Section 363 · Appeals
Section 363 of the Income-tax Act, 2025 — Orders of the Appellate Tribunal
By CA Rajat Agrawal
Updated 05 Jul 2026
Chapter XVIII
📜 What the law says — Section 363, Income-tax Act 2025
363. (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.
(2) The Appellate Tribunal may amend any order passed by it under sub-section (1)
for the rectification of any mistake apparent from record, within six months from
the end of the month in which the order was passed, if the mistake is brought to its
notice by the assessee or the Assessing Officer.
(3) An amendment, as referred to in sub-section (2), which has the effect of
enhancing an assessment or reducing a refund or otherwise increasing the liability
of the assessee, shall not be made, unless the assessee has been allowed a reasonable
opportunity of being heard.
(4) Any application filed by the assessee under sub-section (2) shall be accompanied
by a fee of ` 50.
(5) In every appeal, the Appellate Tribunal, where it is possible, may hear and
decide such appeal within four years from the end of the financial year in which
such appeal is filed under section 362(1) or (2).
(6) 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 section 362(1), for a period not exceeding one hundred and eighty days from
the date of such order, subject to the condition that the assessee—
(a) deposits not less than 20% of the amount of tax, interest, fee, penalty or
any other sum payable under this Act; or
(b) furnishes security of equal amount as referred to in clause (a),
and the Appellate Tribunal shall dispose of the appeal within the said period of stay
specified in that order.
(7) No extension of stay, as referred to in sub-section (6), 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 passed under the said sub-section, unless—
(a) the assessee makes an application and has complied with the condition
referred to in sub-section (6); and
(b) 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.
(8)
In plain language
What Section 363 is about
Section 363 of the Income-tax Act, 2025 (effective 1 April 2026) sets out the powers and procedure of the Income Tax Appellate Tribunal (ITAT) when it decides an appeal. The ITAT is the second and final fact-finding authority in the income-tax appeal chain — you reach it after the Commissioner (Appeals) / Joint Commissioner (Appeals). This section is the re-enacted and consolidated version of the old Section 254 of the Income-tax Act, 1961, so the practice built up over decades continues to apply.
In plain words, Section 363 answers four questions: What order can the Tribunal pass? Can it correct its own mistakes? Can it stay (pause) the tax demand while your appeal is pending? And how final is its decision?
Who it applies to
- Any assessee — an individual, HUF, firm, LLP, company or trust — who has filed an appeal before the ITAT, or against whom the Department has filed an appeal.
- The Income-tax Department (the Assessing Officer / Principal Commissioner or Commissioner), which is the other party in every ITAT appeal.
- It is relevant to anyone contesting an assessment, penalty, TDS demand, or a CIT(Appeals) order in a tax dispute of meaningful value.
Key powers granted to the Tribunal
- Power to pass "such orders as it thinks fit": After hearing both sides, the Tribunal can confirm, reduce, enhance, cancel or set aside the order under appeal, or send the matter back (remand) to the lower authority. This is a wide power, but it must be used only on issues arising in the appeal.
- Opportunity of being heard: Both the taxpayer and the Department must get a fair chance to present their case before any order is passed. This is a mandatory principle of natural justice.
- Rectification of mistakes: The Tribunal can amend its own order to correct a "mistake apparent from the record" — an obvious, self-evident error, not a debatable point. This can be done on its own, or when pointed out by the assessee or the Assessing Officer.
Important time limits and conditions
- Rectification window — 6 months: A mistake apparent from record can be rectified within six months from the end of the month in which the order was passed. (Note: this is tighter than the older 1961-era four-year window, so act quickly.)
- No adverse order without a hearing: If a rectification would enhance the assessment, reduce a refund, or otherwise increase the assessee's liability, the assessee must first be given a reasonable opportunity of being heard.
- Rectification fee — ₹50: An application by the assessee for rectification must be accompanied by a fee of just fifty rupees.
- Disposal target — 4 years: Where possible, the Tribunal should hear and decide an appeal within four years from the end of the financial year in which it is filed. This is a guideline, not a strict deadline.
Stay of demand — the practical lifeline
While your appeal is pending, the Department can still try to recover the disputed tax. Section 363 lets the Tribunal grant a stay (a pause on recovery) on strict conditions:
- You must deposit at least 20% of the disputed tax, interest, fee, penalty or other sum, OR furnish equivalent security.
- An initial stay can be granted for a period not exceeding 180 days.
- It can be extended, but the total stay cannot exceed 365 days in aggregate. If the appeal is still not decided, the stay is vacated. Following Supreme Court guidance under the old law, the stay should not lapse automatically if the delay is not the assessee's fault.
How it interacts with related sections
- Finality: Save as provided for appeals to the High Court, the Tribunal's order on questions of fact is final — you cannot re-argue facts, only substantial questions of law can go higher.
- It follows the appeal to the ITAT and works alongside the sections on appeals to the Commissioner (Appeals) and the further appeal to the High Court on a substantial question of law.
- The Tribunal sends a copy of every order to the assessee and the Principal Commissioner or Commissioner.
Practical implications
- Frame your grounds of appeal carefully — the Tribunal decides only what is raised before it.
- Spot errors in the order fast: the 6-month rectification window is short. A miscalculated figure or an ignored ground can be fixed cheaply (₹50), but only if it is a clear, apparent mistake.
- If recovery is a worry, file a well-supported stay application and be ready to pay/secure 20%.
💡 Example
Worked example 1 — Stay of demand: Suppose the Assessing Officer raises a total demand of ₹50,00,000 (tax + interest + penalty) on Mr. Sharma, and CIT(Appeals) confirms it. Mr. Sharma files an appeal before the ITAT and seeks a stay. To get a stay under Section 363, he must deposit at least 20% of ₹50,00,000 = ₹10,00,000 (or furnish security of that value). The Tribunal then stays recovery of the balance ₹40,00,000 for up to 180 days, extendable to a maximum of 365 days in total while the appeal is heard.
Worked example 2 — Rectification: The Tribunal decides Priya's appeal on 15 May 2026 but, by a clerical slip, records disallowed expenses as ₹2,50,000 instead of the ₹25,000 actually argued. This is a mistake apparent from record. Priya can file a rectification application with a fee of just ₹50, and she must do so within six months from the end of May 2026 — i.e. by 30 November 2026. The Tribunal corrects the figure without re-hearing the whole appeal.
A relatable story: Rajesh, a small trader, lost at CIT(Appeals) on a ₹30 lakh addition and feared the Department would freeze his bank account overnight. His CA filed an ITAT appeal and a stay application, deposited ₹6,00,000 (20%), and got recovery of the rest paused. Two years later the Tribunal deleted most of the addition. Because ITAT findings on facts are final, the matter effectively ended there — saving Rajesh a long fight and protecting his working capital in the meantime.
| Feature | Section 363, Income-tax Act 2025 |
|---|
| 1961 Act equivalent | Section 254 |
| Authority | Income Tax Appellate Tribunal (ITAT) |
| Core power | Pass such orders as it thinks fit after hearing both parties |
| Rectification of mistake apparent from record | Within 6 months from end of month order was passed |
| Rectification fee (by assessee) | ₹50 |
| Adverse rectification (higher tax / lower refund) | Only after reasonable opportunity of hearing |
| Target for deciding appeal | Within 4 years from end of FY in which appeal filed |
| Deposit for stay of demand | At least 20% of tax/interest/fee/penalty, or security |
| Initial stay period | Not exceeding 180 days |
| Maximum aggregate stay | 365 days |
| Finality | Final, subject to appeal to High Court on question of law |
Related sections
Section 254 (1961 Act) — Orders of Appellate Tribunal (predecessor) Section 356 — Appeals to the Commissioner (Appeals) Section 362 — Procedure of the Appellate Tribunal Section 365 — Appeal to the High Court on substantial question of law Section 361 — Appeals to the Appellate Tribunal Section 287 — Rectification of mistakes by tax authorities
Frequently asked questions
What does Section 363 of the Income-tax Act, 2025 deal with?
It lays down the powers of the Income Tax Appellate Tribunal (ITAT) to pass orders on appeals, to rectify mistakes apparent from record, and to grant a stay of tax demand. It is the re-enacted version of Section 254 of the Income-tax Act, 1961.
How long does the Tribunal have to rectify a mistake in its order?
A mistake apparent from record can be rectified within six months from the end of the month in which the order was passed. The application can be made by the assessee or the Assessing Officer, or the Tribunal can act on its own.
How much do I have to deposit to get a stay of demand at ITAT?
You must deposit at least 20% of the disputed tax, interest, fee, penalty or other sum, or furnish equivalent security. The stay can then be granted for up to 180 days, extendable to a maximum of 365 days.
Is the Tribunal's order final?
Yes, the ITAT's findings on questions of fact are final. You can go further only to the High Court, and only on a substantial question of law, not to re-argue the facts.
What is the fee for a rectification application?
An application by the assessee for rectification under Section 363 must be accompanied by a fee of ₹50.
Can the Tribunal increase my tax liability while rectifying an order?
Yes, but only after giving you a reasonable opportunity of being heard. Any amendment that enhances the assessment, reduces a refund, or otherwise increases your liability cannot be made without that hearing.
In what time should the Tribunal decide my appeal?
Where possible, the Tribunal aims to hear and decide the appeal within four years from the end of the financial year in which it was filed. This is a guiding timeline rather than a strict legal deadline.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 05 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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