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

M/S Pearls Intercontinental Ltd., New Delhi vs. DCIT, New Delhi

In the result, the appeal of the assessee is allowed for statistical purposes

ITA 1883/DEL/2014[1996-97]Status: DisposedITAT Delhi21 Apr 2017AY 1996-97

Bench: Sh. I.C. Sudhir & Sh. O.P. Kantassessment Year: 1996-97 Vs. Dcit, Circle – 14(1), New Delhi M/S. Pearls Intercontinental Ltd., 112-A, Ekta Enclave, New Peera Garhi, New Delhi Pan : Aaacp6925A (Appellant) (Respondent) Appellant By Sh. Sanjay Kapoor, Ca Respondent By Mrs. Veena Joshi, Cit(Dr) Date Of Hearing 23.03.2017 Date Of Pronouncement 21.04.2017 Order Per O.P. Kant, A.M.: This Appeal By The Assessee Is Directed Against Order Dated 22/01/2014 Of Ld. Commissioner Of Income-Tax (Appeals)-Xvii, Laxmi Nagar, Delhi (In Short ‘The Cit-A’), For Assessment Year 1996-97, In Respect Of Penalty Levied Under Section 271(1)(C) Of The Income-Tax Act, 1961 (In Short ‘The Act’). The Grounds Of Appeal Raised Are As Under: 1. The Provisions Of Section 271(1)(C) Read With Section 275 Are Not Applicable At All. 2. There Is Neither Concealment Of Income Nor Appellant Has Filed Inaccurate Particulars Of Income, Thus The Provisions Of Section 271(1)(C) Are Not Applicable At All. 3. Without Prejudice To Ground That No Penalty Is Leviable, Cit(A) Has Erred In Enhancing The Penalty. 4. Bonafide Claim Made, Disallowed In Assessment Proceeding Does Not Attract Penalty At All. 5. The Cit(A) Has Erred In Holding That Appellant Has Not Furnished Any Explanation With Regard To Addition/Disallowance.

Section 139(1)Section 142(1)Section 144Section 263Section 271(1)(C)Section 271(1)(c)Section 275