Section 263 of the Income Tax Act

Income-tax Act, 2025: s.377

Section 263 of the Income-tax Act, 1961 corresponds to section 377 (Revision of orders prejudicial to revenue) of the Income-tax Act, 2025.

Read section 377 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 263 is Malabar Industrial Co. Ltd. v. CIT (243 ITR 83), cited in 2,943 of the 13,616 judgments on BharatTax that turn on this section.

Leading authorities on Section 263

Malabar Industrial Co. Ltd. v. CIT
243 ITR 83 · 2000 · Supreme Court
2,943
citing judgments

For revision under Section 263, the Assessing Officer's order must be both erroneous and prejudicial to the interests of the revenue; if either condition is not met, the revisionary jurisdiction cannot be invoked. An order is not erroneous merely because the Assessing Officer did not record the details of enquiries conducted, provided due enquiries were made.

Totgars Co-operative Sale Society Ltd. v. ITO
322 ITR 283 · 2010 · Supreme Court
1,283
citing judgments

The interest income earned by a cooperative society from investing its surplus funds in fixed deposits with banks is not "derived from" its eligible business activities and is taxable as "income from other sources" under Section 56, thus not qualifying for deduction under Section 80P.

CIT v. Max India Ltd.
295 ITR 282 · 2007 · Supreme Court
1,162
citing judgments

Under Section 263, an assessment order is not erroneous and prejudicial to the interest of the revenue merely because the Principal Commissioner disagrees with the Assessing Officer's (AO) view, particularly if the AO has adopted one of two permissible views in law, unless that view is completely unsustainable. If due inquiries were made, the AO's order does not become erroneous solely because the fact of inquiries was not recorded.

CIT v. Gabriel India Ltd.
203 ITR 108 · 1993 · High Court
990
citing judgments

The Commissioner cannot revise an assessment order under Section 263 merely because they hold a different opinion or believe a deeper inquiry was warranted if the Assessing Officer has applied their mind and conducted some inquiry. Revision under Section 263 is permissible only in cases of a complete lack of inquiry or non-application of mind by the Assessing Officer, not for merely inadequate inquiry.

CIT v. Sunbeam Auto Ltd.
332 ITR 167 · 2011 · High Court
897
citing judgments

The Commissioner cannot revise an assessment under Section 263 merely because the assessment order does not explicitly reflect an inquiry, or because the Commissioner holds a different opinion. An inquiry, even if considered inadequate, or an assessment based on a plausible view by the Assessing Officer after due examination, does not automatically make the order erroneous or prejudicial to the interests of the revenue.

State Bank Of India v. CIT
389 ITR 578 · 2016 · High Court
817
citing judgments

Income arising from a cooperative society's surplus funds invested in short-term deposits and securities is not attributable to the society's core activities and, therefore, is not eligible for exemption under Section 80P(2)(a)(i) of the Income-tax Act.

Rampyari Devi Saraogi v. CIT
67 ITR 84 · 1968 · Supreme Court
616
citing judgments

An assessment order is erroneous and prejudicial to the Revenue's interests if the Assessing Officer accepts a sum offered as income by an assessee, even when that sum was not actually earned, thereby allowing revision under Section 263.

Madras Industrial Investment Corporation Ltd. v. CIT
225 ITR 802 · 1997 · Supreme Court
568
citing judgments

Expenditure that provides an enduring benefit should be amortized over its useful life, not allowed as a deduction in a single year, to prevent a distorted picture of profits. Specifically, premium paid on debentures for their issue should be amortized on a straight-line method over the life of the debentures.

Gee Vee Enterprises v. Addl. CIT
99 ITR 375 · 1975 · High Court
543
citing judgments

An assessment order is erroneous and prejudicial to the interest of revenue if the Assessing Officer fails to make proper inquiries before accepting the assessee's statements or claims. The Commissioner can revise such an order under Section 263 without conducting further inquiries himself.

Subramanian and Anr. v. Siemens India Ltd. and Anr.
156 ITR 11 · 1985 · High Court
541
citing judgments

When there is a conflict between the decisions of non-jurisdictional High Courts, the view that favors the assessee should be preferred.

Judgments on Section 263

Deffree Engineering Private Limited, Coimbatore vs. DCIT, Coimbatore

The appeal stand allowed in terms of our above order

ITA 1870/CHNY/2019[2014-15]Status: DisposedITAT Chennai03 Nov 2021AY 2014-15

Bench: Hon’Ble Shri Mahavir Singh, Vp & Hon’Ble Shri Manoj Kumar Aggarwal, Am आयकरअपील सं./ Ita No.1870/Chny/2019 (िनधा"रण वष" / Assessment Year: 2014-15) M/S. Deffree Engineering Private Ltd. Dcit बनाम/ S.F.No.125/2B, Neelambur Village Corporate Circle-1, Avinashi Road Coimbatore. Vs. Coimbatore-641 014. !थायीलेखासं./जीआइआरसं./Pan/Gir No. Aaacd-7943-E (अपीलाथ./Appellant) : (12थ. / Respondent) अपीलाथ.कीओरसे/ Appellant By : Shri S.Sridhar, Advocate 12थ.कीओरसे/Respondent By : Shri Amol Kirtane – Ld. Cit-Dr सुनवाईकीतारीख/ : 13/10/2021 Date Of Hearing घोषणाकीतारीख / : 03/11/2021 Date Of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal () 1. In This Appeal, The Assessee Assails The Validity Of Revisional Jurisdiction U/S 263 As Exercised By Learned Principal Commissioner Of Income Tax-1, Coimbatore (Pr. Cit) Vide Order Dated 11/02/2019. The Assessment Was Framed By Ld. Assessing Officer (Ao) U/S 143(3) Of The Act On 21/11/2016. 2. A Delay Of 67 Days Has Been Noted In The Appeal, The Condonation Of Which Has Been Sought By The Assessee On The Strength Of Condonation Petition As Supported By The Affidavit Of The Director Of The Assessee Company. It Has Been Submitted That Delay Was Not Deliberate

For Appellant: Shri S.Sridhar, AdvocateFor Respondent: Shri Amol Kirtane – Ld. CIT-DR
Section 115BSection 143(3)Section 263Section 80