Sub-section (1) lists the powers of the Commissioner (Appeals) or the Joint Commissioner (Appeals) in disposing of an appeal. Under clause (a), in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment. Under clause (b), where the appeal is against an assessment made under section 271, the Commissioner (Appeals) may set aside the assessment and refer the case back to the Assessing Officer for a fresh assessment. Under clause (c), in an appeal against an assessment for which the proceeding before the Settlement Commission abates under section 245HA of the Income-tax Act, 1961, the Commissioner (Appeals) may confirm, reduce, enhance or annul the assessment after taking into consideration all material and information produced before the Settlement Commission, the results of any inquiry held or evidence recorded by it, and such other material as is brought on his record. Under clause (d), in an appeal against an order imposing a penalty, he may confirm or cancel the order, or vary it so as either to enhance or to reduce the penalty. Under clause (e), in any other case he may pass such orders in the appeal as he thinks fit.
Sub-section (2) bars enhancement of an assessment or a penalty, and reduction of the amount of a refund, unless the appellant has had a reasonable opportunity of showing cause against the enhancement or reduction. Sub-section (3) allows either appellate authority to consider and decide any matter arising out of the proceedings in which the order appealed against was passed, irrespective of the fact that the matter was not raised before him by the appellant.
Why it is there
The first appellate authority is not confined to granting or refusing the relief the appellant asks for; the section gives it the same reach over the assessment as the Assessing Officer had, including the power to make the appellant worse off. That is why sub-section (2) exists as its counterweight — enhancement and reduction of refund are permitted, but not without a reasonable opportunity to show cause. Sub-section (3) completes the picture by letting the authority take up matters arising in the proceeding that the appellant never raised.
Who it applies to
The Commissioner (Appeals) disposing of an appeal
The Joint Commissioner (Appeals) disposing of an appeal
An appellant against an order of assessment, including an assessment made under section 271
An appellant against an order imposing a penalty
An appellant whose assessment was the subject of a proceeding before the Settlement Commission that abated under section 245HA of the Income-tax Act, 1961
The Assessing Officer, to whom a case may be referred back for fresh assessment under clause (b)
What this means in practice
An appeal here can cost the appellant more than it gains: clause (a) permits enhancement of the assessment and clause (d) permits enhancement of a penalty, and sub-section (3) lets the authority pick up an issue nobody argued, so long as it arises out of the proceedings in which the order appealed against was passed. The safeguard in sub-section (2) is procedural only — it requires a reasonable opportunity of showing cause, not the appellant's agreement — and it covers three things: enhancement of assessment, enhancement of penalty, and reduction of the amount of refund. The set-aside power in clause (b) is narrower than the rest of the section in two ways: it is confined to an appeal against an assessment made under section 271, and it is given to the Commissioner (Appeals), not to the Joint Commissioner (Appeals). In a penalty appeal the options under clause (d) are to confirm, cancel or vary; there is no power there to remit.
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
A firm appeals against an addition of Rs 40 lakh, asking that it be deleted. In the course of the appeal the Commissioner (Appeals) notices a separate deduction of Rs 25 lakh wrongly allowed in the same assessment, which the firm never raised. Sub-section (3) lets him take it up, and clause (1)(a) lets him enhance the assessment on it — but only after giving the firm a reasonable opportunity of showing cause under sub-section (2). The firm can therefore end the appeal with a higher assessed income than it started with.
Where you meet this section
In the order disposing of a first appeal, and, before it, in a show cause notice proposing to enhance the assessment or penalty or to reduce a refund — that notice is issued because sub-section (2) requires it. Clause (b) is met as an order setting aside a section 271 assessment and sending the case back to the Assessing Officer.
The words themselves
he may confirm, reduce, enhance or annul the assessment
Section 360(1)(a), Income-tax Act, 2025.
shall not enhance an assessment or a penalty or reduce the amount of refund, unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction
Section 360(2), Income-tax Act, 2025.
irrespective of the fact that such matter was not raised before him by the appellant
Section 360(3), Income-tax Act, 2025.
What people get wrong
Assuming an appeal can only improve the appellant's position. Clause (1)(a) allows enhancement of the assessment and clause (1)(d) allows enhancement of a penalty.
Treating sub-section (2) as requiring more than an opportunity. It requires a reasonable opportunity of showing cause against the enhancement or reduction, not the appellant's consent.
Reading the set-aside power as general. Clause (1)(b) is confined to an appeal against an order of assessment made under section 271 and is given to the Commissioner (Appeals).
Expecting a penalty appeal to be remitted. Clause (1)(d) allows the authority to confirm, cancel, or vary the penalty order so as to enhance or reduce it.
Assuming only grounds raised in the appeal can be decided. Sub-section (3) allows any matter arising out of the proceedings in which the order appealed against was passed to be considered and decided.
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
251 - Powers of the Joint Commissioner (Appeals) or the Commissioner (Appeals)
Rules of the Income-tax Rules, 2026 that work section 360. Where the rule’s own heading names the section we say so; the rest are marked on reading the rule, which is our derivation and not the department’s. A rule that serves the section silently and that we have missed will not appear here.
Rule 192 — Production of additional evidence before Joint Commissioner (Appeals) and Commissioner (Appeals) under section 533(2)(x) — on reading the rule
A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.
Circular No. 367 — Section 264 l Revision of Other Orders [Corresponding to section 33A of the 1922 Act] 1983-07-26
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 360. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
CIT v Kanpur Coal SyndicateSupreme Courttagged s.251 How wide are the first appellate authority's powers when it disposes of an appeal?
CIT v S. Chenniappa MudaliarSupreme Courttagged s.251 Can an appellate authority under the Income-tax Act throw out an appeal because the appellant did not turn up?
CIT v Shapoorji Pallonji MistrySupreme CourtHelps taxpayertagged s.251 Can the first appellate authority tax a source of income the officer never looked at?
Jute Corporation of India Ltd v CITSupreme CourtCuts both waystagged s.251 Can you raise a ground before the CIT(A) that you never raised before the officer?
B.R. Bamasi v CITHigh Courttagged s.251 Can a respondent who did not appeal use Rule 27 to get the assessment annulled?
Bharat Petroleum Corporation Ltd v ITATHigh Courttagged s.251 What happens if an appeal is dismissed for want of prosecution and the recall application is filed late?
Bhupendra Murji Shah v DCITHigh CourtHelps taxpayertagged s.251 Must you pay 20% while your first appeal is still undecided?
CIT v Edward Keventer (Successors)High Courttagged s.251 How far can a respondent go under Rule 27 - can it reopen matters outside the subject-matter of the appeal?
CIT v Premkumar Arjundas Luthra (HUF)High CourtHelps taxpayertagged s.251 You did not appear before the CIT(A). Can the appeal simply be dismissed for non-prosecution?
CIT v Pruthvi Brokers & ShareholdersHigh CourtHelps taxpayertagged s.251 Goetze says I cannot make a claim except by revised return. Does that stop me raising it before the CIT(A) or the Tribunal?
CIT v Sardari Lal & CoHigh CourtHelps taxpayertagged s.251 Can the CIT(A) enhance my assessment by taxing a source the AO never looked at?
CIT v Sundaram & CoHigh Courttagged s.251 Is Rule 27 a concession the Tribunal may refuse, or a right the respondent can insist on?
CIT v Union TyresHigh Courttagged s.251 If the CIT(A) spots an untaxed source of income, what is the correct route to bring it to tax?
Satish Kumar Bansal HUF v NFACHigh CourtHelps taxpayertagged s.251 I asked for a personal hearing in my faceless assessment and never got one. Is the order bad?
Smt. Prabhavati S. Shah v CITHigh Courttagged s.251 If additional evidence does not fit any of the four gateways in Rule 46A, is the CIT(A) powerless to look at it?
Kaane Visionary Projects Pvt Ltd v ACITITATHelps taxpayertagged s.251 The CIT(A) deleted the addition but taxed something else instead. Can the first appeal introduce a new source of income?
Net Agri Co P Ltd v ITOITATHelps taxpayertagged s.251 The CIT(A) accepted my explanation for the property investment but taxed the cash deposits behind the loan repayments instead. Can he do that without…
What the CIT(A)'s enhancement notice has to saytagged s.251 The CIT(A) has issued an enhancement notice that says almost nothing. Must it set out what he proposes to add and how it is worked out?
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.
