Chapter XVIII - Appeals, Revisions and Alternate Dispute Resolutions
Section 360
Section 360: powers of the appellate authority in disposing of an appeal
Section 360 sets out the powers of the Joint Commissioner (Appeals) and Commissioner (Appeals) when deciding an appeal. They may confirm, reduce, enhance or annul an assessment; only the Commissioner (Appeals) is expressly authorised by clause (1)(b) to set aside a Section 271 assessment for a fresh assessment. Enhancement or reduction of refund requires a reasonable opportunity to respond.
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Need advice on Section 360?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) In disposing of an appeal, the Commissioner (Appeals) or the Joint Commissioner (Appeals), shall have the following powers:—
(a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment;
(b) where such appeal is against an order of assessment made under section 271, the Commissioner (Appeals) may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;
(c) in an appeal against the order of assessment for which the proceeding before the Settlement Commission abates under section 245HA of the Income-tax Act 1961, the Commissioner (Appeals) may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;
(d) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;
(e) in any other case, he may pass such orders in the appeal as he thinks fit.
(2) The Joint Commissioner (Appeals) or the Commissioner (Appeals), shall not enhance an assessment or a penalty or reduce the amount of refund, unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.
(3) The Joint Commissioner (Appeals) or the Commissioner (Appeals), may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, irrespective of the fact that such matter was not raised before him by the appellant.
Introduction
The outcome depends on the kind of appeal: assessment, penalty and other matters have different stated powers. The appellate authority can also consider a matter arising from the original proceedings even if the appellant did not raise it.
Key takeaways
Assessment outcomes vary
The authority may confirm, reduce, enhance or annul an assessment. For a Section 271 assessment, the Commissioner (Appeals) specifically may set it aside and refer it for a fresh assessment.
Penalty may be changed
A penalty order may be confirmed, cancelled, enhanced or reduced on appeal.
Adverse enhancement requires a hearing
An assessment or penalty cannot be enhanced, and a refund cannot be reduced, without a reasonable opportunity for the appellant to show cause.
Unraised matters can be considered
The authority may decide a matter arising out of the proceedings even if the appellant omitted it from their appeal grounds.
Powers in disposing of an appeal
In disposing of an appeal, the Commissioner (Appeals) or Joint Commissioner (Appeals) may:
- In an appeal against an assessment order - confirm, reduce, enhance or annul the assessment
- In an appeal against an assessment made under section 271 - the Commissioner (Appeals) may set aside the assessment and refer the case back to the Assessing Officer for a fresh assessment
- In an appeal against an assessment for which proceedings before the Settlement Commission abated under section 245HA of the Income-tax Act, 1961 - after considering the material, inquiry results and evidence from the Settlement Commission proceedings and any other material on record, confirm, reduce, enhance or annul the assessment
- In an appeal against a penalty order - confirm or cancel the order, or vary it to enhance or reduce the penalty
- In any other case - pass such order as it thinks fit
Right to be heard before enhancement
The appellate authority cannot enhance an assessment or penalty, or reduce a refund, unless the appellant has been given a reasonable opportunity of showing cause against such enhancement or reduction.
Deciding matters not raised by the appellant
The appellate authority may consider and decide any matter arising from the proceedings in which the appealed order was passed, even if the appellant did not specifically raise that matter.
Step-by-step flow for the powers of the appellate authority under Section 360
- 1
What type of order is under appeal?
Section 360(1) gives different powers for an assessment order, an assessment under section 271, an assessment where the Settlement Commission proceeding abated under section 245HA of the Income-tax Act, 1961, a penalty order, and any other order.
- 2
Assessment or penalty
For an assessment, the authority may confirm, reduce, enhance or annul it. For an assessment under section 271, the Commissioner (Appeals) may also set it aside and send it back for a fresh assessment. For a penalty, it may confirm, cancel, enhance or reduce it. In any other case, it may pass such orders as it thinks fit.
- 3
Does the authority want to consider a matter the appellant did not raise?
Section 360(3) allows it to consider and decide any matter arising out of the proceedings in which the order appealed against was passed, even if not raised by the appellant.
- 4
Does the proposed order enhance the assessment or penalty, or reduce a refund?
- Yes: Under Section 360(2), the appellant must first get a reasonable opportunity to show cause against the enhancement or reduction. Go to the next step.
- No: Go to the next step.
- 5
Pass the order
The appeal is disposed of using the power that fits the type of order, after any opportunity required by Section 360(2).
Practical checklist
Do
- Identify whether the appeal concerns assessment, penalty or another order before seeking a particular remedy.
- If enhancement or refund reduction is proposed, respond to the required show-cause opportunity.
Avoid
- Assume the appellate authority can only address the grounds originally listed by the appellant.
Illustrative example
Worked example: relief on one issue, enhancement on another
Hypothetical facts (illustration only, not a real taxpayer): The Assessing Officer assessed Ms. Rao's total income at ₹12,00,000, including an addition of ₹80,000 that she disputes in appeal. While examining the record, the Commissioner (Appeals) finds that an income item of ₹50,000 in the same assessment proceedings was not taxed. All figures are assumed.
Disputed addition
The Commissioner (Appeals) finds in her favour on the ₹80,000 addition and proposes to delete it.
New matter
The ₹50,000 item arises out of the proceedings in which the assessment was passed, so it may be considered under Section 360(3) though Ms. Rao did not raise it.
Opportunity
Taxing the ₹50,000 would enhance the assessment, so Ms. Rao must first be given a reasonable opportunity to show cause under Section 360(2).
Result
If, after hearing her, the enhancement is made: ₹12,00,000 − ₹80,000 + ₹50,000 = ₹11,70,000.
Outcome
- The assessment can be reduced on one issue and enhanced on another in the same appeal under Section 360(1)(a).
- The enhancement is valid only after a reasonable opportunity to show cause.
Frequently asked questions
Can the Commissioner (Appeals) increase my tax liability beyond what the Assessing Officer assessed?
Yes, the appellate authority can enhance the assessment or a penalty, but only after giving the appellant a reasonable opportunity to show cause against the enhancement, as required by Section 360(2).
Can the appellate authority decide an issue I never raised in my appeal?
Yes - Section 360(3) allows the Joint Commissioner (Appeals) or Commissioner (Appeals) to consider and decide any matter arising out of the proceedings, even if the appellant did not raise it.
What can happen to a best-judgment assessment on appeal?
For an assessment made under section 271, the Commissioner (Appeals) can set aside the assessment and send the case back to the Assessing Officer to make a fresh assessment.
Need help applying this provision to your situation?
Get help with your income-tax appealLast updated 9 October 2026