Section 365 — HC Appeal | ITA 2025

Section 365 — - APPEAL TO HIGH COURT

Section 365 is the substantive equivalent of 1961 s. 260A -- the framework for SECOND APPELLATE FORUM at HIGH COURT. The provision restricts HC appeals to cases involving SUBSTANTIAL QUESTION OF LAW arising from ITAT order. HC does NOT re-examine facts; ITAT's findings on facts are FINAL. Practitioner: HC appeal requires careful identification of legal question; not all unfavourable ITAT orders give rise to HC appeal. Filing window: 120 DAYS from ITAT order receipt; condonation possible. Comprehensive substantial-question-of-law identification crucial.

Statutory text — Income-tax Act, 2025

Marginal note -- Appeal to High Court

(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law.

(2) The Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be—

(a) filed within one hundred and twenty days from the date on which the order appealed against is received by the assessee or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner;

(b) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.

(3) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in sub-section (2)(a), if it is satisfied that there was a sufficient cause for not filing the same within the said period.

(4) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.

(5) The appeal shall be heard only on the question so formulated, and the respon- dents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question.

(6) The provisions of sub-section (5) shall not take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.

(7) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.

(8) The High Court may determine any issue which the Appellate Tribunal,—

(a) has not determined; or

(b) has wrongly determined, by reason of a decision on such question of law as is referred to in sub-section (1).

(9) Save as otherwise provided in this Act, the provisions of the Code of Civil Pro- cedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.

(10) Where the High Court delivers a judgment in an appeal filed before it under this section, effect shall be given to such order by the Assessing Officer, on the basis of a certified copy of the judgment. Case before High Court to be heard by not less than two Judges.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 365	INCOME-TAX ACT, 1961 -- s. 260A
Sub-s. (1) -- HC appeal -- substantial question of law	1961 s. 260A(1)
Sub-s. (2) -- 120-day limitation	1961 s. 260A(2)
Sub-s. (3) -- Memorandum of appeal	1961 s. 260A(3)
Sub-s. (4) -- HC formulation of question	1961 s. 260A(4)
Sub-s. (5) -- HC hearing / decision	1961 s. 260A(5)

STATUTORY ARCHITECTURE

ELIGIBILITY: (I) HC APPEAL ONLY ON SUBSTANTIAL QUESTION OF LAW arising from ITAT order; (II) ITAT FACTUAL FINDINGS NOT RE-EXAMINABLE -- ITAT is final fact-finder; (III) Question must be 'substantial' -- not trivial / settled; not mere question of fact dressed as law. FILING: (a) 120 DAYS from ITAT order receipt; (b) Memorandum of appeal under HC Rules; (c) PRECISELY-FORMULATED substantial question(s) of law; (d) Court fees per State HC Rules. PROCEDURE: (I) HC examines whether substantial question of law exists; (II) If yes, formulates the question; (III) Hears parties on the question; (IV) Passes order. POWERS: HC can: (a) Confirm / reverse / modify ITAT order; (b) Remand to ITAT for fresh decision; (c) Direct fresh assessment in specific cases.

WHAT CONSTITUTES 'SUBSTANTIAL QUESTION OF LAW'

Following established principles (Sir Chunilal V. Mehta v. Century Spinning Mills SC 1962; Khazan Singh v. UoI SC; numerous subsequent decisions): (I) NEW point of law not settled by HC / SC; (II) Conflicting decisions of HCs requiring resolution; (III) Question of GENERAL PUBLIC IMPORTANCE; (IV) Substantial question of statutory interpretation; (V) Procedural irregularity in ITAT order if substantial. NOT SUBSTANTIAL: (a) Pure question of fact; (b) Application of well-settled law to particular facts; (c) Weight of evidence (within ITAT's domain); (d) Hyper-technical issues.

PRACTITIONER NOTES

(i) QUESTION FORMULATION -- precise; tied to ITAT findings; tested against substantial-question criteria. (ii) 120-DAY DIARY -- strict; condonation requires reasonable cause + early filing of application. (iii) CASE LAW RESEARCH -- jurisdictional HC + SC decisions on similar questions; emphasise precedent. (iv) ALTERNATIVE FORUMS -- review s. 380 (DRC FA 2021) for some cases; SC Article 136 SLP if HC dismisses. (v) STAY APPLICATION -- separate stay-application before HC; ITAT-stay typically not extended automatically by HC.

CROSS-REFERENCES

Section 362-364 -- ITAT framework.
Section 366 -- HC bench composition.
Section 367 -- SC appeal.
Section 374 -- Interpretation of 'High Court'.
Constitutional Article 226 -- writ jurisdiction (alternative).
Constitutional Article 136 -- SLP to SC.

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