s.251 — Powers of the Commissioner (Appeals)
The powers of the Commissioner (Appeals) in disposing of an appeal: to confirm, reduce, enhance or annul an assessment and, since 1 October 2024, to set aside a best judgment assessment and refer it back.
The proviso to sub-section (1)(a) was inserted by the Finance (No. 2) Act, 2024 with effect from 1 October 2024. The section governs first appeals for every tax year beginning before 1 April 2026, whenever filed. For tax year 2026-27 onwards the counterpart is section 360 of the Income-tax Act, 2025, where the proviso is re-enacted as clause (b) of sub-section (1) for an assessment made under section 271.
Income-tax Act, 1961
s.251
Income-tax Act, 2025
s.360
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 251(1)(a) of the Income-tax Act, 1961 gives the Commissioner (Appeals), in an appeal against an order of assessment, power to "confirm, reduce, enhance or annul the assessment". The proviso, in force from 1 October 2024, adds one power: "where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment". Clause (b) deals with an appeal against a penalty, and under clause (c), in any other case, he may "pass such orders in the appeal as he thinks fit". Sub-section (1A) gives the Joint Commissioner (Appeals) the corresponding powers without the proviso. Sub-section (2) forbids enhancement of an assessment or penalty, or reduction of a refund, "unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction". The Explanation lets the appellate authority consider and decide any matter arising out of the proceedings in which the order appealed against was passed, though the appellant did not raise it. The counterpart in the Income-tax Act, 2025 is section 360: sub-section (1)(a) keeps the four powers, sub-section (1)(b) re-enacts the proviso for an order of assessment "made under section 271", sub-section (2) keeps the rule on enhancement and sub-section (3) the Explanation.
What the provision does
Lists what the Commissioner (Appeals) may do with an assessment, a penalty and any other order under appeal, and conditions enhancement on a reasonable opportunity to show cause. Since 1 October 2024 it lets him set aside an assessment made under section 144 and refer it back. It gives no general power to set aside: the Tribunal has held that an order under section 143(3) or section 147 read with section 144B alone is not within the proviso. The proviso is not given to the Joint Commissioner (Appeals). The word is "may", and the power to annul is untouched. The section does not mention dismissal of an appeal for default.
Threshold questions
- Whether the assessment order under appeal recites section 144, or only section 143(3) or section 147 read with section 144B
- Whether the appeal is before the Commissioner (Appeals), since sub-section (1A) gives the Joint Commissioner (Appeals) no power to set aside
- Whether a ground on jurisdiction or limitation was raised, and whether it was decided before the assessment was set aside
- Whether the Commissioner (Appeals) considered whether a set-aside was required at all, the proviso being discretionary
- Whether any enhancement was preceded by a reasonable opportunity of showing cause under sub-section (2)
- Whether the appellate order decides the appeal with reasons, as section 250(6) requires, instead of dismissing it for default
In practice
The recurring disputes.
Whether a best judgment assessment can be set aside without deciding a jurisdictional or limitation ground
The appellant's case is that a set-aside presupposes an assessment that can lawfully be made again; if the notice was bad or the order out of time there is nothing to send back. In ITO, Ward-3(1)(1), Ahmedabad v. The Wardrobe Theorem (ITAT Ahmedabad, 8 July 2025, para 9) the Bench held that the word "may" makes the proviso "discretionary in nature", and that a legal ground on the reopening "was required to be first decided only by the Ld. CIT(A). This issue couldn't have been set aside to the AO." Mamatha Gubbala v. ITO, Ward-15(1), Hyderabad (ITAT Hyderabad, 30 January 2026, para 14) reasons that otherwise the challenge to the assumption of jurisdiction "would stand frustrated". The Revenue's case is that the proviso contains no such condition; it is engaged by the kind of order under appeal, and the assessee can raise his objections in the fresh round. In Yakin Jayantilal Shah v. ITO, Ward-2(1)(1), Ahmedabad (ITAT Ahmedabad, 15 October 2025, para 7.21) the Tribunal did not send the undecided ground back to the Commissioner (Appeals); it decided the ground itself, against the assessee, and held that the matter had been "rightly restored" to the Assessing Officer. The firm's view is that the ground must be decided first, because a direction to make a fresh assessment assumes the power to assess. The Ahmedabad Bench has gone both ways on who decides it, and the question is open.
Whether the proviso reaches assessments made before 1 October 2024
The appellant who wants a decision on merits can rely on Sanjay Jayantilal Shah v. ITO, Ward-2(1)(1), Ahmedabad (ITAT Ahmedabad, 7 October 2025, para 5.7). The assessment order there was dated 31 March 2022, and the Bench said that "applying such provision retrospectively to assessments of earlier years would not be legally permissible unless the statute so provides expressly". Paragraph 5.7 opens "We may also observe" but closes by resting the result "on both counts", so it is one of two stated grounds of the order; it was given on a point the Departmental Representative did not answer (paras 4 and 4.1), and before the Ahmedabad Bench it has to be met until a later Bench considers it. The contrary case is that the proviso is a power of the appellate authority, exercised when the appeal is decided. The Commissioner (Appeals) had invoked it against a reassessment of 23 May 2023 in The Wardrobe Theorem and against a reassessment of 19 March 2024 in Mamatha Gubbala, and in each the Tribunal, reversing the set-aside on other grounds, treated the proviso as available, no objection founded on the date of the assessment being recorded. None of these orders tests the question by the date on which the appeal was filed or decided. The appellate order reproduced in Mamatha Gubbala (para 5) quotes the Memorandum explaining the amendment as saying that it "will be applicable to appellate orders passed by the Commissioner (Appeals)" on or after 1 October 2024; the Tribunal did not comment on that passage. The firm's view is that the proviso is available in any appeal decided on or after 1 October 2024, whatever the date of the assessment. The point is open.
Whether an order under section 147 read with section 144B can be treated as a best judgment assessment
The argument that it can was the assessee's in ITO, Ward-1, Vizianagaram v. Al Safa Foods (ITAT Visakhapatnam, 3 July 2026): an order under section 147 read with section 144B is in substance a best judgment assessment. The Bench refused (para 12): "as the assessment is explicitly stated to be framed under section 147 r.w.s. 144B of the Act, there can be no justification for considering it as an assessment framed under section 144 of the Act." The contrary argument succeeded on the assessee's appeal in Sanjay Jayantilal Shah, where the Commissioner (Appeals) had set aside a faceless reassessment as a best judgment order; the Bench identified as the first pre-condition that there "must be an appeal against an order of assessment made under section 144 of the Act" (para 5.4) and held the set-aside "clearly unsustainable in law" (para 5.6). ITO, Pune v. Raman Kumar (ITAT Pune, 25 May 2026, paras 4 and 5) is to the same effect for an order under section 143(3) read with section 144B. Either side may want the set-aside or resist it, depending on the file. The Tribunal's orders are consistent that the section recited in the assessment order decides the matter. They are orders of the Tribunal only, and none of the High Court decisions referred to on this page deals with the point.
Whether clause (c) of section 251(1) permits dismissal of an appeal for default
The Revenue's case is clause (c), under which the Commissioner (Appeals) may in any other case "pass such orders in the appeal as he thinks fit", together with decisions that an appeal not prosecuted is no appeal. The appellant's case is that an appeal against an assessment falls under clause (a), which lists four powers and, since 1 October 2024, a power to set aside confined to best judgment assessments, but none to dismiss for default, and that section 250(6) requires a decision with reasons on the points for determination. In Vedansh Traders Private Limited v. Income Tax Officer, Ward-13/1, Kolkata (Calcutta High Court, 7 February 2025) the Division Bench answered the Revenue's reliance on clause (c): "Clause (c), in our opinion, should be read in conjunction with clause (a) and (b)." The Orissa High Court had held in Sri Ashok Kumar Shaw v. Principal Chief Commissioner, Income Tax, Bhubaneswar and others (31 March 2022, para 6) that the Commissioner (Appeals) "could not have by the impugned order proceeded to dismiss the appeal in default". The Ahmedabad Bench of the Tribunal has invoked section 250(6) in terms (Gaurav Vinodbhai Mitra v. ITO, Ward 1(2)(1), Ahmedabad, 19 November 2025, para 5.5), but more often restores the appeal as one more opportunity without holding the dismissal illegal. Whether the dismissal is illegal, or only an occasion for indulgence, is where the High Court decisions and the Ahmedabad orders part.