mechanically. If your case is strong or cash is tight, ask for less and give reasons. A refusal can go to the Principal Commissioner.
Read More: Stay of Demand Under Section 220(6): How to Get One
Your first appeal goes either to the Commissioner of Income-tax (Appeals), known as the CIT(A), or to the Joint Commissioner (Appeals) for smaller matters. You don't choose. The portal routes it. Both run faceless, and you can ask for a hearing over video.
You have 30 days from service of the demand notice. Late appeals can be admitted for good reason, but we'd never plan around that. Tax on your returned income must be paid first, or the appeal isn't admitted. The fee is ₹250 if assessed income is up to ₹1 lakh, ₹500 up to ₹2 lakh and ₹1,000 above that (the 2025 Act keeps these slabs).
Evidence the officer never saw is admitted only in limited cases under Rule 46A. That's why what you file during assessment matters so much.
Give each addition its own ground. And the CIT(A) can enhance the assessment after notice, so weak grounds aren't risk free.
Not every case has to go to the CIT(A).
The Dispute Resolution Panel (DRP) under Section 144C (Section 275 in the new Act) is open only to "eligible assessees", which in practice means foreign companies and businesses facing a transfer pricing adjustment. You file objections to the draft order within 30 days, and the final order goes straight to the ITAT. Our blog on transfer pricing disputes over cross-border payments covers that route in detail.
Revision under Section 264 (Section 378 in the new Act) is quieter. You ask the Principal Commissioner to revise the order in your favour within a year, for a ₹500 fee. It's barred once you've appealed, or while the appeal period runs unless you waive it. We use it for obvious errors where an appeal is overkill.
Vivad se Vishwas 2024 closed for declarations on 30 April 2025, so it won't help now. Facing a reopened assessment instead? Start with whether you can stop a Section 148 reassessment.
Lost before the CIT(A)? The next stop is the ITAT. The appeal goes in Form 36 under Section 253 (Section 362 in the new Act), within two months from the end of the month in which the CIT(A) order was communicated to you.
Fees depend on assessed income: ₹500 up to ₹1 lakh, ₹1,500 up to ₹2 lakh, and above that 1% of assessed income, capped at ₹10,000. A stay application costs another ₹500.
Under Section 254(2A), the ITAT can stay a demand for up to 180 days, usually against a deposit of at least 20% or equal security. Extensions come only if the delay isn't yours, and never past 365 days in total, so we ask for an early hearing at the same time.
If the department appeals, file cross-objections in Form 36A within 30 days of notice. There's no fee, and it lets you defend points you lost before the CIT(A).
The ITAT is the last forum on facts. A clean, indexed paper book with short submissions wins more cases than clever argument, in our experience.
Also Read: ITAT Appeal: How Long It Takes and What It Really Costs
Beyond the ITAT sits the High Court under Section 260A (Section 365 in the new Act), with a 120-day limit. It won't go back over the facts. It takes up a case only where there's a "substantial question of law", for example a section read wrongly or a finding with no evidence behind it.
The department has its own limits. Under CBDT Circular 9/2024 it generally won't appeal to the ITAT where the tax effect is ₹60 lakh or less, to the High Court at ₹2 crore or less, or to the Supreme Court at ₹5 crore or less. In plain terms, a CIT(A) win with a ₹40 lakh tax effect will usually be the end of the matter, barring a few exceptions.
Assessment and the first appeal turn on facts, so get every confirmation, ledger and agreement on record early, and say so in your grounds if you got no real hearing. At the ITAT, lead with your strongest point and rulings of your own High Court (Punjab and Haryana, for Gurugram businesses). At the High Court, one tight question of law is enough.
From day one, keep a file with:
One last piece of advice. If an addition is clearly correct, accept it and fight the rest. It costs less, and it makes your other arguments easier to believe.
You get 30 days from service of the demand notice to file the first appeal. For the ITAT, it's two months from the end of the month in which the CIT(A) order reaches you.
No. Only the tax on your returned income has to be paid before the first appeal. For the disputed part, apply for a stay. Officers normally ask for 20%, though you can make a case for less.
Not if the appeal relates to a tax year that began before 1 April 2026. Section 536 keeps the 1961 Act in place for those years, including appeals filed after that date.
DSRV India has represented businesses in income tax disputes since 1987. As an ICAI-registered, peer-reviewed CA firm in Gurgaon, we handle everything from rectification and stay applications to CIT(A) and ITAT appeals. Send us your order and we'll give you a straight answer on where you stand.
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