Powers of the Commissioner (Appeals)-[CIT(A)] [Section 251]

Under Section 251 of the Income Tax Act, 1961, the Commissioner of Income Tax (Appeals) [CIT(A)] has wide-ranging powers to adjudicate appeals against orders passed by the Assessing Officer (AO) or other tax authorities. Here’s a detailed breakdown of these powers:

1. Power to Confirm, Reduce, Enhance, or Annul the Assessment

The CIT(A) can:

✔ Confirm the AO’s order (uphold the assessment).

✔ Reduce the assessment (lower the tax demand).

✔ Enhance the assessment (increase tax liability, but only after giving the appellant a reasonable opportunity to be heard).

✔ Annul the assessment (cancel it entirely if legally invalid).

Example: If the AO wrongly disallowed a business expense, CIT(A) can reduce the taxable income.

2. Power to Set Aside or Remand the Case

• The CIT(A) can set asidethe assessment and direct the AO to make a fresh assessment after proper inquiry.
• The AO must follow CIT(A)’s directions and pass a new order.

Judicial Precedent:

• CIT vs. Kanpur Coal Syndicate (1964)– CIT(A) has co-terminus powers with the AO and can examine all aspects of the case.

3. Power to Consider New Grounds & Evidence

• The CIT(A) can admit new legal argumentsnot raised before the AO.
• Additional evidencecan be submitted under Rule 46A, but only if:
  • The AO refused to admitit despite opportunity.
  • It was not available earlierdue to unavoidable reasons.
  • The CIT(A) considers it necessary for justice.

Example: If the appellant discovers a new legal precedent, they can raise it before CIT(A).

4. Power to Impose or Cancel Penalties

• CIT(A) can confirm, reduce, or cancelpenalties (e.g., under Sections 271, 271A, 271B).
• Can also enhance penaltiesif justified (after giving notice).

Example: If the AO imposed a penalty for late filing, CIT(A) can waive it if reasonable cause is shown.

5. Power to Grant Stay on Demand

• While not explicitly mentioned in Section 251, CIT(A) has implied powersto stay tax recovery during appeal proceedings.
• The appellant must apply separatelyfor a stay.

Practical Tip: File a stay application along with the appeal to avoid coercive recovery.

6. Limitations on CIT(A)’s Powers

❌ Cannot review orders passed by higher authorities (e.g., ITAT, High Court).

❌ Cannot admit appeals against orders where appeal lies directly to ITAT (e.g., transfer pricing cases under Section 92CA).

❌ Cannot modify an order beyond the issues raised in the appeal.

7. Judicial Precedents on CIT(A) Powers

1. Jute Corp. of India Ltd. vs. CIT (1991)– CIT(A) can consider new legal grounds even if not raised before the AO.
2. CIT vs. Shapoorji Pallonji Mistry (1962)– CIT(A) has enhancement powers but must give a fair hearing before increasing tax liability.
3. Esthuri Aswathiah vs. CIT (1966)– CIT(A) must issue a notice before enhancement.

Summary Table: CIT(A) Powers Under Section 251