New Income-tax Act, 2025: Can JCIT(A) Set Aside an Assessment? A Small Drafting Change May Create a Big Litigation Issue

 

The Income-tax Act, 2025 has been presented as a major exercise in simplification and rationalisation of the income-tax law. But when old provisions are rewritten, even a small change in drafting can sometimes create an entirely new interpretational question. One such interesting issue appears in the provisions dealing with the powers of the Commissioner (Appeals) and Joint Commissioner (Appeals).

The question is simple:

Can a Joint Commissioner (Appeals) [JCIT(A)] set aside an assessment and send the matter back to the Assessing Officer for a fresh assessment under the Income-tax Act, 2025?

The answer may not be as straightforward as one would expect.

What Was the Position Under the Income-tax Act, 1961?

Under section 251 of the Income-tax Act, 1961, the powers of the Commissioner (Appeals) and Joint Commissioner (Appeals) were separately structured.

Section 251(1) specifically dealt with the powers of the Commissioner (Appeals).

Among other things, clause (b) permitted the Commissioner (Appeals), in an appeal against an assessment made under section 144, to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment.

The position of the Joint Commissioner (Appeals) was separately dealt with in section 251(1A).

Thus, the statutory scheme itself made a distinction between the powers of the CIT(A) and JCIT(A).

This distinction becomes particularly important when we look at the corresponding provision in the new law.

Enter Section 360 of the Income-tax Act, 2025

The Income-tax Act, 2025 replaces section 251 of the 1961 Act with section 360, dealing with the powers of the Commissioner (Appeals) and Joint Commissioner (Appeals).

At first glance, the new provision appears to adopt a simplified drafting approach.

Section 360(1), as reproduced in the comparison accompanying this discussion, provides that:

“In disposing of an appeal, the Commissioner (Appeals) or the Joint Commissioner (Appeals) shall have the following powers…”

It then proceeds to specify the powers under clauses (a) to (e).

So far, everything appears perfectly clear.

Both appellate authorities are mentioned together.

But the interesting part comes in clause (b).

Clause (b) Refers Only to the Commissioner (Appeals)

Clause (b) provides, in substance, that:

where an appeal is against an order of assessment made under the specified provision, the Commissioner (Appeals) may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment.

Notice the terminology.

The opening part of section 360(1) refers to:

“Commissioner (Appeals) or the Joint Commissioner (Appeals)”

But clause (b), which contains the power to set aside and remand an assessment, refers specifically to:

“the Commissioner (Appeals)”.

There is no corresponding reference to the Joint Commissioner (Appeals) in that clause.

And this creates an interesting interpretational issue.

Does the Opening Phrase Automatically Give JCIT(A) the Power?

One possible argument could be that since section 360(1) says that the Commissioner (Appeals) or Joint Commissioner (Appeals) shall have the powers specified in clauses (a) to (e), all those powers should be available to both authorities.

If that interpretation is adopted, clause (b) would effectively be read as conferring the set-aside power upon the JCIT(A) as well.

But another interpretation is possible.

The legislature has consciously used the expression “Commissioner (Appeals)” in clause (b), instead of repeating the expression “Commissioner (Appeals) or Joint Commissioner (Appeals)”.

If every power in clauses (a) to (e) was intended to be available identically to both authorities, why was clause (b) drafted specifically with reference to the Commissioner (Appeals)?

That is where the potential controversy lies.

Why Does This Matter?

This is not merely a drafting curiosity.

The power to set aside an assessment and send the matter back to the Assessing Officer is materially different from the power to adjudicate the appeal on merits.

An assessee approaches the appellate authority expecting the disputed assessment to be examined and decided within the framework of the appellate jurisdiction.

If the JCIT(A) starts exercising a power to set aside an assessment and sends the matter back for a fresh assessment, the question may arise:

Where exactly does the statute confer that power?

An appellate authority derives its jurisdiction from the statute. Therefore, the precise language used by Parliament can become extremely important.

The Difference Between Old and New Drafting

The comparison makes the change particularly interesting.

Under the earlier law, section 251 expressly contained separate provisions for the powers of the CIT(A) and JCIT(A).

The new section 360 adopts a more consolidated drafting style by placing the Commissioner (Appeals) and Joint Commissioner (Appeals) together in section 360(1).

This certainly makes the provision shorter and apparently simpler.

However, the drafting creates an apparent tension:

The opening provision refers to both authorities, while the specific set-aside power in clause (b) refers only to the Commissioner (Appeals).

This is precisely the kind of drafting issue which may ultimately require judicial interpretation.

What Could Happen in Practice?

Suppose a JCIT(A), while deciding an appeal, comes to the conclusion that the assessment requires a fresh examination by the Assessing Officer.

The JCIT(A) may consider setting aside the assessment and directing the AO to make a fresh assessment.

The assessee, however, could potentially question:

“Where is the statutory power of the JCIT(A) to set aside the assessment?”

The Department, on the other hand, could contend that section 360(1), by expressly conferring the powers under clauses (a) to (e) upon both appellate authorities, makes the power available to the JCIT(A) as well.

Thus, two competing approaches may emerge.

The Literal Approach

Under a strict reading, clause (b) specifically says Commissioner (Appeals).

Therefore, the power to set aside may be regarded as restricted to the CIT(A).

The Harmonious Reading

Alternatively, the opening words of section 360(1) may be relied upon to argue that both CIT(A) and JCIT(A) have the powers enumerated in clauses (a) to (e), and the reference to “Commissioner (Appeals)” in clause (b) may need to be understood in that broader context.

Which interpretation will ultimately prevail is a matter for judicial determination if the issue reaches the appellate forums.

Simplification Can Sometimes Create Litigation

The larger lesson is interesting.

The Income-tax Act, 2025 seeks to simplify the language and structure of the income-tax law. Consolidating provisions and reducing repetition can certainly make legislation easier to read.

But simplification of drafting must not create uncertainty about jurisdiction.

In tax law, the question “Who has the power to do what?” is fundamental.

An appellate authority cannot assume jurisdiction merely because a particular course of action appears administratively convenient. The source of the power has to be found in the statutory framework.

Therefore, the precise language of section 360 deserves attention from tax professionals, particularly where an appeal is being heard by a JCIT(A).

This May Become a New Litigation Point

The issue is particularly relevant because the new Act is scheduled to operate from 1 April 2026, replacing the Income-tax Act, 1961 for the relevant tax regime.

As implementation progresses, taxpayers and professionals will encounter provisions whose wording has changed even though the underlying concept may appear familiar.

Section 360 is one such example.

Whether the words in the opening part of section 360(1) are sufficient to confer every enumerated power upon both appellate authorities, or whether the specific wording of clause (b) restricts the set-aside power to the CIT(A), is a question that may eventually have to be tested before the appellate authorities and, potentially, the courts.

The TAX Talk

The Income-tax Act, 2025 may be simpler in language, but simplicity does not always mean absence of litigation.

Section 360 presents an interesting example.

On one hand, section 360(1) begins by referring jointly to the Commissioner (Appeals) and Joint Commissioner (Appeals) and says that they shall have the specified powers.

On the other hand, the specific clause dealing with setting aside an assessment and referring the matter back to the Assessing Officer uses the expression “Commissioner (Appeals)” alone.

So, the question remains:

Can a JCIT(A) set aside an assessment under section 360, or is that power confined to the CIT(A)?

At present, the wording itself creates room for interpretation. If the JCIT(A) begins exercising the set-aside power, the scope of section 360 may well become a subject of litigation.

 Section 360 of ITA – 2025 reads as under:

Powers of Joint Commissioner (Appeals) or Commissioner (Appeals).

360. (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 (43 of 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.

A provision intended to simplify the law may, ironically, become the starting point of a new chapter in tax litigation.

This article is intended to highlight the apparent drafting issue arising from a comparison of section 251 of the Income-tax Act, 1961 with section 360 of the Income-tax Act, 2025. The final legal position would depend upon the interpretation adopted by the appellate authorities and courts.

For more practical analysis of the Income-tax Act, 2025 and other tax developments, visit thetaxtalk.com.