Section 254 of ITA, 1961 : Section 254: Orders Of Appellate Tribunal

Explanation using Example

Imagine a business owner, Mrs. Sharma, who has been assessed for income tax by the Income Tax Department. She believes that the assessment is incorrect and has resulted in a higher tax demand than what is actually due. Mrs. Sharma decides to appeal against the assessment to the Income Tax Appellate Tribunal (ITAT).

Under Section 254(1) of the Income-tax Act, 1961, the ITAT hears the arguments from both Mrs. Sharma and the Income Tax Department. After considering the evidence presented, the Tribunal passes an order with the decision it deems fit, which could either be in favor of Mrs. Sharma or the Income Tax Department.

Two months after the order, Mrs. Sharma notices a calculation error in the order that went unnoticed during the hearings. She files an application for rectification under Section 254(2). The ITAT reviews the record, acknowledges the mistake, and amends the order within six months from the end of the month in which the original order was passed. However, if the amendment results in an increased tax liability for Mrs. Sharma, the ITAT must give her notice and an opportunity to be heard before making such an amendment.

The ITAT aims to decide on the appeal within four years as per Section 254(2A). If Mrs. Sharma needs a stay on the proceedings, she can apply for it, and the ITAT may grant a stay for up to 180 days initially, with a possible extension up to a total of 365 days, provided the delay is not due to her actions.

As for the costs associated with the appeal, Section 254(2B) states that it will depend on the Tribunal's discretion.

Once the ITAT makes a decision, under Section 254(3), it sends a copy of the order to Mrs. Sharma and the Principal Commissioner or Commissioner of the Income Tax Department.

Finally, according to Section 254(4), except for specific cases where a further appeal to the High Court is allowed under section 256 or to the Supreme Court under section 260A, the ITAT's order is final and cannot be contested further.