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, Non Corporate Circle 11(1), Chennai vs. Arun Excello Constructions LLP, Chennai

In the result, the appeal filed by the Revenue is dismissed

ITA 2197/CHNY/2017[2012-13]Status: DisposedITAT Chennai31 Jan 2017AY 2012-13

Bench: Shri Duvvuru Rl Reddy & Shri S. Jayaramanआयकर अपील सं./I T.A. No. 2197/Mds/2017 "नधा"रण वष"/Assessment Year:2012-13 The Assistant Commissioner Of M/S. Arun Excello Construction Llp, Income Tax, Non Corporate Circle 11, Vs. 18, Bhattad Towers, West Cott Road, 2Nd Floor, Bsnl Building, Tower Ii, 16, Royapettah, Chennai 600 014. Greams Road, Chennai 600 006. [Pan:Aaufa2577J] (अपीलाथ" /Appellant) (""यथ"/Respondent) अपीलाथ" क" ओर से / Appellant By : Shri Ar.V. Sreenivasan, Jcit ""यथ" क" ओर से/Respondent By : Shri B. Ramakrishnan, C.A. सुनवाई क" तार"ख/ Date Of Hearing : 25.01.2018 घोषणा क" तार"ख /Date Of Pronouncement : 31.01.2018 आदेश /O R D E R Per Duvvuru Rl Reddy: This Appeal Filed By The Revenue Is Directed Against The Order Of The Commissioner Of Income Tax (Appeals) 6, Chennai Dated 16.08.2017 Relevant To The Assessment Year 2013-14. The Only Effective Ground Raised In The Appeal Of The Revenue Is That The Ld. Cit(A) Erred In Directing The Assessing Officer To Quantify The Exempt Income & Restrict The Disallowance To The Exempt Income As The Assessee Has Not Claimed Any Exempt Income In The Return Of Income.

For Appellant: Shri AR.V. Sreenivasan, JCITFor Respondent: Shri B. Ramakrishnan, C.A
Section 143(3)Section 14ASection 263Section 4

DCIT, Central Circle 1(1), Chennai vs. Vellore Institute of Technology, Vellore

In the result, the appeal filed by the Revenue is dismissed

ITA 2196/CHNY/2017[2009-10]Status: DisposedITAT Chennai31 Jan 2017AY 2009-10

Bench: Shri Duvvuru Rl Reddy & Shri S. Jayaramanआयकर अपील सं./I T.A. No. 2196/Mds/2017 "नधा"रण वष"/Assessment Year:2009-10 The Deputy Commissioner Of M/S. Vellore Institute Of Technology, Income Tax, Central Circle 1(1), Vs. 54, Thennamaram Street, Chennai 600 034. Vellore 632 014. [Pan:Aaatn0569M] (अपीलाथ" /Appellant) (""यथ"/Respondent) अपीलाथ" क" ओर से / Appellant By : Shri Ar.V. Sreenivasan, Jcit ""यथ" क" ओर से/Respondent By : Shri A. Mahesh, C.A. सुनवाई क" तार"ख/ Date Of Hearing : 25.01.2018 घोषणा क" तार"ख /Date Of Pronouncement : 31.01.2018 आदेश /O R D E R Per Duvvuru Rl Reddy: This Appeal Filed By The Revenue Is Directed Against The Order Of The Commissioner Of Income Tax (Appeals) 18, Chennai Dated 28.06.2017 Relevant To The Assessment Year 2009-10. The Only Effective Ground Raised By The Revenue Is That The Ld. Cit(A) Has Erred In Holding The Assessment Order Passed By The Assessing Officer Giving Effect To Order Under Section 263 Of The Income Tax Act, 1961 [“Act” In Short] As Infructuous.

For Appellant: Shri AR.V. Sreenivasan, JCITFor Respondent: Shri A. Mahesh, C.A
Section 10Section 10(22)Section 11Section 12ASection 142(1)Section 143(3)Section 263

N.. Jamnadas & Co., Mumbai vs. CIT (Cen)-III, Mumbai

In the result the appeal of the assessee is allowed,

ITA 2930/MUM/2012[2007-08]Status: DisposedITAT Mumbai27 Jan 2017AY 2007-08

Bench: Shri Mahavir Singh, Jm & Shri Rajesh Kumar, Am आमकय अऩीर सं./I.T.A.2930/Mum/2012 (ननधधायण वषा / Assessment Year: 2007-08) N Jamnadas & Co., The Dy.Commissioner Of 16, Bank Street, Income Tax, फनधभ/ Fort, Central Circle-39, Mumbai-400001 Room No.32, Aayakar Bhavan, Vs. M K Road, Mumbai-400020 (अऩीरधथी /Applicant) (प्रत्मथी / Respondent) : स्थधमी रेखध सं./ जीआइआय सं./ Pan : Aacfn8427G अऩीरधथी की ओय से / Applicant By : Shri Harsh Shah प्रत्मथी की ओय से/Respondent By : Shri N P Singh सुनवधई की तधयीख /Date Of Hearing : 23.1.2017 घोषणध की तधयीख /Date Of : 27.1.2017 Pronouncement आदेश / O R D E R Per Rajesh Kumar, A. M: This Is An Appeal Filed By The Assessee Challenging The Order Dated 28.3.2012 Passed By The Commissioner Of Income Tax, Mumbai For The Assessment Year 2007-08. 2. The Issue Raised In All The Grounds Of Appeal Is Against The Exercising The Revisionary Powers Under Section 263 Of The Income Tax Act, 1961 By The Cit On The Ground That The Ao Has Failed To Initiate Penalty Proceedings U/S 271(1)(C) Of The Act In The Re-Assessment Order.

For Respondent: Shri N P Singh
Section 143(3)Section 263Section 271(1)Section 271(1)(c)Section 37(1)