My client has received a notice under Chapter X-A saying his arrangement may be an impermissible avoidance arrangement. What is the procedure from here, who actually decides, and can I appeal the decision?
GAAR cannot be applied by the Assessing Officer on his own. He must refer the matter to the Principal Commissioner or Commissioner under s.144BA(1) in Form No. 3CEG after first putting a written notice to the assessee under Rule 10UB(1); the Principal Commissioner then issues his own notice under s.144BA(2) giving the assessee up to sixty days to object and a hearing, and either drops the matter in Form No. 3CEH or refers it to the Approving Panel in Form No. 3CEI. The Approving Panel's direction under s.144BA(6) is binding on the assessee and on the Commissioner and his subordinates, and s.144BA(14) bars any appeal under the Act against that direction — the only route against it is a writ.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2018-04-01, reported as Income-tax Act, 1961, section 144BA; Income-tax Rules, 1962, rules 10UB and 10UC. It bears on section 144BA, section 144BA(1), section 144BA(2), section 144BA(4), section 144BA(6), section 144BA(11), section 144BA(12), section 144BA(13), section 144BA(14), section 95, section 96, section Rule 10UB, section Rule 10UC of the Income Tax Act 1961, in Assessment & Scrutiny, Appeals and How Tax Law Is Read matters.
Almost every practical answer to a GAAR notice is procedural, and the timetable is short and asymmetric. The assessee gets 'not exceeding sixty days' to object, and that period is fixed by the officer in the notice, not by the assessee. On the department's side Rule 10UC caps the Commissioner: no s.144BA(3) direction after one month from the end of the month in which the date of compliance with the s.144BA(2) notice falls, and no reference to the Approving Panel after two months from the end of the month in which the assessee's final submission is received. The Panel itself has six months from the end of the month of receipt of the reference under s.144BA(13), with the Explanation excluding treaty-information time (capped at one year) and stay periods, and a sixty-day floor if less than sixty days remain. Three traps. First, the bar on appeal in s.144BA(14) means an adverse Panel direction cannot be carried to the Commissioner (Appeals) or the Tribunal as a direction — the assessee's remedy is a writ against the direction, or an appeal against the assessment order that gives effect to it. Second, s.144BA(11) lets a direction reach other previous years without a fresh reference, so a single Panel direction can govern years that were never referred. Third, s.144BA(12) requires the Principal Commissioner's prior approval before the assessment order itself is passed where Chapter X-A consequences have been determined, and absence of that approval is a live ground. Note also that the Panel is not a departmental body: its Chairperson is or has been a High Court judge (s.144BA(16)), one member is an IRS officer not below Principal Chief Commissioner or Chief Commissioner, and one is an academic or scholar; it decides by majority under s.144BA(9), must hear both the assessee and the Assessing Officer on prejudicial directions under s.144BA(7), and has the powers of the Authority for Advance Rulings under s.245U by virtue of s.144BA(19).
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 144BA sets out the only route by which Chapter X-A can be applied. Sub-section (1): where the Assessing Officer at any stage of assessment or reassessment considers it necessary to declare an arrangement an impermissible avoidance arrangement and to determine the consequences under Chapter X-A, he may make a reference to the Principal Commissioner or Commissioner. Rule 10UB(1) requires him, before making that reference, to issue a written notice to the assessee seeking objections, and Rule 10UB(2) prescribes its five contents; Rule 10UB(3) prescribes Form No. 3CEG for the reference itself. Sub-section (2): the Principal Commissioner, if of opinion that Chapter X-A must be invoked, issues a notice setting out the reasons and basis of that opinion, for objections and a hearing, within a period not exceeding sixty days as specified in the notice. Sub-section (3): if no objection is furnished within that time he issues such directions as he deems fit. Sub-section (4): if the assessee objects and the Principal Commissioner after hearing him is not satisfied, he makes a reference to the Approving Panel, having first recorded his satisfaction in Form No. 3CEI under Rule 10UB(5). Sub-section (5): if satisfied that Chapter X-A is not to be invoked, he communicates that by an order in writing to the Assessing Officer with a copy to the assessee, in Form No. 3CEH under Rule 10UB(4). Sub-section (6): the Approving Panel issues such directions as it deems fit, including specifying the previous year or years to which the declaration applies. Sub-section (7): no such direction without an opportunity of being heard to the assessee and the Assessing Officer on directions prejudicial to the interest of the assessee or of the revenue. Sub-section (8): the Panel may direct further inquiry, call for records, or require documents and evidence. Sub-section (9): majority decides. Sub-section (10): the Assessing Officer completes the proceedings in accordance with the directions. Sub-section (11): a direction covering another previous year binds the Assessing Officer for that year without a fresh reference. Sub-section (12): no assessment or reassessment order determining Chapter X-A consequences without the prior approval of the Principal Commissioner or Commissioner. Sub-section (13): the Panel must issue directions within six months from the end of the month in which the reference under sub-section (4) was received. Sub-section (14): the directions bind the assessee and the Principal Commissioner and his subordinates, and no appeal lies against them. Sub-sections (15) to (21) deal with constitution, composition, term, remuneration, the Panel's section 245U powers, its officials and the Board's rule-making power. The Explanation excludes from the six-month period the time taken for information sought through a section 90 or 90A competent authority (or one year, whichever is less) and any period of court stay, with a proviso extending a remaining period of less than sixty days to sixty days. Rule 10UC fixes the Commissioner's own time limits.
Statutory position — no holding is asserted; this entry reproduces statutory and rule text. The Assessing Officer has no power to apply Chapter X-A himself: the matter must travel from him to the Principal Commissioner or Commissioner and, if the assessee's objections are not accepted, to the Approving Panel, whose direction binds both the assessee and the department and against which no appeal lies under the Act.
The scheme is deliberately three-tiered and there is no judicial gloss on most of it. Section 144BA(1) uses 'may make a reference', but Chapter X-A supplies no other machinery for declaring an arrangement impermissible, and section 144BA(12) makes the Principal Commissioner's prior approval a condition of the assessment order itself, so the reference route is in practice the only route. The Approving Panel is not a departmental filter: its Chairperson is or has been a High Court judge, the third member is an academic or scholar, and by section 144BA(19) it has the powers vested in the Authority for Advance Rulings under section 245U. Section 144BA(14) states the binding effect on the assessee and on the Commissioner and his subordinates in the same breath as the bar on appeal, which is why the direction operates as a determination rather than as a proposal — and why the two-way binding effect is as much a shield for the assessee as a sword for the department where the Panel declines to apply Chapter X-A. Rules 10UB and 10UC carry the detail the section leaves out: the pre-reference notice and its contents, the three forms, and the Commissioner-side limitation periods that the section itself does not prescribe.
and notwithstanding anything contained in any other provision of the Act, no appeal under the Act shall lie against such directions.
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Handle my notice → Ask a CA on WhatsAppGAAR cannot be applied by the Assessing Officer on his own. He must refer the matter to the Principal Commissioner or Commissioner under s.144BA(1) in Form No. 3CEG after first putting a written notice to the assessee under Rule 10UB(1); the Principal Commissioner then issues his own notice under s.144BA(2) giving the assessee up to sixty days to object and a hearing, and either drops the matter in Form No. 3CEH or refers it to the Approving Panel in Form No. 3CEI. The Approving Panel's direction under s.144BA(6) is binding on the assessee and on the Commissioner and his subordinates, and s.144BA(14) bars any appeal under the Act against that direction — the only route against it is a writ. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 144BA, section 144BA(1), section 144BA(2), section 144BA(4), section 144BA(6), section 144BA(11), section 144BA(12), section 144BA(13), section 144BA(14), section 95, section 96, section Rule 10UB, section Rule 10UC of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, section 144BA; Income-tax Rules, 1962, rules 10UB and 10UC. Almost every practical answer to a GAAR notice is procedural, and the timetable is short and asymmetric. The assessee gets 'not exceeding sixty days' to object, and that period is fixed by the officer in the notice, not by the assessee. On the department's side Rule 10UC caps the Commissioner: no s.144BA(3) direction after one month from the end of the month in which the date of compliance with the s.144BA(2) notice falls, and no reference to the Approving Panel after two months from the end of the month in which the assessee's final submission is received. The Panel itself has six months from the end of the month of receipt of the reference under s.144BA(13), with the Explanation excluding treaty-information time (capped at one year) and stay periods, and a sixty-day floor if less than sixty days remain. Three traps. First, the bar on appeal in s.144BA(14) means an adverse Panel direction cannot be carried to the Commissioner (Appeals) or the Tribunal as a direction — the assessee's remedy is a writ against the direction, or an appeal against the assessment order that gives effect to it. Second, s.144BA(11) lets a direction reach other previous years without a fresh reference, so a single Panel direction can govern years that were never referred. Third, s.144BA(12) requires the Principal Commissioner's prior approval before the assessment order itself is passed where Chapter X-A consequences have been determined, and absence of that approval is a live ground. Note also that the Panel is not a departmental body: its Chairperson is or has been a High Court judge (s.144BA(16)), one member is an IRS officer not below Principal Chief Commissioner or Chief Commissioner, and one is an academic or scholar; it decides by majority under s.144BA(9), must hear both the assessee and the Assessing Officer on prejudicial directions under s.144BA(7), and has the powers of the Authority for Advance Rulings under s.245U by virtue of s.144BA(19). If it applies to you, the first step is this: Check first whether a Rule 10UB(1) notice was issued by the Assessing Officer BEFORE the reference to the Commissioner, and whether it contains all five things Rule 10UB(2) requires — the arrangement, the tax benefit, the basis for saying the main purpose was a tax benefit, the basis for saying one of the four limbs of s.96(1) is met, and the list of documents relied on. A notice missing the tainted-element reasoning is the strongest early attack.
Section 144BA sets out the only route by which Chapter X-A can be applied. Sub-section (1): where the Assessing Officer at any stage of assessment or reassessment considers it necessary to declare an arrangement an impermissible avoidance arrangement and to determine the consequences under Chapter X-A, he may make a reference to the Principal Commissioner or Commissioner. Rule 10UB(1) requires him, before making that reference, to issue a written notice to the assessee seeking objections, and Rule 10UB(2) prescribes its five contents; Rule 10UB(3) prescribes Form No. 3CEG for the reference itself. Sub-section (2): the Principal Commissioner, if of opinion that Chapter X-A must be invoked, issues a notice setting out the reasons and basis of that opinion, for objections and a hearing, within a period not exceeding sixty days as specified in the notice. Sub-section (3): if no objection is furnished within that time he issues such directions as he deems fit. Sub-section (4): if the assessee objects and the Principal Commissioner after hearing him is not satisfied, he makes a reference to the Approving Panel, having first recorded his satisfaction in Form No. 3CEI under Rule 10UB(5). Sub-section (5): if satisfied that Chapter X-A is not to be invoked, he communicates that by an order in writing to the Assessing Officer with a copy to the assessee, in Form No. 3CEH under Rule 10UB(4). Sub-section (6): the Approving Panel issues such directions as it deems fit, including specifying the previous year or years to which the declaration applies. Sub-section (7): no such direction without an opportunity of being heard to the assessee and the Assessing Officer on directions prejudicial to the interest of the assessee or of the revenue. Sub-section (8): the Panel may direct further inquiry, call for records, or require documents and evidence. Sub-section (9): majority decides. Sub-section (10): the Assessing Officer completes the proceedings in accordance with the directions. Sub-section (11): a direction covering another previous year binds the Assessing Officer for that year without a fresh reference. Sub-section (12): no assessment or reassessment order determining Chapter X-A consequences without the prior approval of the Principal Commissioner or Commissioner. Sub-section (13): the Panel must issue directions within six months from the end of the month in which the reference under sub-section (4) was received. Sub-section (14): the directions bind the assessee and the Principal Commissioner and his subordinates, and no appeal lies against them. Sub-sections (15) to (21) deal with constitution, composition, term, remuneration, the Panel's section 245U powers, its officials and the Board's rule-making power. The Explanation excludes from the six-month period the time taken for information sought through a section 90 or 90A competent authority (or one year, whichever is less) and any period of court stay, with a proviso extending a remaining period of less than sixty days to sixty days. Rule 10UC fixes the Commissioner's own time limits. The matter was decided on 2018-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Statutory position — no holding is asserted; this entry reproduces statutory and rule text. The Assessing Officer has no power to apply Chapter X-A himself: the matter must travel from him to the Principal Commissioner or Commissioner and, if the assessee's objections are not accepted, to the Approving Panel, whose direction binds both the assessee and the department and against which no appeal lies under the Act.
The scheme is deliberately three-tiered and there is no judicial gloss on most of it. Section 144BA(1) uses 'may make a reference', but Chapter X-A supplies no other machinery for declaring an arrangement impermissible, and section 144BA(12) makes the Principal Commissioner's prior approval a condition of the assessment order itself, so the reference route is in practice the only route. The Approving Panel is not a departmental filter: its Chairperson is or has been a High Court judge, the third member is an academic or scholar, and by section 144BA(19) it has the powers vested in the Authority for Advance Rulings under section 245U. Section 144BA(14) states the binding effect on the assessee and on the Commissioner and his subordinates in the same breath as the bar on appeal, which is why the direction operates as a determination rather than as a proposal — and why the two-way binding effect is as much a shield for the assessee as a sword for the department where the Panel declines to apply Chapter X-A. Rules 10UB and 10UC carry the detail the section leaves out: the pre-reference notice and its contents, the three forms, and the Commissioner-side limitation periods that the section itself does not prescribe. In the words reproduced by the source cited on this page: "and notwithstanding anything contained in any other provision of the Act, no appeal under the Act shall lie against such directions."
It was decided by the CBDT Circulars & Instructions on 2018-04-01 and is reported as Income-tax Act, 1961, section 144BA; Income-tax Rules, 1962, rules 10UB and 10UC. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 144BA, section 144BA(1), section 144BA(2), section 144BA(4), section 144BA(6), section 144BA(11), section 144BA(12), section 144BA(13), section 144BA(14), section 95, section 96, section Rule 10UB, section Rule 10UC, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Statutory position — no holding is asserted; this entry reproduces statutory and rule text. The Assessing Officer has no power to apply Chapter X-A himself: the matter must travel from him to the Principal Commissioner or Commissioner and, if the assessee's objections are not accepted, to the Approving Panel, whose direction binds both the assessee and the department and against which no appeal lies under the Act. It arises in Assessment & Scrutiny, Appeals and How Tax Law Is Read matters, on section 144BA, section 144BA(1), section 144BA(2), section 144BA(4), section 144BA(6), section 144BA(11), section 144BA(12), section 144BA(13), section 144BA(14), section 95, section 96, section Rule 10UB, section Rule 10UC of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Diarise the period specified in the s.144BA(2) notice; it cannot exceed sixty days but the officer may specify less, and objections filed late lose the assessee the hearing, after which s.144BA(3) lets the Commissioner issue directions without one. Run the Rule 10UC clock against the department: if the Commissioner issued a s.144BA(3) direction more than one month after the end of the month of the compliance date, or referred the matter to the Approving Panel more than two months after the end of the month in which the final submission was received, take the point at the earliest opportunity. Compute the Approving Panel's six-month limit under s.144BA(13) from the end of the month in which the reference under s.144BA(4) was received, then apply the Explanation exclusions — treaty-information time capped at one year, and any period of court stay — and the proviso extending the balance to sixty days. Ask for the s.144BA(7) hearing before the Panel expressly and in writing; it is available to the assessee and to the Assessing Officer on any direction prejudicial to the interest of either side. Before filing any appeal, read s.144BA(14): no appeal under the Act lies against the Panel's direction. Frame the challenge either as a writ against the direction, or as an appeal against the assessment order made in conformity with it, and do not let limitation run on the assessment appeal while a writ is being considered. In the assessment order itself, verify the s.144BA(12) prior approval of the Principal Commissioner or Commissioner where Chapter X-A consequences have been determined, and call for it if it is not on record. If the direction purports to cover previous years other than the year referred, check s.144BA(11) — the Assessing Officer may act on it for those years without a fresh reference, so a concession or an unchallenged direction in one year has a reach beyond that year.
Still good law. This is the statutory and rule text, not a decision about it. The section was read in full on two departmental pages carrying different current-vintage Year stamps (2026 and 2025) with identical wording for sub-sections (12), (13) and (14). Departmental rule pages carry no 'Year:' stamp, and the rule 10UB and rule 10UC pages print no amendment footnote either, so neither rule could be dated and both are stated as the department currently prints them; the rule 10UB page showed an upload date of 13/12/2025. Rule pages are not uniformly silent, however — the /w/rule-10u page does print amendment footnotes (see the separate Chapter X-A commencement entry) — so a rule page must be asked for its footnotes before it is treated as undatable. Later treatment was not checked against any decision construing section 144BA, and no decision striking down or reading down any part of the machinery was searched for. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Two corrections to the way this procedure is commonly described. (1) The bar on appeal is in sub-section (14), NOT sub-section (13). Sub-section (13) is the Approving Panel's six-month time limit; sub-section (14) is the binding-effect-plus-no-appeal provision. Both were read twice, on the departmental section page stamped Year 2026 (/w/section-144ba-16) and independently on the page stamped Year 2025 (/w/section-144ba-13), and the two transcriptions agree word for word. (2) The section runs to sub-section (21) plus an Explanation, not to sub-section (16) — sub-sections (17) to (21) deal with the Panel's term, remuneration, its section 245U powers, its officials and the Board's rule-making power, and the Explanation supplies the exclusions from the six-month period. The base page /w/section-144ba carries a 'Year: 2012' stamp and prints the pre-2013 heading 'Reference to Commissioner in certain cases'; it is an archived version and must not be used. /w/section-144ba-1 (2013), -2 (2014), -3 (2015), -10 (2023), -12 (2024 No. 2), -14 (2018) and -15 (2019 No. 1) are likewise archived. The Year 2026 page prints one amendment footnote, '67. Sub. by Act No. 7 of 2025, w.e.f. 1-4-2025'. Asked to reprint the Explanation with its footnote markers left in place, the page printed the marker 67 at the head of clause (ii) with the substituted clause in square brackets, so the footnote is established as attaching to clause (ii) of the Explanation — the court-stay exclusion — which was substituted by the Finance Act 2025 with effect from 1 April 2025. Clause (i), the competent-authority information exclusion, carries no marker. The Telangana High Court narrative used as a corroborating source for the rule 10UB(1) practice is the order Indian Kanoon indexes as Oxford Ayyappa Consulting Services v PCIT (doc 82437550, 7 June 2024). It is the same common order, in the same W.P.Nos.46510 and 46467 of 2022 before the same Bench of P. Sam Koshy and Laxmi Narayana Alishetty JJ, disposed of at paragraph 43, as Ayodhya Rami Reddy Alla v PCIT which the library already carries; Indian Kanoon indexes the one judgment twice under different petitioner names. It is used here only as corroborating narrative, not as a separate authority. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Statutory position — no holding is asserted; this entry reproduces statutory and rule text. The Assessing Officer has no power to apply Chapter X-A himself: the matter must travel from him to the Principal Commissioner or Commissioner and, if the assessee's objections are not accepted, to the Approving Panel, whose direction binds both the assessee and the department and against which no appeal lies under the Act.
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