Section 251 of the Income Tax Act
Income-tax Act, 2025: s.360
Section 251 of the Income-tax Act, 1961 corresponds to section 360 (Powers of Joint Commissioner (Appeals) or Commissioner (Appeals)) of the Income-tax Act, 2025.
Read section 360 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 251 is CIT v. Sardari Lal & Co. (251 ITR 864), cited in 240 of the 1,124 judgments on BharatTax that turn on this section.
Leading authorities on Section 251
An appellate authority cannot introduce a new source of income that was not considered by the Assessing Officer; taxability of new sources should be addressed through reassessment provisions like Section 147/148 or revision under Section 263.
The appellate authority cannot enhance an assessment by considering a source of income that was not examined by the Assessing Officer. The scope of appellate power is limited to the subject matter considered by the Assessing Officer.
Tax planning is legitimate only if it is within the framework of law. Colourable devices cannot be part of tax planning, and it is wrong to encourage avoiding tax through dubious methods.
The appellate authority, while hearing an appeal, possesses all the powers that the original assessing authority had, unless restricted by statute. This means the appellate authority can modify an assessment order on an additional ground not raised before the assessing officer.
The Supreme Court clarified that an appellate authority's 'finding' must be essential for disposing of the appeal for the relevant assessment year, not an incidental observation about another year's income. Appellate authorities cannot issue directions on matters not directly arising in the appeal for the specific assessment year, especially regarding escaped income, which has separate statutory mechanisms.
The primary burden of proof for concealment of income lies with the revenue, and a DVO valuation report can only be relied upon after the revenue has discharged this initial burden.
When a refund is due to an assessee under Section 244A, the amount must first be adjusted towards the interest payable on such refund, with the balance then adjusted against the tax amount refundable. This follows the principle of Section 140A(1) and means "any amount" in Section 244A includes accrued interest.
The assessee bears the onus to prove the veracity of claimed expenses. Income diverted by an overriding obligation before it is earned does not form part of the assessee's total income.
A District Valuation Officer (DVO) report, by itself, is not sufficient incriminating evidence to make additions for unexplained investments in a block assessment under Section 158BC. The revenue bears the primary burden of proof to establish undisclosed income, and a DVO opinion alone is also insufficient information for reopening an assessment under Section 147.
