Objection and Appeal Against an Income Tax Assessment

An objection to an income tax assessment is filed in writing with the Assessing Officer, with detailed reasoning, within 30 days from the date the assessment notice was served (Section 150(a) of the Income Tax Ordinance). If the objection does not result in an agreement, the Assessing Officer issues an order, which may be appealed to the District Court within 30 days from the date it was served. Between these two deadlines there are hearings and document requests, and sometimes a proposed assessment agreement. Signing such an agreement closes the path to appeal, so it is worth reviewing it carefully before deciding. Send us your assessment notice, and we will calculate the deadline and the arguments that can be raised.

Usually when you receive a document from the Assessing Officer that starts a countdown of deadlines, or when you need to decide whether to sign an agreement:

• You received a best-judgment assessment notice, and the 30-day objection period is already running from the date of service.

• You received a partial assessment under Section 145A2, addressing only one issue from your return.

• You have been summoned to an objection hearing, and the Assessing Officer is requesting documents or seeking to examine your employee or client.

• You have been offered an assessment agreement and want to know what you are giving up by signing it.

• You received an order under Section 152(b), sometimes for an amount higher than the original assessment, and you have 30 days left to appeal.

• Your books have been disqualified, and you need to choose between filing an objection with the Committee for Admissibility of Books and appealing together with the assessment.

• More than a year has passed since you filed your objection, and no decision has been made yet.

The process is governed by Part 9 of the Income Tax Ordinance and the Courts Regulations (Income Tax Appeals), 5739-1978. It begins with an assessment, proceeds to an objection before the Assessing Officer, and ends with an agreement or an order that may be appealed.

Types of Assessments

• Self-assessment: the annual return you filed under Section 131 (Section 145(a)(1)).

• Best-judgment assessment: the Assessing Officer may issue one within four years from the end of the tax year in which the return was filed, if there are reasonable grounds to believe the return is incorrect (Section 145(a)(2)(b)).

• Partial assessment: an assessment on one or several issues from the return, once per tax year, after the Assessing Officer has notified you of the matter under review (Section 145A2(a1)).

• Assessment for failure to file a return: under Section 145(b), with no statutory time limit.

The Objection and Its Hearing

An objection is filed in writing, with precise details of the grounds, within 30 days from the date the assessment notice was served (Section 150(a)). The person who prepared the assessment may not hear the objection (Section 150A). The Assessing Officer may request details and documents and examine witnesses, but your employee or a person handling your affairs on the basis of personal trust may be examined only at your request (Section 151). If you filed a return, the Assessing Officer must give you a reasonable opportunity to present arguments before issuing an order, and the order must specify the reasoning and the method by which the assessment was made (Section 158A).

Agreement or Order

If an agreement is reached, the assessment is amended accordingly (Section 152(a)). If not, the Assessing Officer determines the tax by order and may uphold, reduce, or increase the assessment (Section 152(b)). The right of appeal exists only against an order (Section 153), and therefore an assessment agreement closes the path to the District Court.

When Is an Objection Deemed Accepted Automatically?

If no agreement is signed and no order is issued by the end of four years from the end of the tax year in which the return was filed, or by the end of one year from the date the objection was filed, whichever is later, the objection is deemed accepted (Section 152(c)). For example: a return for the 2023 tax year filed in 2024, with an objection filed on 1.3.2028. The four-year period ends on 31.12.2028, and the one-year period from the objection ends on 1.3.2029, making the latter the determining date. For an objection to an assessment under Section 145(b), the period is five years from the end of the tax year in which the objection was filed. Time during which an appeal against book disqualification is pending before the Committee is not counted (Section 130(d)(2)).

Appeal to the District Court

A notice of appeal is filed within 30 days from the date the order was served on you (Regulation 2). The Assessing Officer files grounds of assessment within 30 days, including the method by which the assessment was made and the legal reasoning, and within an additional 30 days you file grounds of appeal (Regulation 5). Witness-in-chief testimony is submitted in writing unless the court directs otherwise (Regulation 9(b1)). The hearing is held in camera unless you request otherwise (Section 154(c)), and the court may confirm, reduce, increase, or cancel the assessment (Section 156).

Burden of Proof

The appellant must prove that the assessment is excessive. A taxpayer who maintained admissible books shifts the burden to the Assessing Officer to justify the decision (Section 155), and in that case the Assessing Officer also presents evidence first (Regulation 10(a)).

Disqualification of Books

A reasoned notice of book disqualification (Section 130(c)) may be challenged by filing an objection with the Committee for Admissibility of Books within 30 days (Section 130(d)). This objection does not replace an objection to the assessment (Section 130(g)). A taxpayer who did not file an objection with the Committee may challenge the disqualification together with the appeal against the assessment (Section 130(h)). When the disqualification is based on an unrecorded receipt or a fictitious invoice, a request for reconsideration is submitted to the Assessing Officer within 30 days, and a denial of the request may be appealed within 60 days (Sections 130(k) and 145B).

Payment During Proceedings

Within 15 days of the assessment notice, only the undisputed tax is payable (Section 183), and the same applies after an order when an appeal is filed (Section 184). After judgment, a taxpayer who overpaid receives the difference plus linkage differentials and interest, and a taxpayer who underpaid must pay the balance within 15 days (Section 185). What happens when the debt is referred to collection is explained on the page Liens and Collection Proceedings by the Israel Tax Authority.

1. We calculate the deadlines: 30 days for the objection, and if the books were disqualified, also 30 days for an objection to the Committee for Admissibility of Books.

2. We reconstruct the Assessing Officer's calculation based on the reasoning in the notice and determine whether the dispute concerns the facts or the interpretation of the law.

3. We file a reasoned objection with supporting documentation and attend hearings prepared with the documents the Assessing Officer is likely to request under Section 151.

4. When an assessment agreement is proposed, we compare it to the likely outcome in court, because once signed there is no appeal.

5. If an order is issued, we file a notice of appeal within 30 days, followed by grounds of appeal and witness-in-chief affidavits. At the same time, we pay the undisputed portion or apply for a deferral under Section 186 to prevent collection proceedings from commencing.

Objections and appeals are handled by Adv. and CPA Shlomi Vaknin and his team. Shlomi, a former national inspector in the Professional Division of VAT at the Israel Tax Authority, has been a certified public accountant since 2000 and an attorney since 2008, enabling him to review both the assessment calculation and the legal arguments.