Direct and Indirect Taxation · Filing of Return of Income

Filing of Appeal by Income-tax Authority under Section 373

Updated 10 October 2026 · Fact-checked

Section 373 of the Income-tax Act, 2025 lets the Central Board of Direct Taxes fix monetary limits through orders, instructions or directions to income-tax authorities. The department then need not file an appeal where the tax effect is within the limit. To answer, check who is filing, the forum, the tax effect and any exception.

Understand Filing of Appeal by Income-tax Authority (Section 373)

Most appeal rules you study are about the assessee: who can appeal, where, and by when. Section 373 looks at the other side. It deals with appeals and references by the income-tax authorities, that is, the department.

The department loses many cases at the first appeal stage. If it appealed every one, the Tribunal and courts would be flooded with small disputes and the cost of litigation would exceed the tax at stake. So the Act lets the Central Board of Direct Taxes (CBDT) regulate this. It can issue orders, instructions or directions to other income-tax authorities fixing monetary limits. These limits control whether an appeal or reference is filed.

In simple terms: if the tax effect of the dispute is within the limit fixed by the Board, the authority is not required to file the appeal. The limits are not written in the section. They sit in Board circulars and can be revised, so your exam question will normally give the limit or say a limit applies. Use the figure in the question.

Two safeguards matter. First, the limit is about that case. Not appealing does not mean the department accepts the legal view for other years or other assessees. Where the same issue comes up in another year and the amount is above the limit, the department can still file. Second, the Board's circulars list exceptions where appeals are filed regardless of the amount, for example where the validity of a provision or of a Board instruction is challenged. Check the current circular for the exact list before stating it.

So section 373 is a regulating section. It does not create a new right of appeal. It controls how the department uses its existing rights.

Key rules to remember

Source of limits: Monetary limit = fixed by CBDT order, instruction or direction (not by the section itself); Limits can be different for different appellate forums and can be revised. Use the figure given in the question.
Basic filing rule: Tax effect ≤ limit fixed by Board → authority is not required to file appeal; Tax effect above the limit → appeal can be considered on merits. Check the Board's circular for exact wording on the boundary.
Tax effect (working): Tax effect = tax on the disputed income (including surcharge and cess), as defined in the Board's circular; Take only the disputed addition or disallowance. Do not use the whole assessed income. Treat interest as excluded unless the question says otherwise.
No precedent from non-filing: Appeal not filed due to limit ⇒ no acceptance of the issue for other years or assessees; The department keeps the freedom to appeal the same issue where the amount is above the limit.

How to solve Filing of Appeal by Income-tax Authority (Section 373) questions

Use this order for any question on departmental appeals. It keeps you on the rule and stops you from mixing in the assessee's appeal rules.

1Identify who wants to appeal. If it is the department (an income-tax authority), section 373 is relevant. If it is the assessee, it is not.
2Note the forum: Appellate Tribunal, High Court or Supreme Court. Board limits can differ by forum.
3Find the monetary limit given in the question. If none is given, say that the Board fixes it by order, instruction or direction and that it is revised from time to time.
4Compute the tax effect of the disputed issue only: disputed income × applicable rate, including surcharge and cess if the question gives them.
5Compare the tax effect with the limit. If it is within the limit, the authority is not required to file. If above, the appeal may be filed.
6Check for exceptions stated in the question, such as a challenge to the validity of a provision or a Board instruction. These can allow filing regardless of amount.
7State the effect on other years: not filing does not mean the issue is accepted, and the department can appeal the same issue in another year if the amount is above the limit.
8Write a clear conclusion in one line.

Quickest way: Three-check method for departmental appeals

When to use it: Use it for short answers and MCQs that ask whether the department can or must file an appeal.

Who is appealing? Department, so section 373 applies.
Tax effect vs the Board limit: is it above or within?
Any exception or other-year issue? Say that non-filing is not acceptance of the issue.

Common mistakes in Filing of Appeal by Income-tax Authority (Section 373)

Writing that section 373 gives the department a right of appeal
The section title says 'filing of appeal', so students assume it creates the right.
Fix: Say the section lets the Board regulate filing by fixing monetary limits. The right of appeal comes from the other appeal provisions.
Stating a rupee limit as part of the section
Students memorise a figure from a circular and treat it as law.
Fix: Say the limit is fixed by the Board and can change. In numericals, use only the limit given in the question.
Using the whole assessed income to find the tax effect
Students confuse total tax with tax on the disputed issue.
Fix: Take only the disputed addition or disallowance and apply the rate. Include surcharge and cess if the question includes them.
Saying non-filing means the department accepts the issue for all years
Students link a decision not to appeal with acceptance of the assessee's view.
Fix: State that non-filing due to the limit does not preclude appeals on the same issue in other years or cases.
Mixing assessee appeal rules with departmental appeal rules
The chapter covers appeals from both sides.
Fix: Start every answer by naming the appellant. Apply section 373 only when it is the department.
Ignoring exceptions to the monetary limit
Students treat the limit as absolute.
Fix: Mention that Board circulars list cases where appeals are filed regardless of amount, and apply any such case given in the question.

Worked examples

Example 1

The Board has fixed a monetary limit of ₹50,00,000 for filing appeals before the Appellate Tribunal (assume this figure for the question). The Commissioner (Appeals) deleted an addition of ₹1,50,00,000 made in the assessment of Mehta Traders Pvt. Ltd. Assume an effective tax rate of 31.2% on the disputed addition. Is the department required to file an appeal?

Show the solution

The appellant would be the department, so section 373 applies and the Board's monetary limit regulates filing.
Tax effect = ₹1,50,00,000 × 31.2% = ₹46,80,000.
Compare: ₹46,80,000 is less than the assumed limit of ₹50,00,000.
So the income-tax authority is not required to file the appeal.
Not filing is because of the limit and is not acceptance of the issue on merits.

Answer: Tax effect is ₹46,80,000, which is within the assumed ₹50,00,000 limit. The department is not required to file an appeal, and this does not amount to accepting the issue.

Example 2

Continuing the facts above, in the next year the same issue arises for Mehta Traders Pvt. Ltd. and the tax effect is ₹55,00,000. The department did not appeal in the earlier year because of the limit. Can it appeal now? Use the same assumed limit of ₹50,00,000.

Show the solution

The appellant is again the department, so section 373 and the Board's limit apply.
The tax effect is ₹55,00,000, which is above the assumed limit of ₹50,00,000.
Non-filing in the earlier year was due to the limit. Section 373 does not stop the department from appealing the same issue in another year.
So the department may file the appeal for this year.

Answer: Yes. The tax effect of ₹55,00,000 exceeds the assumed limit, and earlier non-filing does not stop an appeal on the same issue in another year.

Exam tips

Begin every answer by naming the appellant. Section 373 is about the department, not the assessee.
In numericals, use only the limit given in the question and label it as per the question. Do not bring in figures from memory.
Show the tax effect working in one line, then compare it with the limit and conclude.
Add the one-line point that non-filing due to the limit is not acceptance of the issue. It is a common mark-earner in short notes.
For MCQs, watch for options that say the section itself fixes the limit or creates the right of appeal. Both are wrong.

Practice questions from Filing of Return of Income

Filing of Appeal by Income-tax Authority (Section 373) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Filing of Appeal by Income-tax Authority (Section 373): frequently asked questions

What does section 373 of the Income-tax Act, 2025 deal with?

It deals with filing of appeals and references by income-tax authorities. It allows the Board to fix monetary limits by orders, instructions or directions, so that small-value disputes are not taken to the Tribunal or courts.

Who fixes the monetary limit for department appeals?

The Central Board of Direct Taxes fixes it through orders, instructions or directions to income-tax authorities. The limits are in Board circulars, not in the section, and can be revised. In exams, use the figure given in the question.

If the department does not appeal because of the limit, has it accepted the assessee's view?

No. Not filing due to the monetary limit does not mean the department accepts the issue. It can still appeal the same issue in other years where the amount is above the limit.

How is the tax effect worked out?

Take the disputed addition or disallowance and apply the relevant tax rate, including surcharge and cess where the question gives them. Do not use the whole assessed income or total tax.