The twin provisions of Sections 158A and 158AB of the Income-tax Act mark a significant shift towards a more efficient and less litigious tax system. While Section 158A empowers assessees to align their cases with similar questions of law already pending before the High Court or Supreme Court, Section 158AB extends this mechanism to the Revenue by allowing it to defer appeals where identical questions are already sub judice.

In this article, Advocates S. Sridhar and A.G. Sudharshanan discuss the statutory framework, procedural requirements, and recent judicial interpretations of the aforesaid provisions. Stating that these provisions serve a crucial role in reducing repetitive litigation, the Authors conclude by remarking that “The judiciary has consistently upheld the spirit of these sections, emphasizing the need for reasoned orders and the understanding that this procedural streamlining does not provide immunity from tax payment…”

“A New Chapter in Tax Litigation: The Power of Deferral u/s 158A & 158AB”

Section 158A: Assessee's Initiative

Section 158A outlines the procedure for an assessee who claims that a question of law in their current case ("the relevant case") is the same as one pending before a High Court or the Supreme Court in another case ("the other case"). To use this provision, the assessee must provide a declaration to the Assessing Officer or appellate authority. In this declaration, the assessee agrees that if the department applies the final decision from the "other case" to their "relevant case," they will not raise that question of law in any future appeals to any appellate authority, the High Court, or the Supreme Court.

Upon receiving this declaration, the Assessing Officer or appellate authority may either admit the claim if they are satisfied the questions of law are identical or reject it if they are not. If the claim is admitted, the case can be disposed of without waiting for the final decision in the other case. Once the decision in the "other case" becomes final, it will be applied to the "relevant case," and the order will be amended accordingly if necessary. An order made under this section to admit or reject the claim is final and cannot be challenged in any appeal, reference, or revision.

As per the provision of Rule 15A of the Income-tax Rules specifies that the declaration for Section 158A must be made in Form No. 8. It further details that the declaration needs to be verified and signed by the appropriate person, and should be furnished in duplicate or triplicate depending on the authority it is being submitted to the Deputy Commissioner/Commissioner of Appeals or the Appellate Tribunal.

The tribunal’s duty to ensure consistent and predictable exposition of law must be balanced with the reality that the Tribunal cannot be rendered paralysed by mere admissions at the High Court. As the Special Bench held in Deputy CIT v. Summit Securities Ltd (2011) 140 TTJ (Mumbai)(SB) 393 (2011) 132 ITDT 1 (2011) 59 DTR_TRIB 313 (2011) 11 ITR_TRIB 88, the mere fact that a High Court has admitted a similar question does not automatically bar the Tribunal from proceeding to decide matters or from constituting a Special Bench where a later Bench entertains a doubt about an earlier coordinate Bench view. The correct institutional response, if a Bench doubts the correctness of an earlier view, is to refer the point to the President for constitution of a Special Bench under s.255(3) rather than to refuse to decide or to create inconsistent piecemeal rulings. This approach prevents paralysis of Tribunal functioning and secures authoritative uniformity by appropriate institutional means. 

In particular, Summit Securities reasons that:

(a) Admission by a High Court is only a procedural stage and is not a conclusive determination; waiting for finality on every admission would stall Tribunal work indefinitely. 

(b) s.255(3) furnishes the Tribunal with its internal corrective mechanism — a reference to the President for constituting a Special Bench — where there is a bona fide doubt about an earlier coordinate Bench view. 

(c) s.158A supplies a statutory route to achieve inter-year uniformity where an “other case” is pending at HC/SC, but it does not convert mere admission into an automatic injunction on Tribunal proceedings.

In the case of Titanor Components Ltd. v. Commissioner of Income-tax, Panaji, Goa [TS-5387-HC-2009(Bombay)-O] is highly significant as it provides judicial clarity on the procedural requirements and true intent behind Section 158A of the Income-tax Act. The ruling established that for a declaration made under Section 158A to be validly handled, the Assessing Officer or appellate authority must pass a separate, explicit, and reasoned order either admitting or rejecting the assessee's claim. This is a crucial procedural step, as the court found that simply passing a final order on the merits of the appeal without addressing the Section 158A declaration frustrates the very purpose of the provision. The Bombay High Court's decision also provides a critical interpretation of the term "agrees" in Section 158A(1). It ruled that this word does not give the tax authorities an "unbridled authority not to agree" with the assessee's declaration. Instead, the authorities are required to judicially evaluate the reasons for not agreeing and pass a reasoned order. The court emphasized that Section 158A was added to the statute to "put an end to unnecessary litigation and to reduce number of cases" and that authorities must act in accordance with this legislative intent.

In the case of Karnataka Chamber of Commerce & Industry v. Commissioner of Income tax [2013] (Karnataka) the court held that while a declaration under this section can be filed to await a final decision on an identical question of law, it does not grant the assessee any immunity from paying the tax that is already due as per the assessment order. This ruling clarifies that Section 158A is a procedural tool for streamlining litigation, not a mechanism to stay the collection of tax. The court explicitly rejected the assessee's contention that the Assessing Officer should refrain from demanding tax simply because an application under Section 158A had been accepted.

Section 158AB: Income Tax Department's Initiative

Section 158AB provides a procedure for the Income Tax Department to avoid filing appeals in cases where an identical question of law is pending before a High Court or the Supreme Court. This process is initiated by a collegium, which is comprised of two or more Chief Commissioners or Principal Commissioners. If the collegium believes that a question of law in a case is identical to one in another case pending before a higher court, and the decision in the other case was in favor of the assessee, they may decide and inform the Principal Commissioner or Commissioner not to file an appeal.

Upon receiving this direction, the Principal Commissioner or Commissioner will instruct the Assessing Officer to make an application to the Appellate Tribunal or High Court within 120 days from the date the order was received. This application states that an appeal will be filed when the decision on the question of law in the other case becomes final. The department can only proceed with this application if the assessee provides written acceptance that the question of law in both cases is identical. If the assessee does not provide this acceptance, the department will proceed with the appeal as per the usual process. If the final decision from the other case is not in conformity with the order in the relevant case, the Principal Commissioner or Commissioner may direct the Assessing Officer to file an appeal. This appeal must be filed within 60 days to the Appellate Tribunal or 120 days to the High Court from the date the final order is communicated.

The composition of the Collegium is as follows:

The seniormost member of the collegium acts as its Chairperson. The collegium has the option to co-opt one additional officer of the rank of PCIT or CIT.

The Circular No. 8 of 2023, dt. 31st May,2023 clarifies the application of monetary limits for appeals deferred under Section 158AB. The collegium's decision to defer an appeal must consider the existing monetary limits set by the CBDT, along with specified exceptions. For cases with a single contested ground where the tax effect is above the monetary limit, the appeal may be deferred and filed later when the final decision on the legal question is received. In cases with multiple contested grounds, the appeal may be filed on the grounds not covered by Section 158AB while the grounds that are applicable may be deferred. The circular also specifies that once a final judicial decision is reached in the "other case" in favor of the Revenue, the appeal in the "relevant case" must be contested on its merits, regardless of the monetary limits at that time. The same rule applies if the decision is not in the Revenue's favor and the department chooses to contest it to achieve judicial finality.

As per the provisions of the Rule 16 of the income tax rules, 1962 it provides that the Assessing officer shall make an application to the Appellate Tribunal or High court in the Form.8A.

In the cases of Assistant Commissioner of Income Tax v. Laxmi Civil Engineering Services (P) Ltd. (2024) (Bom), Assistant Commissioner of Income Tax v. Namrata Developers Flora City (2024) (Bom), Assistant Commissioner of Income Tax v. TDK Electronics AG (2024) (Bom), Joint Commissioner of Income Tax v. Ansys Inc. (2024) (Bom) and Asst. Commissioner of Income-tax vs. Sandvik IT Services Ab [2024] (Bombay), the procedural application of Section 158AB is consistently affirmed. The core finding across these rulings is that the assessee's written consent is a mandatory and crucial prerequisite for the Income Tax Department to successfully defer an appeal. The courts accepted the Revenue's applications to postpone appeals because a similar question of law was already pending before a higher court, and in each instance, the assessee had provided a letter of acceptance. These cases collectively validate Section 158AB as a functional and effective tool for reducing redundant litigation, allowing both the department and the taxpayer to agree to await a definitive judgment on an identical legal issue.

The benefit can be reaped only of the assessee's jurisdictional High Court. If the similar question of law is pending with High Courts of other state and not with the assessee's jurisdictional High Court, than the benefit of this section will not be available. The revenue has to file the appeal despite of the case pending with other non-jurisdictional High Court.

The benefit is only restricted to identical question of law. However in case where the assessee has identical question of facts which are in litigation for different years the same will still have to be filed before ITAT.

CONCLUSION

The judicial interpretations of Sections 158A and 158AB of the Income-tax Act mark a significant shift towards a more efficient and less litigious tax system. As evidenced by a series of case laws, including those involving Titanor Components Ltd., Laxmi Civil Engineering Services, and Namrata Developers Flora City, these provisions serve a crucial role in reducing repetitive litigation. Section 158A empowers the assessee to proactively seek a deferral of their appeal, while Section 158AB provides the Income Tax Department with a similar tool, with both requiring the assessee's consent as a mandatory prerequisite. The judiciary has consistently upheld the spirit of these sections, emphasizing the need for reasoned orders and the understanding that this procedural streamlining does not provide immunity from tax payment, as clarified in the Karnataka Chamber of Commerce & Industry case. By allowing both parties to agree to await a definitive judgment on an identical question of law, these sections, reinforced by the formal procedures outlined in the associated rules and circulars, have become a practical and effective mechanism for conserving judicial and administrative resources while ensuring the finality of tax disputes.