Revision of orders prejudicial to revenue - Section 263 - Income Tax - Ready Reckoner - Income Tax

Revision of orders prejudicial to revenue - Section 263 Scope of Authority and Orders Subject to Revision Section 263(1) confers the power of revision on the Principal Commissioner or Commissioner in respect of any proceeding under this Act, specifically where an order passed by the AO or TPO is considered erroneous in so far as it is prejudicial to the interests of the revenue. Opportunity of Being Heard and Inquiry Section 263(1) mandates that the assessee must be given an opportunity of being heard before any revisionary order is passed. This is a fundamental principle of natural justice. Inquiry: The Commissioner may make or cause to be made any inquiry as deemed necessary before passing the revisionary order. This ensures that the order is not passed mechanically or without due application of mind. Types of Orders: The Commissioner can: (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section. Besides the Principal Commissioner/Commissioner, the Chief Principal Commissioner/Chief Commissioner have also been vested with power of revision U/s 263 [Amended by FA, 2021] Explanation 1:- Clarifies that orders passed by various officers and under different circumstances are covered, including orders passed on the basis of directions from higher authorities and orders u/s 92CA. it is declared that the Principal Commissioner or commissioner have also been vested with power of revision u/s 263 ,- An order passed the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall include- an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A ; an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer or the Transfer Pricing Officer, as the case may be, conferred on, or assigned to, him under the orders or directions issued by the Board or by the PCCIT/CCIT/PDGIT/DGIT/PCIT/CIT authorised by the Board in this behalf under section 120; an order under section 92CA by the Transfer Pricing Officer [Amendment made by the FA, 2022] Explanation 2: Provides a deeming fiction for when an order shall be considered erroneous and prejudicial to the interests of the revenue. Erroneous Order - For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, - the order is passed without making inquiries or verification which should have been made; the order is passed allowing any relief without inquiring into the claim; the order has not been made in accordance with any order, direction or instruction issued by the Board u/s 119 ; or the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. Time limit for passing revision order u/s 263 [ Section 263(2) ] Time Limit:- The order under this section shall not be made after the expiry of two years from the end of the financial year in which order sought to be revised was passed. However, an order under this section may be passed at any time to give effect to the finding or direction contained in an order of the High Court or Supreme Court. Computation of Limitation: - In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and [ any period during which any proceeding under this section is stayed by an order or injunction of any court the period commencing on the date on which stay on any proceeding under this section was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by the jurisdictional Principal Commissioner or Commissioner (Substituted w.e.f. 01.04.2025 vide Finance Act, 2025 ) ] shall be excluded. Exceptions:- Sub-section (3) provides that in cases An order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Note 1: Intimation or deemed intimation under section 143(1) is not an order and therefore cannot be revised under section 263 . Note 2: If the Assessing Officer has completed the assessment without initiating penalty proceedings, then the order of Assessing Officer cannot be said to be erroneous. The CIT cannot set aside the order of assessment of Assessing Officer and direct him to initiate penalty proceedings. For the applicability of section 263 , there are two requisites namely- - Order must be erroneous and - Order must be prejudicial to the revenue .