Revision by Chief Commissioner/Commissioner [Sections 263 & 264]

Under the Income Tax Act, 1961, the Principal Chief Commissioner (PCCIT), Chief Commissioner (CCIT), Principal Commissioner (PCIT), or Commissioner (CIT) have revisionary powers to review orders passed by subordinate authorities. These powers are exercised under:

1. Section 263(Revision for Revenue’s Interest)
2. Section 264(Revision for Assessee’s Relief)

1. Revision by Commissioner – Section 263

(A) When Can CIT Exercise Section 263 Powers?

The CIT can revise an order if it is:

✔ Erroneous (legally incorrect) and

✔ Prejudicial to Revenue (causes loss to tax department).

Examples:

• AO allowed deductions without proper verification.
• AO passed an order without proper inquiry.

(B) Time Limit

• Within 2 yearsfrom the end of the financial year in which the order was passed.

(C) Procedure

1. CIT issues a show-cause notice (SCN)to the assessee.
2. Assessee gets opportunity to respond.
3. CIT passes a final revision order(may modify, cancel, or enhance assessment).

Case Law:

• Malabar Industrial Co. vs. CIT (2000)– Order must be both erroneous & prejudicial.
• CIT vs. Max India Ltd. (2007)– Mere difference of opinion does not justify revision.

Example:

If an AO allows a deduction of ₹10 lakh without proper verification, resulting in lower tax liability, the Commissioner may invoke Section 263. After reviewing records and hearing the assessee, they may set aside the order and direct the AO to reassess the deduction, ensuring compliance with tax laws.

2. Revision by Commissioner – Section 264

(A) When Can CIT Exercise Section 264 Powers?

The CIT can revise an order to provide relief to the assessee if:

✔ The order is erroneous but not prejudicial to Revenue, or

✔ The assessee was denied a fair hearing.

Examples:

• AO wrongly disalloweda genuine expense.
• Assessee could not file a reply due to genuine reasons.

(B) Time Limit

• Assessee must apply within 1 yearfrom the order.
• CIT can suo motorevise within same time limit.

(C) Procedure

1. Assessee files an application(no prescribed form).
2. CIT may call for recordsand pass an order.
3. CIT cannot enhancethe assessment.

Case Law:

• CIT vs. Shree Manjunathesware Packing Products (1998)– CIT must act fairly & judiciously.

Example:

Suppose Ms. Gupta files a return but misses claiming a deduction under Section 80C due to oversight. The AO passes an assessment order without allowing it. Ms. Gupta applies for revision under Section 264 within one year. After hearing her, the Commissioner may revise the order to allow the deduction, reducing her tax liability.

3. Key Differences: Section 263 vs. 264

4. Judicial Safeguards

✔ No Revision if Appeal Pending – CIT cannot revise if the matter is already appealed.

✔ No Multiple Revisions – Once revised, the same issue cannot be reopened.

✔ Writ Remedy Available – If CIT acts arbitrarily, assessee can approach High Court.

5. Practical Tips for Assessees

✅ Section 263 (Revenue’s Revision)

• • Respond to SCN with strong legal arguments.
  • Prove that the AO’s order was neither erroneous nor prejudicial.

✅ Section 264 (Assessee’s Revision)

• • File application within 1 year.
  • Submit all supporting documents.