Effective October 1, 2024, the Finance Bill 2024 introduces significant changes to the powers of the Commissioner (Appeals) under Section 251 of the Income-tax Act. Currently, the Commissioner (Appeals) can confirm, reduce, enhance, or annul assessments and penalties. The new amendment empowers the Commissioner (Appeals) to set aside assessments made under Section 144, which deals with best judgment assessments, and refer these cases back to the Assessing Officer for a fresh evaluation. This change aims to address the backlog of appeals and ensure more accurate assessments by allowing further scrutiny. Additionally, the amendment to Section 153(3) will set time limits for disposing of cases remanded by the Commissioner (Appeals). This update is designed to improve efficiency in handling disputes and expedite the resolution process in tax appeals.
Budget 2024: Powers of the Commissioner (Appeals)
The existing provisions of section 251 of the Act specify the powers of the Joint Commissioner (Appeals) or the Commissioner (Appeals). Further, sub-section (1) of the said section provides that Commissioner (Appeals) shall have, inter-alia, the following powers in disposing of an appeal:
(a) He may confirm, reduce, enhance or annul the assessment, in the case of an appeal against an order of assessment.
(b) He may confirm, cancel, or vary to enhance or reduce, the penalty order, in the case of an appeal against an order imposing a penalty.
2. Further, sub-section (4) of section 250 of the Act prescribes that Commissioner (Appeals) may seek the report from the Assessing Officer after making further inquiry, before disposing any appeal.
3. It has been found that in the best judgement cases, taxpayers remain nonresponsive to the letters or notices issued by the Faceless Assessing Officer. However, they directly file the appeal to Commissioner (Appeals) against the relevant assessment order.
4. Considering the huge pendency of appeals and disputed tax demands at the Commissioner (Appeals) stage, it is proposed that the cases where assessment order was passed as best judgement case under section 144 of the Act, Commissioner (Appeals) shall be empowered to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment. Further, it is proposed to make consequential amendment in section 153(3) of the Act in order to provide the time limit for disposal of cases which are set aside by the Commissioner (Appeals).
5. This amendment will take effect from the 1st day of October, 2024. It will be applicable to appellate orders passed by the Commissioner (Appeals) on or after 01.10.2024.
[Clause 77]
Extract of Clause 71 of Finance Bill 2024
Clause 77 of the Bill seeks to amend section 251 of the Income-tax Act relating to powers of the Joint Commissioner (Appeals) or the Commissioner (Appeals).
Sub-section (1) of the said section provides that Commissioner (Appeals) shall have, inter alia, the powers to confirm, reduce, enhance or annul the assessment, in the case of an appeal against an order of assessment; or confirm, cancel, or vary to enhance or reduce, the penalty order, in the case of an appeal against an order imposing a penalty while disposing of such appeal.
It is proposed to amend the said sub-section by inserting a proviso in clause (a) of subsection (1) thereof to provide that where an appeal is against an order of assessment under section 144, the Commissioner (Appeals) shall have the power to set aside such assessment made under section 144, and refer the case back to the Assessing Officer for making a fresh assessment.
This amendment will take effect from 1st October, 2024.
Amendment of section 251.
In section 251 of the Income-tax Act, in sub-section (1), in clause (a), the following proviso shall be inserted with effect from the 1st day of October, 2024, namely:––
“Provided that 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;”.
