Old Fights, New Rules: How the 2025 Act Protects Pending Litigations

In a dialogue inspired by Arjuna and Krishna, this piece explains the transition from the Income Tax Act, 1961 to the Income Tax Act, 2025, with a focus on ongoing litigation. It reassures taxpayers that any appeals pending as of 1st April 2026, whether before CIT(A), ITAT, or higher courts, will continue under the provisions of the 1961 Act until final resolution, ensuring no duplication or restart of proceedings.

The discussion also clarifies that even fresh appeals filed after the new Act’s commencement will follow the old law if they relate to earlier assessment years. It further highlights that search and requisition actions initiated before the transition date will remain governed by the earlier Act, avoiding procedural confusion.

Additionally, the revised framework for revision orders under the 2025 Act is explained, emphasizing continuity in legal principles while introducing safeguards like a minimum 60-day period for passing revision orders. Overall, the article reassures taxpayers that while section numbers may change, the core principles of justice, appellate structure, and procedural fairness remain intact.

Arjuna (Fictional Character): Krishna, taxpayers are often involved in long-running legal battles. Now that the Income Tax Act, 2025 is coming, what happens to all those pending appeals? Do we have to start our fight from scratch?

Krishna (Fictional Character): Arjuna, the law is like a river; it flows forward but respects the path it has already travelled. The new Act ensures that your justice is not disrupted by the change in the statute.

Arjuna (Fictional Character): Krishna, if a taxpayer has an appeal pending before the CIT(A) or ITAT as of 1st April 2026, should it be filed again?

Krishna (Fictional Character): No, Arjuna. The new Act provides total continuity as follows: 

• Any proceeding pending before an authority, Tribunal, or Court on 1st April 2026 will be disposed of as if the 2025 Act had not been enacted.  The 1961 Act will continue to govern that specific litigation until its final resolution. 
• Even for fresh appeals filed after 1st April 2026, if the matter relates to an Assessment Year prior to the Tax Year 2026-27, the taxpayer must follow the old Act's procedures.

Arjuna (Fictional Character): Krishna, what happens if the Department initiates a search on a taxpayer just before the new Act starts?

Krishna (Fictional Character): Arjuna, the rules are determined by the start date of the action which are as follows:

• If a search under Section 132 or a requisition under Section 132A was initiated before 1st April 2026, all connected proceedings including the block assessment stay under the 1961 Act.
• Even if the final assessment order is passed long after the 2025 Act commences, the taxpayer is assessed based on the old Act's provisions.
• Section 536(2)(v) of the IT Act 2025 ensures that a taxpayer is not caught between two different sets of investigative rules mid-way.

Arjuna (Fictional Character): Krishna, can a taxpayer expect any relief in how revision orders are passed?

Krishna (Fictional Character): Arjuna, the power of revision (Section 377) remains the same, but better clarity has been provided for the taxpayers:

• An order must still be "erroneous and prejudicial to the interests of revenue" to be revised.
• To ensure fairness, if the time left to pass a revision order is less than 60 days (after excluding stay periods), the 2025 Act automatically extends it to 60 days to give the taxpayer a proper hearing.

Arjuna (Fictional Character): Krishna, what should taxpayers learn from this?

Krishna (Fictional Character): Arjuna, while the section numbers may change (like Section 263 becoming Section 377), the principles of justice do not. The Appellate Hierarchy from CIT(A) to the Supreme Court remains unchanged. Trust the transition, keep your records ready, and follow the timelines of the Act that governed your income year!