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

ACIT, Central Circle- 17, New Delhi vs. Comfort Net Traders Pvt. Ltd., New Delhi

In the result, the appeal of Revenue is dismissed

ITA 2390/DEL/2018[2010-11]Status: DisposedITAT Delhi22 Feb 2021AY 2010-11

Bench: Sh. Anil Chaturvedi & Sh. Sudhanshu Srivastava(Through Video Conferencing) Acit Vs. Comfort Net Traders Pvt. Central Circle – 17, Ltd., New Delhi-110 055 C/O. Rra Taxindia , D-28, South Extension Part-1, New Delhi-110049 Pan No. Aaacc 3286 D (Appellant) (Respondent) Assessee By Ms. Nidhi Srivastava, Cit-Dr Revenue By Ms. Tavi Malik, Adv. Date Of Hearing: 22/02/2021 Date Of Pronouncement: 22/02/2021 Order Per Anil Chaturvedi, Am: This Appeal Filed By The Revenue Is Directed Against The Order Dated 09.01.2018 Passed By The Commissioner Of Income Tax (Appeals)-Xxv, New Delhi Relating To Assessment Year 2010-11. 2. Revenue Has Raised The Following Grounds Of Appeals: “1. Whether On The Facts Of The Case The Ld. Cit(A) Has Erred In Deleting The Additions Made By The Ao In Pursuance Of The Specific Directions Of The Pr. Cit Given Vide Order U/S 263 Of The It Act, 1961. Acit Vs. Comfort Net Traders Pvt.Ltd. A.Y. 2010-11 2 2. Whether On The Facts Of The Case The Ld. Cit(A) Has Erred In Appreciating The Facts That The Hon’Ble Apex Court In The Case Of Deniel Merchants Pvt. Ltd. Vs Ito (Dated 29.11.2007) Also Upheld The Action Of The Pr. Cit Issuing Similar Type Of Direction U/S 263 As Given. 3. The Appellant Craves Leave To Add, Alter Or Amend Any/All Of The Grounds Of Appeal Before Or During The Course Of The Hearing Of The Appeal.”

Section 263