CHAPTER XX — APPEALS AND REVISION | B.—Appeals to the Appellate Tribunal
CHAPTER XX — APPEALS AND REVISION | B.—Appeals to the Appellate Tribunal
Section 254 — Orders of Appellate Tribunal
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live. The Tribunal's order-making power (sub-s.1), rectification of mistakes apparent from the record (sub-s.2), stay of demand with outer time-limits (sub-s.2A), costs (sub-s.2B), transmission of the order (sub-s.3, with new sub-s.3A from the Finance Act, 2026), and the finality of its factual decisions (sub-s.4).
Finance Act, 2026: AMENDED. New sub-section (3A) inserted (deemed w.e.f. 30-3-2026): for orders passed on or after 1-10-2026, the Tribunal shall send a copy electronically to the jurisdictional Principal Commissioner/Commissioner on the designated portal, and the limitation periods for any appeal, reference or revision apply accordingly.
Nature / mechanism: Plenary appellate disposal subject to the subject-matter limit; a narrow rectification power (mistake apparent, not review); a circumscribed stay power; and finality on questions of fact.
Litigation profile: Among the most litigated provisions of the Act — the breadth of section 254(1), the line between rectification and review under section 254(2), and the stay regime under section 254(2A).
A. COMMENTARY
Section 254(1): wide, but tied to the subject-matter of the appeal
The Tribunal may pass 'such orders thereon as it thinks fit'. The word 'thereon' ties the power to the subject-matter of the appeal (Hukumchand Mills), but within that subject-matter the power is plenary — it may confirm, reduce, enhance (within limits), annul, remand for inquiry, or decide a pure question of law arising on the record (National Thermal Power; Mahalakshmi Textile). A respondent may, under Rule 27, support the order on a ground decided against him without filing a cross-appeal.
The Tribunal cannot dismiss an appeal for default
Per S. Chenniappa Mudaliar, the Tribunal must decide the appeal on merits; it cannot dismiss it merely because the appellant or his counsel is absent. Rule 24 was amended to conform — an ex parte order on merits is permissible, but dismissal for non-prosecution is not, and such an order is liable to recall.
Section 254(2): rectification, not review
The Tribunal may rectify a 'mistake apparent from the record' within the limitation prescribed. The mistake must be patent, obvious and not requiring elaborate argument (Volkart Bros). Non-consideration of a binding jurisdictional/Supreme Court decision, or of material on record, is such a mistake (Saurashtra Kutch; Honda Siel), and the Tribunal may even recall an order in its entirety to cure a resulting prejudice (Lachman Dass Bhatia). But section 254(2) is not a power of review: the Tribunal cannot re-appreciate merits or substitute a different view — the remedy for an erroneous order on merits is an appeal to the High Court (Reliance Telecom).
Section 254(2A): stay of demand and its outer limits
The Tribunal may stay recovery, but a stay cannot extend beyond 365 days in the aggregate. In Pepsi Foods the Supreme Court struck down, as violative of Article 14, the third proviso in so far as it mandated automatic vacation of stay on expiry of 365 days 'even if the delay in disposing of the appeal is not attributable to the assessee' — reading down 'even' so that stay may be extended where the delay is not the assessee's fault. (The Finance Act, 2025 amendments to the stay conditions, including the 20% deposit requirement, are read with this.)
Section 254(3A): the Finance Act, 2026 insertion
For orders passed on or after 1-10-2026, the Tribunal must transmit its order electronically to the jurisdictional Principal Commissioner/Commissioner on the designated portal, with limitation for any further appeal, reference or revision running accordingly — a digital-service measure to fix the start of limitation with certainty. Sub-section (4) preserves the finality of the Tribunal's findings of fact, save the reference/appeal routes in sections 256-260A.
B. STATUTORY TEXT (verbatim)
Reproduced verbatim from the Income-tax Act, 1961. Sub-section (3A) — shown in its statutory place after sub-section (3) — was inserted by the Finance Act, 2026 and is deemed inserted w.e.f. 30-3-2026 (operative for Tribunal orders passed on or after 1-10-2026); it is the only Finance Act, 2026 change to Chapter XX.
Orders of Appellate Tribunal.
254. (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.
(1A) [***]
(2) The Appellate Tribunal may, at any time within six months from the end of the month in which the order was passed, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer :
Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard :
Provided further that any application filed by the assessee in this sub-section on or after the 1st day of October, 1998, shall be accompanied by a fee of fifty rupees.
(2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) or sub-section (2) of section 253 :
Provided that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of section 253, for a period not exceeding one hundred and eighty days from the date of such order subject to the condition that the assessee deposits not less than twenty per cent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnishes security of equal amount in respect thereof and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order:
Provided further that no extension of stay shall be granted by the Appellate Tribunal, where such appeal is not so disposed of within the said period of stay as specified in the order of stay, unless the assessee makes an application and has complied with the condition referred to in the first proviso and the Appellate Tribunal is satisfied that the delay in disposing of the appeal is not attributable to the assessee, so however, that the aggregate of the period of stay originally allowed and the period of stay so extended shall not exceed three hundred and sixty-five days and the Appellate Tribunal shall dispose of the appeal within the period or periods of stay so extended or allowed:
Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceed three hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee.
(2B) The cost of any appeal to the Appellate Tribunal shall be at the discretion of that Tribunal.
(3) The Appellate Tribunal shall send a copy of any orders passed under this section to the assessee and to the Principal Commissioner or Commissioner.
(3A) For the purposes of sub-section (3), where any order is passed under this section on or after the 1st day of October, 2026, the Appellate Tribunal shall send a copy of the order to the jurisdictional Principal Commissioner or Commissioner electronically on the designated portal designed by the Director General or Principal Director General and the provisions relating to time limits under this Act for any appeal, reference or revision shall apply accordingly. [Inserted by the Finance Act, 2026, deemed w.e.f. 30-3-2026.]
(4) Save as provided in section 256 or section 260A, orders passed by the Appellate Tribunal on appeal shall be final.
C. AUTHORITIES
The clusters below track the three battlegrounds — the breadth of section 254(1), rectification versus review under section 254(2), and the stay regime under section 254(2A).
Cluster 1 — Section 254(1): scope of 'thereon' and plenary disposal
Hukumchand Mills Ltd. v. CIT, (1967) 63 ITR 232 (SC)
Holding 'Such orders thereon as the Tribunal thinks fit' confines the power to the subject-matter of the appeal, but within it the Tribunal has all the powers of the first appellate authority, including directing a further inquiry.
Relevance The classic delineation of the section 254(1) power.
Holding The Tribunal may permit a new aspect of the subject-matter of the appeal to be urged; its jurisdiction is over the whole subject-matter.
Relevance Breadth of disposal within the subject-matter.
National Thermal Power Co. Ltd. v. CIT, (1998) 229 ITR 383 (SC)
Holding The Tribunal can decide a question of law arising on the facts on record though raised for the first time.
Relevance Latitude to decide new legal questions.
CIT v. S. Chenniappa Mudaliar, (1969) 74 ITR 41 (SC)
Holding The Tribunal is bound to decide the appeal on merits and cannot dismiss it for default of appearance; Rule 24 permitting such dismissal was ultra vires section 33(4) of the 1922 Act (and was amended).
Relevance An ex parte dismissal for non-prosecution is impermissible and liable to recall.
Cluster 2 — Section 254(2): rectification, not review
T.S. Balaram, ITO v. Volkart Bros., (1971) 82 ITR 50 (SC)
Holding A 'mistake apparent from the record' is one that is obvious and patent, not one requiring a long-drawn process of reasoning on points on which there may be two opinions; a debatable point of law is not such a mistake.
Relevance The benchmark for the section 254(2) jurisdiction.
Holding Non-consideration of a decision of the jurisdictional High Court or of the Supreme Court is a mistake apparent from the record rectifiable under section 254(2).
Relevance Identifies a recognised category of apparent mistake.
Honda Siel Power Products Ltd. v. CIT, (2007) 295 ITR 466 (SC)
Holding Where the Tribunal fails to consider material/argument on record causing prejudice, rectification (including recall) is justified to ensure no party suffers due to the Tribunal's own mistake; the power exists to prevent prejudice, not to review.
Relevance Justifies recall to cure prejudice from non-consideration.
Lachman Dass Bhatia Hingwala (P) Ltd. v. ACIT, (2011) 330 ITR 243 (Del)(FB)
Holding Under section 254(2) the Tribunal may, in an appropriate case, recall its order in entirety to rectify a mistake apparent from the record, but cannot re-adjudicate on merits in the guise of rectification.
Relevance Confirms recall-in-entirety as a permissible remedy while marking the review boundary.
Holding Section 254(2) is confined to correcting a mistake apparent from the record and is akin to Order XLVII Rule 1 CPC; the Tribunal cannot recall and re-hear on merits. If the order is erroneous on merits, the remedy is an appeal to the High Court.
Relevance The decisive recent authority against using section 254(2) to review.
Cluster 3 — Section 254(2A): the stay regime
DCIT v. Pepsi Foods Ltd. (now PepsiCo India Holdings P. Ltd.), (2021) 433 ITR 295 (SC)
Holding The third proviso to section 254(2A), in so far as it mandated automatic vacation of stay after 365 days even where the delay was not attributable to the assessee, is arbitrary and discriminatory under Article 14 and is struck down/read down by deleting 'even'; stay may be extended where the delay is not the assessee's fault.
Relevance The governing authority on the limits of the automatic-vacation rule.
Principle — outer limit and conditions
Position Stay under section 254(2A) is subject to the aggregate 365-day cap and (post Finance Act, 2025) the conditions for grant; the Tribunal retains power to extend in deserving cases consistent with Pepsi Foods.
Caution Apply with the current text of the provisos and the Pepsi Foods reading.
CHAPTER XX — APPEALS AND REVISION | B.—Appeals to the Appellate Tribunal
Section 254 — Orders of Appellate Tribunal
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live. The Tribunal's order-making power (sub-s.1), rectification of mistakes apparent from the record (sub-s.2), stay of demand with outer time-limits (sub-s.2A), costs (sub-s.2B), transmission of the order (sub-s.3, with new sub-s.3A from the Finance Act, 2026), and the finality of its factual decisions (sub-s.4).
Finance Act, 2026: AMENDED. New sub-section (3A) inserted (deemed w.e.f. 30-3-2026): for orders passed on or after 1-10-2026, the Tribunal shall send a copy electronically to the jurisdictional Principal Commissioner/Commissioner on the designated portal, and the limitation periods for any appeal, reference or revision apply accordingly.
Nature / mechanism: Plenary appellate disposal subject to the subject-matter limit; a narrow rectification power (mistake apparent, not review); a circumscribed stay power; and finality on questions of fact.
Litigation profile: Among the most litigated provisions of the Act — the breadth of section 254(1), the line between rectification and review under section 254(2), and the stay regime under section 254(2A).
A. COMMENTARY
Section 254(1): wide, but tied to the subject-matter of the appeal
The Tribunal may pass 'such orders thereon as it thinks fit'. The word 'thereon' ties the power to the subject-matter of the appeal (Hukumchand Mills), but within that subject-matter the power is plenary — it may confirm, reduce, enhance (within limits), annul, remand for inquiry, or decide a pure question of law arising on the record (National Thermal Power; Mahalakshmi Textile). A respondent may, under Rule 27, support the order on a ground decided against him without filing a cross-appeal.
The Tribunal cannot dismiss an appeal for default
Per S. Chenniappa Mudaliar, the Tribunal must decide the appeal on merits; it cannot dismiss it merely because the appellant or his counsel is absent. Rule 24 was amended to conform — an ex parte order on merits is permissible, but dismissal for non-prosecution is not, and such an order is liable to recall.
Section 254(2): rectification, not review
The Tribunal may rectify a 'mistake apparent from the record' within the limitation prescribed. The mistake must be patent, obvious and not requiring elaborate argument (Volkart Bros). Non-consideration of a binding jurisdictional/Supreme Court decision, or of material on record, is such a mistake (Saurashtra Kutch; Honda Siel), and the Tribunal may even recall an order in its entirety to cure a resulting prejudice (Lachman Dass Bhatia). But section 254(2) is not a power of review: the Tribunal cannot re-appreciate merits or substitute a different view — the remedy for an erroneous order on merits is an appeal to the High Court (Reliance Telecom).
Section 254(2A): stay of demand and its outer limits
The Tribunal may stay recovery, but a stay cannot extend beyond 365 days in the aggregate. In Pepsi Foods the Supreme Court struck down, as violative of Article 14, the third proviso in so far as it mandated automatic vacation of stay on expiry of 365 days 'even if the delay in disposing of the appeal is not attributable to the assessee' — reading down 'even' so that stay may be extended where the delay is not the assessee's fault. (The Finance Act, 2025 amendments to the stay conditions, including the 20% deposit requirement, are read with this.)
Section 254(3A): the Finance Act, 2026 insertion
For orders passed on or after 1-10-2026, the Tribunal must transmit its order electronically to the jurisdictional Principal Commissioner/Commissioner on the designated portal, with limitation for any further appeal, reference or revision running accordingly — a digital-service measure to fix the start of limitation with certainty. Sub-section (4) preserves the finality of the Tribunal's findings of fact, save the reference/appeal routes in sections 256-260A.
B. STATUTORY TEXT (verbatim)
Reproduced verbatim from the Income-tax Act, 1961. Sub-section (3A) — shown in its statutory place after sub-section (3) — was inserted by the Finance Act, 2026 and is deemed inserted w.e.f. 30-3-2026 (operative for Tribunal orders passed on or after 1-10-2026); it is the only Finance Act, 2026 change to Chapter XX.
Orders of Appellate Tribunal.
254. (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.
(1A) [***]
(2) The Appellate Tribunal may, at any time within six months from the end of the month in which the order was passed, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer :
Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard :
Provided further that any application filed by the assessee in this sub-section on or after the 1st day of October, 1998, shall be accompanied by a fee of fifty rupees.
(2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) or sub-section (2) of section 253 :
Provided that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of section 253, for a period not exceeding one hundred and eighty days from the date of such order subject to the condition that the assessee deposits not less than twenty per cent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnishes security of equal amount in respect thereof and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order:
Provided further that no extension of stay shall be granted by the Appellate Tribunal, where such appeal is not so disposed of within the said period of stay as specified in the order of stay, unless the assessee makes an application and has complied with the condition referred to in the first proviso and the Appellate Tribunal is satisfied that the delay in disposing of the appeal is not attributable to the assessee, so however, that the aggregate of the period of stay originally allowed and the period of stay so extended shall not exceed three hundred and sixty-five days and the Appellate Tribunal shall dispose of the appeal within the period or periods of stay so extended or allowed:
Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceed three hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee.
(2B) The cost of any appeal to the Appellate Tribunal shall be at the discretion of that Tribunal.
(3) The Appellate Tribunal shall send a copy of any orders passed under this section to the assessee and to the Principal Commissioner or Commissioner.
(3A) For the purposes of sub-section (3), where any order is passed under this section on or after the 1st day of October, 2026, the Appellate Tribunal shall send a copy of the order to the jurisdictional Principal Commissioner or Commissioner electronically on the designated portal designed by the Director General or Principal Director General and the provisions relating to time limits under this Act for any appeal, reference or revision shall apply accordingly. [Inserted by the Finance Act, 2026, deemed w.e.f. 30-3-2026.]
(4) Save as provided in section 256 or section 260A, orders passed by the Appellate Tribunal on appeal shall be final.
C. AUTHORITIES
The clusters below track the three battlegrounds — the breadth of section 254(1), rectification versus review under section 254(2), and the stay regime under section 254(2A).
Cluster 1 — Section 254(1): scope of 'thereon' and plenary disposal
Hukumchand Mills Ltd. v. CIT, (1967) 63 ITR 232 (SC)
Holding 'Such orders thereon as the Tribunal thinks fit' confines the power to the subject-matter of the appeal, but within it the Tribunal has all the powers of the first appellate authority, including directing a further inquiry.
Relevance The classic delineation of the section 254(1) power.
CIT v. Mahalakshmi Textile Mills Ltd., (1967) 66 ITR 710 (SC)
Holding The Tribunal may permit a new aspect of the subject-matter of the appeal to be urged; its jurisdiction is over the whole subject-matter.
Relevance Breadth of disposal within the subject-matter.
National Thermal Power Co. Ltd. v. CIT, (1998) 229 ITR 383 (SC)
Holding The Tribunal can decide a question of law arising on the facts on record though raised for the first time.
Relevance Latitude to decide new legal questions.
CIT v. S. Chenniappa Mudaliar, (1969) 74 ITR 41 (SC)
Holding The Tribunal is bound to decide the appeal on merits and cannot dismiss it for default of appearance; Rule 24 permitting such dismissal was ultra vires section 33(4) of the 1922 Act (and was amended).
Relevance An ex parte dismissal for non-prosecution is impermissible and liable to recall.
Cluster 2 — Section 254(2): rectification, not review
T.S. Balaram, ITO v. Volkart Bros., (1971) 82 ITR 50 (SC)
Holding A 'mistake apparent from the record' is one that is obvious and patent, not one requiring a long-drawn process of reasoning on points on which there may be two opinions; a debatable point of law is not such a mistake.
Relevance The benchmark for the section 254(2) jurisdiction.
ACIT v. Saurashtra Kutch Stock Exchange Ltd., (2008) 305 ITR 227 (SC)
Holding Non-consideration of a decision of the jurisdictional High Court or of the Supreme Court is a mistake apparent from the record rectifiable under section 254(2).
Relevance Identifies a recognised category of apparent mistake.
Honda Siel Power Products Ltd. v. CIT, (2007) 295 ITR 466 (SC)
Holding Where the Tribunal fails to consider material/argument on record causing prejudice, rectification (including recall) is justified to ensure no party suffers due to the Tribunal's own mistake; the power exists to prevent prejudice, not to review.
Relevance Justifies recall to cure prejudice from non-consideration.
Lachman Dass Bhatia Hingwala (P) Ltd. v. ACIT, (2011) 330 ITR 243 (Del)(FB)
Holding Under section 254(2) the Tribunal may, in an appropriate case, recall its order in entirety to rectify a mistake apparent from the record, but cannot re-adjudicate on merits in the guise of rectification.
Relevance Confirms recall-in-entirety as a permissible remedy while marking the review boundary.
CIT v. Reliance Telecom Ltd. / Reliance Communications Ltd., (2022) 440 ITR 1 (SC)
Holding Section 254(2) is confined to correcting a mistake apparent from the record and is akin to Order XLVII Rule 1 CPC; the Tribunal cannot recall and re-hear on merits. If the order is erroneous on merits, the remedy is an appeal to the High Court.
Relevance The decisive recent authority against using section 254(2) to review.
Cluster 3 — Section 254(2A): the stay regime
DCIT v. Pepsi Foods Ltd. (now PepsiCo India Holdings P. Ltd.), (2021) 433 ITR 295 (SC)
Holding The third proviso to section 254(2A), in so far as it mandated automatic vacation of stay after 365 days even where the delay was not attributable to the assessee, is arbitrary and discriminatory under Article 14 and is struck down/read down by deleting 'even'; stay may be extended where the delay is not the assessee's fault.
Relevance The governing authority on the limits of the automatic-vacation rule.
Principle — outer limit and conditions
Position Stay under section 254(2A) is subject to the aggregate 365-day cap and (post Finance Act, 2025) the conditions for grant; the Tribunal retains power to extend in deserving cases consistent with Pepsi Foods.
Caution Apply with the current text of the provisos and the Pepsi Foods reading.