s.144BA — Reference to the Principal Commissioner and the Approving Panel
The procedure that has to be followed before GAAR can be applied, from the Assessing Officer's reference to the Approving Panel's binding directions, and the appeal route from the resulting assessment.
The appeal route is the part most often stated wrongly, in both directions, and it is set out in the answer. Saying that a GAAR assessment is appealable to the Commissioner (Appeals), or that section 144BA(14) bars an appeal against the assessment itself, are both wrong.
Income-tax Act, 1961
s.144BA
Income-tax Act, 2025
s.274
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 144BA of the Income-tax Act, 1961 is the machinery of Chapter X-A and runs to twenty-one sub-sections with an Explanation. The Assessing Officer cannot apply the Chapter himself: under sub-section (1) he refers the arrangement, at any stage of assessment or reassessment, to the Principal Commissioner or Commissioner. Under sub-section (2) that officer, if of the opinion that the Chapter must be invoked, issues a notice setting out the reasons and basis of the opinion and gives the assessee an opportunity to object and be heard within such period, not exceeding sixty days, as the notice specifies. If the objections are not accepted, sub-section (4) sends the matter to an Approving Panel, which under sub-section (13) has six months from the end of the month in which that reference was received to issue directions. Sub-section (12) adds a separate control: no order of assessment or reassessment determining a Chapter X-A consequence pursuant to a direction under sub-section (3) or sub-section (6) may be passed without the prior approval of the Principal Commissioner or Commissioner, which also makes clear that the Chapter can be invoked in a reassessment. The Panel is constituted under sub-section (15), three members including a Chairperson, and composed under sub-section (16), the Chairperson being or having been a High Court judge, with one member of the Indian Revenue Service not below Principal Chief Commissioner or Chief Commissioner rank and one academic or scholar. Rule 10UB requires a notice to the assessee before the reference, which the section does not. Sub-section (14) makes the Panel's directions binding on the assessee and on the Principal Commissioner or Commissioner and the authorities subordinate to him, and bars an appeal against those directions alone; the assessment order made in conformity with them is appealable, but section 246A excludes it from the Commissioner (Appeals), so the appeal lies directly to the Tribunal under section 253(1)(e), which is keyed to that sub-section (12) approval, and one consequence is that section 220(6), being keyed to an appeal under section 246 or section 246A, does not reach the demand. The corresponding provision in the Income-tax Act, 2025 is section 274, and the direct appeal becomes section 362(1)(e).
What the provision does
Takes the decision to invoke GAAR away from the Assessing Officer and routes it through the Commissioner and a panel chaired by a judge, with a hearing for the assessee, a time limit on the panel and a prior approval before the order. It does not make the panel's directions appealable, does not bar an appeal against the assessment that follows them, and says nothing about how the reference sits with a faceless assessment.
Threshold questions
- Whether the Assessing Officer issued the notice rule 10UB requires before making the reference
- Whether the sub-section (2) notice sets out the reasons and basis of the opinion, and whether the period it allows for objections exceeds the sixty days the sub-section caps it at
- Whether the assessee was heard by the Commissioner under sub-section (2), which requires the notice to give him an opportunity to object and be heard, and again by the Panel under sub-section (7), which bars a direction under sub-section (6) without an opportunity of being heard on a direction prejudicial to him
- Whether the Panel issued its directions within six months from the end of the month in which the sub-section (4) reference was received, after applying the exclusions in the Explanation
- Whether the prior approval of the Principal Commissioner or Commissioner under sub-section (12) was obtained before the order determining the tax consequence was passed
- Where the underlying assessment was being made through the faceless machinery, whether the reference, the objections and the order were dealt with by the authorities section 144BA names
- Whether the limitation for completing the assessment has been computed with the exclusion in clause (xi) of Explanation 1 to section 153, which runs from the Principal Commissioner's receipt of the reference to the Assessing Officer's receipt of the direction or order, and whether the appeal has gone to the Tribunal under section 253(1)(e) rather than to the Commissioner (Appeals), who has no jurisdiction over it
In practice
The recurring disputes.
What follows if the Panel misses the six-month period
Sub-section (13) fixes six months from the end of the month in which the reference was received. The Explanation, which sits after sub-section (21) although it computes the sub-section (13) period, excludes the time taken over inquiries made through a treaty partner, capped at one year, and the period of any court stay, and its proviso extends the remaining period to sixty days where less than that is left. What the statute does not say is what happens if the period expires without directions. The taxpayer's argument is that a time limit on a body whose directions bind everyone must be mandatory, or it is no limit at all, and that the Explanation's own proviso, extending the remaining period to sixty days where less than that is left, shows Parliament treating the period as a real constraint rather than an aspiration. The Revenue's argument is that no consequence is prescribed, which usually signals a directory provision, and that the assessee suffers nothing from delay by a body that exists for his protection. There is no decision on it.
Whether a defective reference can be cured
Rule 10UB requires a notice before the reference, and the reference is the foundation of everything that follows. Where the notice was not issued, or the sub-section (2) notice does not set out the reasons and basis of the opinion as it requires, the taxpayer's argument is that the Panel's jurisdiction never arose and the defect is not curable by what the Commissioner or the Panel later records. The Revenue's answer is that the assessee is heard at two further stages and suffers no prejudice, and that a step supplied by a rule rather than by the section cannot be jurisdictional. Whether a defect in the reference goes to jurisdiction or is cured by the later hearings has not been decided.
How far the Tribunal can go behind binding directions
The Panel's directions bind both the assessee and the Revenue, and no appeal lies against them, yet the assessment made in conformity with them is appealable to the Tribunal. The taxpayer's argument is that a direction merged into an appealable order comes up with it, that the bar is on a separate appeal against the directions as such and not on reviewing them when they are the whole substance of the order, and that any other reading leaves a binding determination of liability immune from appellate scrutiny altogether. The Revenue's argument is that the bar would be meaningless if the directions could be reopened in the appeal against the order that merely implements them, and that the remedy against the directions, if any, is by writ. Nothing decides it, and the answer governs what an appeal against a GAAR assessment is actually worth.
Whether the High Court will intervene before the assessment is made
The reported decisions on the Chapter have come by writ petition against the reference or the directions rather than by appeal, which follows from the structure: the directions bind, and by the time the assessment is made the question has been decided by a body whose decision cannot itself be appealed. The taxpayer's argument is that where the jurisdictional preconditions are not satisfied the notice, the reference or the direction is open to challenge at once, and that an appeal against an assessment yet to be made is no alternative remedy for a jurisdictional defect. The Revenue's argument is the ordinary one that a statutory remedy exists, that the assessee is heard at three stages before any order is passed, and that a writ at the reference stage turns a fact-finding exercise into a court proceeding before the facts are found. Courts have entertained these petitions on the merits, but none has said whether that followed from a principle that an appeal against an assessment not yet made is no alternative remedy for a jurisdictional defect, or from the facts of the particular case, so when a writ lies against a reference as of right remains open.