This article is written by Abhyuday Agarwal, COO, LawSikho.A tax lawyer can work on the compliance aspect, perform tax advisory-related work or tax litigation work.

High-stakes tax litigation and advisory work is very rewarding, and very few lawyers are willing to delve into it, due to its relatively technical nature.

Some of the most well-known tax lawyers and senior counsels in High Courts were CAs and decided to pursue law and become full-time practising lawyers so that they could represent their clients.

If you want to be a successful tax lawyer, equipping yourself for tax litigation work can be a promising area of practice.

My father, who is a tax partner in AZB, Delhi and a former additional commissioner of Income Tax, says that learning tax law enables one to quickly deal with other areas of law very easily. So, practising tax litigation might actually open the doors for you to practice a bunch of other kinds of economic and regulatory litigation.    

Which are the top litigation drafts and proceedings that a tax lawyer must know about?

Here is a quick list which we have compiled, as we begin the work to include a plethora of litigation exercises in the Executive Certificate Course in Advanced Corporate Taxation for upcoming batches.

1. Response to notices under 143(2) and 142(1)

• Response to a scrutiny or assessment notice under section 143(2) of the Income-tax Act, 1961 (‘the Act’)
• Response to details called for by the assessing officer (‘AO’) under section 142(1) of the Act/ vide a show cause notice

A notice under section 142(1) is generally issued to call for more information and documents from the taxpayer. A show cause notice is generally served to the assessee to show cause as to why a particular item of expenditure should not be disallowed/ an item of income should not be added.

Both are usually used together.

2. Appellate work before CIT (Appeals) or Filing of Objections before the Dispute Resolution Panel (DRP)

One can either file an Appeal before the Commissioner of Income-tax (Appeals) against the assessment order of the Assessing Officer or file objections before the Dispute Resolution Panel (DRP).

3. Appeal before Income Tax Appellate Tribunal (ITAT)

Appeal before the ITAT can be of two kinds:

• Appeal before the Income Tax Appellate Tribunal against the order of the Commissioner of Income-tax (Appeals) –  Contents of the basic appeal set + application + grounds + statement of facts + factual paper book + legal paper book (depending on the counsel) + procedure (cause list tracking, counsel briefing, etc)
• Appeal against directions of DRP

4. Application before the Authority for Advanced Ruling (AAR) to obtain clarity over the taxability or otherwise of a transaction(s)

In international tax scenarios, where there is high uncertainty about how tax authorities may treat a transaction, one can approach the Authority for Advance Rulings or AAR for a ruling, which is binding only for the purposes of that specific transaction submitted before reference.

5. Statutory appeal before the High Court

Statutory appeal before the jurisdictional High Court (on substantial question of law only) against the order of the Income Tax Appellate Tribunal [260A]. This is very similar to a second appeal under Section 100 of the CPC. Of course, what qualifies as a substantial question of law in tax cases can have a distinct flavour.  

6. Writ before the High Court under Article 226

Where the fundamental rights of the assessee are violated, and there is no alternative efficacious remedy, one can approach the High Court in a writ.

7. Special Leave Petitions

Special Leave Petitions (SLPs) before the Supreme Court under Article 136, which are usually of two kinds:

SLP before the Supreme Court against a High Court judgment, where the High Court was approached under a statutory appeal  

• SLP against the High Court’s orders, where the High Court was itself approached under an Article 226 writ from a ruling of Authority Advance Rulings or the Settlement Commission.

8. Appeals before Supreme Court

Other than an SLP, one can approach the Supreme Court against the order of the jurisdictional High Court, in case of conflicting high court judgements, or when the High Court grants a certificate of fitness to appeal. Both these methods are not so frequent.

9. Application before the “Competent Authority” of a country where the assessee (taxpayer) is a resident to resolve the dispute it is faced with in another country

This application is under the Mutual Agreement Procedure (also known as MAP), where both the countries have entered into a Double Taxation Avoidance Agreement with each other. The decision of the competent authority overrides any alternate remedy given under the local laws of the other country.

10. Litigation against unauthorized investigation, search and seizure

An assessee may challenge and initiate proceedings in respect of raids and investigation conducted by tax authorities.  

Note that all the above 10 types of litigation are applicable to transfer pricing litigation as well, with some unique aspects, such as the fact that the

11. Black money act litigation

Like the Income Tax Act, litigation under Black Money Act may pertain to penalties imposable under the Black Money Act or criminal proceedings for its contravention. The litigation scheme of the Black Money Act is similar to that of the Income Tax Act, except that criminal litigation is undertaken before a special economic offence magistrate. Being familiar with the Black Money Act as well will enable you to handle a wider range of tax litigation work.

12. Criminal proceedings initiated under Income Tax Act

Under certain scenarios, criminal proceedings may be initiated for violation of the provisions of the Income Tax Act. To navigate a client effectively through such proceedings, you will need to know the practical aspects of criminal trials, Code of Criminal Procedure and Evidence Act (covered in this course), and the unique substantive provisions of Income Tax Act.   

The above list mentions the kind of litigation work you may perform as a tax lawyer. However, remember that tax is a complex subject and has its own set of concepts. Sometimes, the concepts are counter-intuitive. There are many legal fictions created which lead to conclusions different from what common sense or logic would lead to.

Therefore, knowing the drafts and formats alone will not be sufficient. The language of tax statutes is complex, and one section can run into 10 or 20 pages as well, with a lot of complex non obstante clauses and provisos.

To be effective in your drafting and strategy, a sound understanding of situations when the most important tax problems are faced, client needs, transactions and tax laws is essential.

For example, without knowing how amalgamations are treated, how capital gains tax applies to acquisitions, how to acquire a loss-making company to reduce tax liability, how remuneration of executives working for global corporations is taxed, you may find it difficult to inspire a client’s confidence and perform such litigation work.   

A short list of such skills you will learn is provided below:

1. Learn how to advise partnerships, LLPs, private limited companies and trusts on taxation of income and distribution of profits
2. Learn how to secure exemption for a public trust
3. Learn how Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) impacts your work
4. How to structure investments to prevent angel tax
5. How to optimally structure remuneration for directors, shareholders and partners
6. How to advise clients on taxation of ESOPs, Sweat Equity and royalty receipts  
7. Perform tax planning for family businesses
8. Learn about deduction and payment of TDS for different types of income, consequences of non-payment of TDS, remedies, etc.
9. Advise on applicability and payment of equalization levy
10. Allowable deductions against income for professional and business expenses
11. Learn about capital gains tax on investment transactions and exits
12. How to claim tax benefits from acquiring loss-making companies
13. Learn about tax on partition and whether partition into unequal shares is susceptible to capital gains tax
14. How to advise and defend a client implicated for entering into a benami transaction
15. How to provide black money-related advisory work and disclosures by conglomerates and businessmen
16. Learn about investigative powers of tax authorities such as raids, attachment and freezing of bank accounts
17. Understand different stages of tax proceedings from issue of notice until High Court or Supreme Court Appeal, Special Leave Petition and Writ Petitions in Tax Cases
18. Learn about proceedings before Assessing Officer
19. Learn how to perform end-to-end tax litigation work for a client
20. Perform drafting and litigation work before CIT (Appeals)
21. Learn how to draft and file appeals before Income Tax Appellate Tribunal (ITAT) and ITAT
22. Draft various kinds of tax litigation petitions to be filed before the High Court
23. Learn about Settlement Commission proceedings for settlement of tax disputes  
24. Learn about filings and drafting work before Authority for Advance Ruling (AAR)
25. Identify when and how business operations are hit by international taxation and Double Taxation Avoidance Agreements (DTAAs)
26. How to proceed when DTAA and domestic law provisions conflict  
27. How to claim tax credits and refunds under DTAAs
28. Global international tax cooperation models to disclose tax avoidance-related information, applicability of GAAR under domestic law and consequences of invocation of GAAR
29. Popular international tax structures used by global businesses and benefits provided by tax havens to international businesses
30. Implications of Vodafone judgment and subsequent developments in income tax law for tax structuring
31. How to identify round tripping and consequences of round tripping  
32. What is a controlled financial corporation (CFCs) and how different countries tax CFCs?
33. What is the place of effective management (POEM) and how does it apply to Indian businesses which are going global?
34. How is international consensus on Base Erosion and Profit Shifting (BEPS) impacting global tax structuring?
35. How thin capitalization rules impact cost of business finance globally
36. When to approach the Authority for Advance Rulings (AAR)  
37. How to settle disputes with tax authorities
38. How to use Mutual Agreement Procedure (MAP) and Advance Pricing Agreement (APA) system for clients
39. Applicability of transfer pricing, methods for computing arm’s length price and selection of appropriate method
40. Learn how to obtain the benefit of Safe Harbour Rules in transfer pricing scenarios
41. Learn how to comply with stamp duty legislation and stamp duty on key business transactions
42. Types of GST, supply, forward and reverse charge mechanism, registration and input tax credit
43. Filing of different GST returns
44. Learn about Composition Scheme, TDS in GST, Tax Return

We also cover GST, Black Money Act, Stamp Duty and Benami Transactions, so that you have a full grasp of taxation-related work.

We believe that learning specific skills can form the foundation of a thriving tax litigation practice, persuasive drafting and effective arguments.

How do you think these skills will impact your ability to be an effective tax litigator?

Have you ever considered tax litigation? If yes, let us know what inspires you about tax litigation. If not, does this make you think about it?

Here is our corporate tax law course that you really want to take up if you are interested in learning these skills.

Feel free to reach out to us on [email protected] or call us on 011-40845203