CIT(A) appeal under Section 246A: filing fee, 30-day clock, condonation, and 20% stay rule

The Scenario

Rajesh Iyer, a senior software engineer in Pune, opened the e-filing portal on 12 May 2026 and found an assessment order dated 8 May 2026 under Section 143(3) for AY 2024-25. The Assessing Officer disallowed a Rs 4.8 lakh long-term capital loss carry-forward, treated Rs 2.2 lakh of relocation reimbursement as a taxable perquisite, and raised a net demand of Rs 3,86,500 including Section 234B interest. Rajesh believes the LTCL claim is supported by his broker contract notes and the perquisite is exempt as actual transfer expenditure. He now has 30 days from service of the demand notice under Section 249(2) of the Income-tax Act 1961 to file Form 35 before the Commissioner of Income-tax (Appeals). Miss the window and the demand becomes recoverable on day 31 under Section 220(1), with 1% per month interest under Section 220(2) accruing on the unpaid balance.

The same fact pattern repeats across India every working day. A salary earner gets a 143(1) intimation with a refund haircut; a freelancer receives a 147 reassessment notice for an old year; a small employer faces a 201(1A) demand for short deduction. Section 246A is the gate to challenge each of these. This guide walks Rajesh through the exact procedure: the fee tier under Section 249(1), Form 35 mechanics, the 20% pre-deposit demanded by the CBDT Office Memorandum dated 31 July 2017, and what the Faceless Appeal Scheme 2021 means once the National Faceless Appeal Centre (NFAC) takes over.

Statutory Answer

Section 246A of the Income-tax Act 1961 enumerates the orders against which any aggrieved assessee may prefer an appeal to the Commissioner (Appeals). The list is wide; the order type dictates which Form 35 sub-field Rajesh will tick.

Section 249(1) fixes the filing fee on a sliding tier that has not been revised in decades.

Section 249(2) sets the limitation at 30 days from the date of service of the notice of demand under Section 156, or from the date the order is communicated where no demand notice arises (for example, a Section 154 refusal to rectify). Section 249(3) lets the Commissioner condone delay where the appellant shows "sufficient cause". The Supreme Court in Collector, Land Acquisition v. Mst Katiji (1987) 167 ITR 471 (SC) fixed that threshold low: the appellate authority must take a liberal, justice-oriented view rather than a technical one.

The vehicle is Form 35, filed entirely online through the e-filing portal at incometax.gov.in. The Faceless Appeal Scheme 2021, originally notified vide CBDT Notification 76/2020 dated 25 September 2020 and reconstituted in 2021, routes the appeal to the NFAC. Physical hearings are confined to cases the NFAC specifically permits under the video-conferencing personal hearing protocol.

Section 251 lists the powers of the CIT(A): the appellate authority may confirm, reduce, enhance, or annul the assessment. Critically, after the Finance Act 2001 amendment that omitted the words "or remand", the Commissioner (Appeals) cannot send the matter back to the Assessing Officer. The Commissioner must decide the issue herself on the record before her.

The recovery rope is set by the CBDT Office Memorandum dated 31 July 2017 (a modification of Instruction 1914). On a properly worded stay petition, the Assessing Officer "shall" grant stay of the disputed demand if the assessee pays 20% of the demand. The OM expressly carves out exceptions for high-pitched assessments, broadly defined as cases where the assessed income is materially higher than the returned income, or where the addition is on a debatable issue already covered in the assessee's favour by a jurisdictional Tribunal or High Court order.

Worked Resolution

Take Rajesh's Rs 3,86,500 demand. His assessed income for AY 2024-25 was Rs 26,40,000 after the disputed additions. The procedure runs in six steps.

Step 1 — The fee. Rajesh's assessed income exceeds Rs 2 lakh. Section 249(1) fixes the fee at Rs 1,000, payable as a self-assessment tax challan under minor head 300, with the Challan Identification Number (CIN) entered in Form 35. He cannot adjust this against a pending refund.

Step 2 — The clock. The order was dated and uploaded to the e-filing portal on 8 May 2026. Service is deemed effected on the day the order is made available, per Section 282 read with Rule 127 of the Income-tax Rules 1962. Day 1 starts on 9 May 2026; the 30-day window expires on 7 June 2026. Rajesh must file before midnight on 7 June and keep the portal acknowledgement receipt.

Step 3 — The grounds. Form 35 requires a Statement of Facts (typically one to two pages) and Grounds of Appeal (each numbered and self-contained). Rajesh frames two substantive grounds: (a) disallowance of Rs 4,80,000 LTCL is bad in law as STT-paid broker contract notes were on record; (b) Rs 2,20,000 relocation reimbursement is exempt as reimbursement of actual expenditure on transfer against bills, attracting Section 10(14)(i) read with Rule 2BB. A third general ground reserving the right to add, alter, or delete grounds is conventional drafting.

Step 4 — The stay petition. With Form 35 acknowledged, Rajesh files a parallel application for stay of demand to the Jurisdictional Assessing Officer under Section 220(6). The 20% benchmark on Rs 3,86,500 is Rs 77,300. He pays this through a regular-assessment challan (minor head 400) and attaches the CIN. Under the 31 July 2017 OM, the AO is bound to grant stay of the balance Rs 3,09,200 during pendency, subject to the high-pitched assessment carve-out. If the AO refuses, Rajesh files a representation to the Principal CIT under the same OM before approaching the writ court.

Step 5 — The interest exposure. Section 234B interest runs at 1% per month on the shortfall in advance tax until the demand is paid. If Rajesh loses, the meter keeps ticking. Model the AY 2024-25 baseline liability using the income tax calculator and stress-test the carry-forward maths against the old vs new regime calculator. Where the dispute is rooted in a TDS short-deduction by a deductor, the TDS calculator shows the gross-up arithmetic before Form 35 is even drafted.

Step 6 — The hearing. The NFAC issues a notice under Section 250(1) with at least 7 days for written submissions. Personal hearing through video conferencing is granted on request where the Chief Commissioner approves. Section 250(6A) reads: "where it is possible", the appeal must be heard and decided within one year from the end of the FY in which it is filed. The provision is directory, not mandatory, and current NFAC turnaround averages 18 to 36 months.

The numbers in one frame:

The same arithmetic applies to a salary employee fighting an HRA disallowance, a small trader contesting a Section 44AD presumptive add-back, or a startup founder disputing a Section 56(2)(viib) angel-tax addition. Where the matter is jurisdictional and the Tribunal has held in the assessee's favour, the high-pitched carve-out can compress the 20% to nil, but the relief must be specifically prayed for.

A parallel exit is the Direct Tax Vivad Se Vishwas Scheme 2024, notified under Sections 88 to 99 of the Finance (No. 2) Act 2024 and operational from 1 October 2024. A pending CIT(A) appellant may withdraw and settle on the disputed tax alone, with full waiver of interest and penalty, subject to the prescribed declaration cut-offs. Rajesh should evaluate this path before the CIT(A) hearing notice arrives, not after.

For context on the regime question that often hides inside the assessment year, see Oquilia's analysis of the Rs 75,000 standard deduction in the new regime. For the instalment timing that triggers Section 234B exposure in the first place, the advance tax calendar for FY 2026-27 walks through the four-cheque rhythm.

FAQ

Can I file a CIT(A) appeal after 30 days if I missed the deadline?

Yes, subject to condonation under Section 249(3). The appellant must annex an affidavit setting out the cause of delay, such as documented hospitalisation, demonstrable non-service of the order, or a professional adviser's error supported by a CA letter. Routine excuses fail; documented illness and reasonable diligence succeed. The Supreme Court in N Balakrishnan v. M Krishnamurthy (1998) 7 SCC 123 set a liberal threshold but cautioned that condonation is never automatic.

What is the appeal fee if my assessed income is zero or a loss?

Rs 250 under Section 249(1). The residual category catches both no assessable income and loss returns. Even where the AO has assessed a loss higher or lower than returned, the fee remains Rs 250 because there is no positive assessable income.

Do I have to pay 20% before filing the appeal?

No. The 20% is a precondition for stay of the disputed demand, not for filing Form 35. The appeal is filed first, with the Rs 250/500/1,000 fee. The 20% is paid only when the AO is approached for stay under Section 220(6), and typically within 30 days of service so the demand is not flagged as defaulted before stay is granted.

Can the CIT(A) increase my tax demand?

Yes. Section 251 expressly empowers the Commissioner to enhance the assessment. However, enhancement requires a separate notice under Section 251(2) giving the appellant reasonable opportunity to be heard. The Commissioner cannot enhance on issues not arising from the assessment under appeal, as the Supreme Court fixed in CIT v. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC) — the subject-matter doctrine.

How long does a CIT(A) appeal take to be decided?

Section 250(6A) sets a directory one-year target from the end of the FY of filing. The Faceless Appeal Scheme has, in practice, stretched timelines to 18-36 months, with older jurisdictional appeals running longer. Stay orders granted under Section 220(6) are typically time-bound and must be renewed at each milestone.

Is the Faceless Appeal Scheme mandatory?

Yes for most domestic cases. CBDT excludes international taxation cases, central charges (search and seizure), and other categories notified from time to time. The NFAC allocates appeals randomly to Appeal Units across the country. Personal hearing by video conferencing is permitted where the appellant requests it and the Chief Commissioner approves.

Can I withdraw a CIT(A) appeal once filed?

Yes, by written application to the Commissioner. Withdrawal is typically used to migrate the dispute to the Direct Tax Vivad Se Vishwas Scheme 2024 (while the scheme remains open) or to settle the full demand and stop interest accrual. Once allowed, the appeal stands dismissed as withdrawn and cannot ordinarily be revived for the same year on the same issue.