Section 254

Section 254 — the law in short

What the courts have decided on section 254, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Reliance Telecom Ltd Supreme CourtHelps department
  The Tribunal recalled its whole order on my miscellaneous application. Will that recall survive?
  No, where the recall amounts to rehearing the appeal on merits. Section 254(2) is a rectification power limited to a mistake apparent from the record; a Tribunal that reconsiders its own conclusions is sitting in appeal over itself. The remedy against an order said to be wrong on merits is an appeal to the High Court.
• DCIT v Pepsi Foods Ltd Supreme CourtHelps taxpayer
  Your Tribunal stay lapsed at 365 days through no fault of yours. Is that constitutional?
  No. The third proviso to s.254(2A), which vacated a stay after 365 days even where the delay was not attributable to the assessee, violates Article 14. A stay now vacates only where the delay is attributable to you.
• Goetze (India) Ltd v CIT Supreme CourtHelps department
  You want to make a claim you missed, but the time to revise the return has gone. Can you just write to the officer?
  Not to the Assessing Officer — a claim before him needs a revised return. But the Court expressly said this does not touch the Tribunal's power under s.254, so the appellate route stays open.
• K.C. Builders v ACIT Supreme CourtHelps taxpayer
  The Tribunal cancelled my concealment penalty. Can the 276C prosecution still continue?
  No. Penalty under s.271(1)(c) and prosecution under s.276C rest on the same fact — concealment. Once the Tribunal, as the final fact-finding authority, holds there was no concealment and cancels the penalty, the substratum of the complaint disappears and quashing follows automatically.
• National Thermal Power Co Ltd v CIT Supreme CourtHelps taxpayer
  You missed a legal point below. Can you raise it for the first time before the Tribunal?
  Yes, where it is a question of law arising from facts already on the record. Section 254 is couched in the widest possible terms and contains nothing confining the Tribunal to grounds urged before the lower authorities.
• Kapurchand Shrimal v CIT Supreme CourtCuts both ways
  The assessing officer ignored my partition claim and assessed the family anyway. If the Tribunal finds that illegal, can it simply cancel the assessment and stop there?
  No. The Supreme Court held that although an assessment made on a Hindu undivided family without the enquiry the statute requires into a partition claim made in time must be set aside, the Tribunal's duty does not end with declaring the assessment illegal. An appellate authority has the jurisdiction and the duty to correct all errors in the proceedings under appeal and to issue appropriate directions to the authority below to dispose of the matter afresh, unless the statute forbids it. The Tribunal erred in cancelling the assessments without directing fresh ones, and the High Court erred in upholding them.
• ITO v M.K. Mohammed Kunhi Supreme CourtHelps taxpayer
  My appeal is pending before the Tribunal and recovery of the demand is going on. Can the Tribunal stay recovery when no section gives it that power?
  Yes. The Supreme Court held that the Tribunal has the power to stay recovery as incidental or ancillary to its appellate jurisdiction. No provision confers it expressly, and the statutory stay in section 220(6) is available only while an appeal is pending before the first appellate authority, not the Tribunal. But an express grant of statutory power carries by necessary implication the authority to use all reasonable means to make the grant effective, and the wide powers in section 254(1) carry with them everything incidental and necessary to make their exercise fully effective - including, in proper cases, orders preventing a successful appeal from being rendered nugatory.
• CIT v Scindia Steam Navigation Co Ltd Supreme CourtHelps taxpayer
  Can I argue a point in the High Court that was never taken before the Tribunal, if it arises on the facts the Tribunal found?
  Not as a new question, but you may take a new contention within the question referred. The Supreme Court held that only a question raised before or decided by the Tribunal arises out of its order. A question neither raised before nor considered by the Tribunal is not one arising out of its order, even though it arises on the findings. But where the question referred is itself wide enough, a fresh contention within its framework may be advanced. Here the referred question - whether Rs 9,26,532 was properly included in the 1946-47 assessment - covered the argument that the charging proviso was not yet in force.
• Omar Salay Mohamed Sait v CIT Supreme CourtCuts both ways
  The order against me reads like a hunch dressed up as a finding. Is there an old authority that says the appellate authority has to decide on the evidence?
  Yes. This 1959 Supreme Court decision is the authority for the proposition that conclusions reached by the revenue authorities must be based on evidence, and that no addition can be made on the basis of suspicion, conjecture or surmise. It is cited to this day by the Tribunal for exactly that, and it is the counterweight to the line of cases that lets the authorities act on the probabilities of a case.
• Honeywell Technology Solutions Lab P Ltd v DCIT High CourtHelps taxpayerNo later treatment found
  The Tribunal decided my appeal years ago and the Assessing Officer still has not passed the order giving effect. What do I get besides the refund?
  You get the refund on the footing that your returned income has become final, plus additional interest under s.244A(1A) at three per cent per annum. The Karnataka High Court held that where the order giving effect is not passed within the three months allowed by s.153(5), the Assessing Officer becomes functus officio, the returned income stands, any tax collected above the tax on the returned income must be refunded, and the additional interest runs from the expiry of the s.153(5) period to the date the refund is granted.
• Sanjay Sawhney v PCIT High CourtHelps taxpayerNo later treatment found
  I won before the CIT(A) but lost the jurisdiction point. Can I raise it in their appeal?
  Yes. Rule 27 lets a respondent who has not appealed support the order on a ground decided against him, provided the ground relates to the subject matter of the appeal and bears on the outcome. Not filing a cross-objection is not acceptance of the adverse findings, and the Rule prescribes no written application.
• Vodafone India Services Pvt Ltd v Union of India (Gujarat) High CourtHelps taxpayerNo later treatment found
  The AO rejected my stay application in a few lines and told me to pay 20%. Can that order stand?
  No. An order under s.220(6) that brushes aside the assessee's submissions and mechanically directs payment of 20% is not a speaking order and will be quashed. The Gujarat High Court also held that a penalty demand is not 'tax', so the CBDT's 20% benchmark and the parameters that govern a tax demand do not simply carry across to a penalty appeal.
• JCB India Ltd v DCIT High CourtHelps taxpayer
  The Tribunal remanded my transfer pricing issue. The Assessing Officer has now passed a final assessment order straight off the TPO's fresh order, without any draft order. Is that good?
  No. Section 144C(1) requires a draft assessment order after receipt of the TPO's report, and there is nothing in its language confining that requirement to the first round; it applies equally where the TPO has acted on a remand by the Tribunal. The Delhi High Court held the resulting final assessment orders were without jurisdiction, that the defect was an incurable illegality and not a mere irregularity which s.292B could cure, and that the correct course was not to send the parties back to the draft order stage but to quash.
• Turner International India Pvt Ltd v DCIT High CourtHelps taxpayer
  After the Tribunal remanded my transfer pricing case, the assessing officer went straight to a final assessment order without a draft order. Is that order valid?
  No. The Delhi High Court set aside the final assessment orders for assessment years 2007-08 and 2008-09, the demand notices and the penalty proceedings, because the assessing officer did not first pass a draft assessment order as section 144C(1) mandatorily requires. The Court held the point was no longer res integra, following Zuari Cement, whose affirmation by the Supreme Court through dismissal of the Revenue's special leave petition it noted, along with Vijay Television, ESPN Star Sports and International Air Transport Association. It rejected the Revenue's argument that the omission was a curable defect to be remedied by a remand.
• Bharat Petroleum Corporation Ltd v ITAT High CourtCuts both ways
  What happens if an appeal is dismissed for want of prosecution and the recall application is filed late?
  The appellant did not appear and its appeal was dismissed for want of prosecution. The Bombay High Court held that there is no power to dismiss an appeal for non-appearance and that the appeal had to be decided on merits after hearing the respondent. The dismissal was irregular, but because the recall application came after the four-year limit it could not be undone.
• CIT v Pruthvi Brokers & Shareholders High CourtHelps taxpayer
  Goetze says I cannot make a claim except by revised return. Does that stop me raising it before the CIT(A) or the Tribunal?
  No. An assessee is entitled to raise before the appellate authorities not merely additional legal submissions but additional claims not made in the return. Goetze (India) was confined to the power of the assessing authority and the Supreme Court expressly said it does not touch the power of the Tribunal under s.254. The appellate authorities have jurisdiction to entertain a new ground; whether they exercise the discretion to admit it is a separate question.
• CIT v Bharat Aluminium High CourtHelps taxpayer
  One machine in my block of assets was not used this year. Can the AO deny depreciation on it?
  No. Once assets are clubbed into a block they lose their individual identity and become an inseparable part of the block, so 'used for the purpose of business' means use of the block and not of any specific item. User of an individual asset is required only in the first year in which that asset is acquired.
• Agrawal Warehousing and Leasing Ltd v CIT High CourtHelps taxpayer
  The Commissioner (Appeals) refused to follow a Tribunal decision in my favour because he thought it was wrong. Can he do that?
  No. The Madhya Pradesh High Court held that orders of the Tribunal bind all the Revenue authorities working within its jurisdiction, and the Commissioner (Appeals) committed both judicial impropriety and an error of law in declining to follow a Tribunal decision he thought incorrect. His course was to follow it and leave the Department to appeal. The Tribunal was equally wrong to overrule its own earlier decision, given by the same Bench; it should have asked the President to constitute a larger Bench under section 255(3). The questions were answered for the assessee and the matter went back to the Tribunal.
• Ahmedabad Electricity Co Ltd v CIT High CourtHelps taxpayer
  A judgment in my favour came after my appeal was filed. Can I raise it as an additional ground before the Tribunal even though it was never before the first appellate authority?
  Yes. A larger Bench of the Bombay High Court held that the Tribunal has jurisdiction to permit additional grounds to be raised before it even though they do not arise from the order of the Appellate Assistant Commissioner, so long as they relate to the subject matter of the entire tax proceedings. The words pass such orders thereon as it thinks fit in section 254(1) confer the widest jurisdiction; thereon does not cut it down. Whether to allow a new ground remains a discretion, to be exercised for good reason. Both references were answered in favour of the assessee.
• Lodha Maharana Pratap Nagar Co-operative Housing Society Limited v ITO ITATCuts both waysNo later treatment found
  The CPC taxed my society's receipts from members. Can I get that corrected under section 154, or have I lost the claim by not making it in the return?
  Section 154 will not carry it. The Mumbai Tribunal agreed with the Assessing Officer and the CIT(A) that mutuality and eligibility under s.80P require examination of foundational facts and cannot be a mistake apparent from the record. But the claim was not lost: Goetze (India) restricts only the Assessing Officer, not the appellate authorities, so the Tribunal restored the matter to the Assessing Officer to examine the claim on merits.
• Dr. Rangasamy Sudha v ITO, Erode ITATHelps taxpayerNo later treatment found
  I meant to stay in the new regime but a wrong Form 10-IE put me back in the old one, and CPC has taxed me under the old regime with no Chapter VI-A deductions because I claimed none in the return. Can I claim them now?
  Yes. The Chennai Tribunal held that a fresh claim of deduction made for the first time before the first appellate authority has to be entertained, and directed the Assessing Officer to recompute the income allowing Rs 2,00,000 of Chapter VI-A deductions — Rs 1,50,000 under s.80C and Rs 50,000 under s.80TTB — that had never been claimed in the return. If CPC has processed the return on the old regime, the assessee is entitled to the old regime's deductions.
• Sprinklr India P. Ltd. v DCIT ITATHelps taxpayerNo later treatment found
  My APA application is still pending and its rollback period covers the very year under appeal. Is that any answer to the recovery notice?
  Yes, it is a ground for stay. Where the year under appeal falls within the rollback period of a pending APA application, the outcome of the APA proceeding has a direct bearing on that year, and the Tribunal will stay the balance of the demand. Here, with 20 per cent already deposited, the balance of Rs. 6,72,38,488 was stayed for 180 days or until disposal of the appeal, whichever is earlier.
• Statutory position — s.150(2): a finding or direction cannot revive a year that was already time-barred when the order under appeal was passed, and from 1 February 2026 the notice itself has a deadline CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  The officer has reopened a very old year and says he is only giving effect to a finding in an appellate order, so limitation does not apply. Is that right, and what stops him?
  Section 150(1) lifts the time limit in section 149: where an assessment, reassessment or recomputation is in consequence of or to give effect to a finding or direction in an order passed on appeal, reference or revision, or by a court, the section 148 notice may be issued at any time. Section 150(2) is the limit on that power and it is the provision that decides cases — sub-section (1) does not apply where the year in question could not have been assessed, by reason of any other time limit, at the moment the order that was the subject-matter of the appeal, reference or revision was made, so a year already dead on that date stays dead. The Supreme Court so held in K.M. Sharma, quashing notices for assessment years 1968-69 to 1971-72 and 1981-82, and the Constitution Bench in Murlidhar Bhagwan Das had already confined “finding” and “direction” to what was necessary for the year under appeal, so a remark about another year does not open it. Section 150 was substituted with retrospective effect from 1 February 2026: sub-section (1) is re-lettered and widened to a court in a proceeding under this Act, sub-section (2) gains a second measuring date, and a new sub-section (3) gives the department only three months from the end of the quarter in which the certified copy of the order reaches the jurisdictional Principal Commissioner or Commissioner. For a tax year beginning on or after 1 April 2026 the provision is section 283 of the Income-tax Act, 2025.
• Sections 15 to 19 of the Black Money Act - the appeal machinery CBDT Circulars & InstructionsCuts both waysNo later treatment found
  What are the time limits, forms and fees for an appeal under the Black Money Act, and where do they differ from the Income-tax Act?
  An appeal to the Commissioner (Appeals) lies under s.15(1) against the amount of tax on undisclosed foreign income or assets, against liability to be assessed under the Act, against a penalty, and against a rectification order or a refusal to rectify. It is filed in Form 2 with a fee of Rs 10,000 within thirty days, and Rule 6(4) bars admission unless the tax with penalty and interest on the liability not objected to has been paid. An appeal to the Tribunal lies within sixty days in Form 3 with a fee of Rs 25,000, with cross-objections in Form 4 within thirty days. An appeal to the High Court on a substantial question of law lies within 120 days. The critical departure from the Income-tax Act is that the power to condone delay is capped: one year before the Commissioner (Appeals) under s.15(4) and one year before the Tribunal under s.18(5), where ss.249(3) and 253(5) of the Income-tax Act contain no such ceiling.
• Statutory position — s.234D: interest on a refund granted under s.143(1) that regular assessment shows should not have been granted — the rate, the period, the reduction under sub-section (2), and Explanation 2 for assessment years commencing before 1 June 2003 CBDT Circulars & InstructionsCuts both ways
  We were given a refund when the return was processed under s.143(1). On scrutiny the Assessing Officer has now raised a demand and has also charged interest under s.234D on the refund. Is that right, for how long does the interest run, and can he do it for an assessment year that is older than the section itself?
  Yes, on the conditions in sub-section (1). Section 234D charges simple interest where a refund is granted to the assessee under s.143(1) and either (a) no refund is due on regular assessment, or (b) the amount refunded under s.143(1) exceeds the amount refundable on regular assessment. The rate is one-half per cent, on the whole or the excess amount so refunded, for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment. The section was inserted by the Finance Act, 2003 with effect from 1 June 2003, and the words "one-half per cent" were substituted for "two-third" by the Taxation Laws (Amendment) Act, 2003 with effect from 8 September 2003 — both recorded in footnotes printed against the section. Sub-section (2) provides that where, as a result of an order under s.154, s.155, s.250, s.254, s.260, s.262, s.263 or s.264, or an order of the Settlement Commission under s.245D(4), the refund granted under s.143(1) is held to be correctly allowed either in whole or in part, the interest chargeable under sub-section (1) shall be reduced accordingly. Explanation 1 makes a first-time assessment under s.147 or s.153A a regular assessment for the purposes of the section. Explanation 2, which the later editions of the section print and the earlier ones do not, reads: "For the removal of doubts, it is hereby declared that the provisions of this section shall also apply to an assessment year commencing before the 1st day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date." Which amending Act inserted Explanation 2, and from what date, is not established here — the editions of the section that print it carry no footnotes, and the editions that carry footnotes do not print it.
• Sesa Goa Ltd v JCIT High CourtHelps taxpayerOverruled
  The Tribunal disallowed my education cess. Does s.40(a)(ii) actually cover cess?
  The High Court said no — s.40(a)(ii) as enacted contains no reference to 'cess' and there is no scope to read one in, so education and secondary cess were deductible, and the claim could be entertained even though it was not made in the original return. The Supreme Court reversed that order.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.