Clause 364 Procedure of Appellate Tribunal.

Income Tax Bill, 2025

Introduction

The Income Tax Appellate Tribunal (ITAT) serves as the apex fact-finding body within the Indian income-tax appellate hierarchy, playing a pivotal role in the resolution of tax disputes. Both Clause 364 of the Income Tax Bill, 2025 and Section 255 of the Income-tax Act, 1961, define the procedural framework, powers, and functioning of the ITAT. With the introduction of the Income Tax Bill, 2025, it is imperative to analyze whether Clause 364 brings about substantive changes, preserves the status quo, or introduces nuances that could impact the administration of tax justice.

This commentary examines Clause 364 in a clause-by-clause manner, elucidating its legislative intent, operational mechanics, and practical implications. It then undertakes a detailed comparative analysis with the corresponding Section 255 of the Income-tax Act, 1961, highlighting similarities, differences, and the broader implications for stakeholders.

Objective and Purpose

Both Clause 364 and Section 255 are designed to ensure that the ITAT operates with institutional integrity, transparency, and efficiency. The provisions aim to:

• Establish the composition and functioning of the ITAT Benches;
• Outline the powers and procedures for adjudication;
• Facilitate specialization and consistency in appellate tax adjudication;
• Balance judicial and accounting expertise in the resolution of complex tax matters;
• Empower the Tribunal with quasi-judicial authority and procedural autonomy.

The historical context reflects Parliament's intention to create an independent, specialized forum for the expeditious and fair disposal of tax appeals, insulated from executive interference and equipped with procedural flexibility.

Detailed Analysis of Clause 364 of the Income Tax Bill, 2025

Sub-clause (1): Constitution of Benches

Clause 364(1) vests the President of the Appellate Tribunal with the authority to constitute Benches from among its members. This centralizes the administrative control over Bench formation, ensuring that the distribution of work is both efficient and responsive to caseload dynamics. The provision upholds the principle of internal autonomy, allowing the Tribunal to adapt to the evolving nature and volume of tax litigation.

Sub-clause (2): Composition of Benches

The default composition of a Bench, as stipulated in Clause 364(2), is one Judicial Member and one Accountant Member. This dual-member structure is a hallmark of the ITAT, blending legal and accounting expertise to address the multifaceted nature of tax disputes. The provision recognizes the need for both interpretative and technical skills in appellate adjudication.

Sub-clause (3): Single Member Benches

Clause 364(3) permits the President or a member authorized by the Central Government to sit singly and dispose of cases where the assessee's total income, as computed by the Assessing Officer, does not exceed fifty lakh rupees. This threshold-based mechanism is designed to expedite the disposal of less complex or lower-stakes matters, alleviating the burden on dual-member Benches and enhancing overall Tribunal efficiency.

The authorization by the Central Government introduces an element of executive oversight, albeit limited to the designation of members eligible to sit singly. The provision also ensures that the single-member dispensation is not arbitrary but is circumscribed by the monetary limit, thereby balancing efficiency with fairness.

Sub-clause (4): Special Benches

The President is empowered under Clause 364(4) to constitute Special Benches comprising three or more members, provided at least one Judicial Member and one Accountant Member are included. Special Benches are typically convened for cases involving substantial questions of law, conflicting precedents, or issues of wide significance. This provision institutionalizes the mechanism for resolving complex or contentious matters, ensuring that such cases benefit from broader deliberation and collective wisdom.

Sub-clause (5): Decision-Making in Case of Difference of Opinion

Clause 364(5) addresses the scenario where Bench members differ on any point. The majority opinion prevails; if equally divided, the points of difference are referred to one or more other members, and the majority opinion among all who have heard the case decides the issue. This ensures that deadlocks are resolved through an expanded panel, upholding the principles of fairness and reasoned adjudication.

Sub-clause (6): Power to Regulate Procedure

The Tribunal is granted the authority to regulate its own procedure and that of its Benches, including the determination of the venues for sittings. This procedural autonomy is critical for the Tribunal's effective functioning, allowing it to devise rules and practices suited to its unique needs and the demands of tax litigation.

Sub-clause (7): Powers and Legal Status

Clause 364(7) confers upon the Tribunal:

• All powers vested in income-tax authorities u/s 246;
• The status of a judicial proceeding u/ss 229 and 267, and for the purposes of section 233 of the Bharatiya Nyaya Sanhita, 2023;
• The status of a Civil Court for the purposes of section 215 and Chapter XXXVIII of the Bharatiya Nagarik Suraksha Sanhita, 2023.

These provisions collectively reinforce the Tribunal's quasi-judicial character, confer procedural safeguards, and ensure that its proceedings and orders are recognized as judicial acts for purposes such as perjury, contempt, and enforcement.

Comparative Analysis with Section 255 of the Income-tax Act, 1961

Structural and Substantive Parity

At a structural level, Clause 364 and Section 255 are nearly identical in their core framework:

• Both empower the President to constitute Benches and Special Benches;
• Both prescribe a dual-member Bench with one Judicial and one Accountant Member;
• Both permit single-member disposal of cases below a specified monetary threshold (currently fifty lakh rupees);
• Both provide a mechanism for resolving differences of opinion through majority decision-making;
• Both grant the Tribunal procedural autonomy and confer quasi-judicial powers and status.

The continuity reflects a deliberate legislative choice to retain a tried-and-tested institutional model that has served Indian tax jurisprudence well for decades.

Key Points of Divergence and Modernization

• Reference to Criminal Statutes: The most significant divergence arises in sub-clause (7). Clause 364 updates cross-references from the Indian Penal Code, 1860 and Code of Criminal Procedure, 1898 (as found in Section 255) to the Bharatiya Nyaya Sanhita, 2023 and Bharatiya Nagarik Suraksha Sanhita, 2023. This reflects the broader legislative overhaul of India's criminal laws, ensuring that the ITAT's judicial status and procedural safeguards remain synchronized with the latest statutory framework.
• Omission of E-Governance Provisions: Section 255(7)-(9), inserted in recent amendments, empowered the Central Government to notify schemes for the disposal of appeals with objectives such as eliminating physical interface, optimizing resources, and introducing dynamic jurisdiction. These provisions facilitated the transition to e-governance and virtual hearings, especially in the wake of the COVID-19 pandemic, and allowed for exceptions or modifications to the Act to operationalize such schemes. Clause 364 of the 2025 Bill does not contain any analogous provision. The omission could imply a return to the Tribunal's inherent procedural autonomy or a legislative choice to address e-governance through separate rules or notifications.
• Reference to Income-tax Authority Powers: Section 255(6) refers to powers vested in income-tax authorities u/s 131 (powers regarding discovery, production of evidence, etc.), while Clause 364(7)(a) refers to section 246 (which, in the 2025 Bill, may correspond to a similar or updated provision). The substance of the power conferred may be materially similar, but cross-references must be mapped precisely once the new Bill is enacted.
• Streamlining and Simplification: Clause 364 appears more streamlined, focusing on core procedural aspects and omitting the detailed machinery for government-notified schemes. This may reflect a legislative intent to avoid excessive flexibility that could undermine the Tribunal's independence or to consolidate procedural innovations in subordinate legislation.

Ambiguities and Potential Issues in Interpretation

• Scope of Single-Member Benches: Both provisions limit single-member Benches to cases below fifty lakh rupees, but the criteria for government authorization and the process for allocation could be further clarified to avoid arbitrary or inconsistent application.
• Procedural Autonomy vs. E-Governance: The absence of explicit e-governance provisions in Clause 364 raises questions about how the Tribunal will adapt to technological changes and whether subordinate legislation will fill this gap.
• Transition to New Criminal Statutes: The shift from the IPC and CrPC to the new penal codes may require transitional provisions to address cases initiated under the old statutes and ensure seamless continuity.

Comparative Table 

5. Practical Implications

5.1. For Taxpayers and Practitioners

The retention of the dual-member and special bench system ensures continuity in the appellate process, maintaining the established safeguards of expertise and fairness. The single-member bench provision for lower-value cases will continue to expedite dispute resolution for small taxpayers. The Tribunal's autonomy to regulate its own procedure may result in more flexible and responsive processes, especially as technological adoption increases.

5.2. For the Tax Administration

The procedural stability and clarity provided by Clause 364 will aid the tax administration in defending appeals and managing litigation risk. The updated powers and status of the Tribunal ensure that its orders and proceedings continue to be respected as judicial acts, with appropriate sanctions for perjury and contempt.

5.3. For the Tribunal

The Tribunal's ability to regulate its own procedure is reinforced, subject only to the overarching Act. The modernized references to criminal and procedural codes ensure that the Tribunal's judicial character is preserved in the new legal environment.

5.4. Transitional Considerations

Transitioning to the new codes may require training, capacity-building, and the issuance of new Tribunal rules or practice directions to clarify procedural matters. The absence of explicit government notification powers for procedural schemes may reduce administrative flexibility but strengthens the Tribunal's self-governance.

Conclusion

Clause 364 of the Income Tax Bill, 2025, largely preserves the tried-and-tested procedural architecture of 6Section 255 of the Income-tax Act, 1961, while updating statutory cross-references to reflect recent criminal law reforms. The omission of explicit e-governance provisions may reflect a policy choice to address technological and procedural innovations through subordinate legislation, preserving the Tribunal's autonomy and adaptability.

The continued emphasis on balanced Bench composition, procedural autonomy, and robust mechanisms for resolving differences ensures that the ITAT remains a credible, efficient, and specialized forum for tax dispute resolution. The modernization of statutory cross-references further cements the Tribunal's role within the broader landscape of Indian adjudicatory institutions.

Going forward, clarity on the regulation of virtual proceedings, transitional arrangements for ongoing cases under the old penal codes, and the scope of government authorization for single-member Benches may benefit from further legislative or judicial guidance. However, the core procedural safeguards and institutional strengths of the ITAT remain firmly anchored in both the existing and proposed legal frameworks.

Full Text:

Clause 364 Procedure of Appellate Tribunal.