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

Hapag Lloyd India Private Limited, Mumbai vs. Principal Commissioner of Income-Tax, Mumbai - 5, Aayakar Bhavan, Mumbai

In the result, the appeal is allowed

ITA 3805/MUM/2025[2020-21]Status: DisposedITAT Mumbai25 Sept 2025AY 2020-21

Bench: Shri Saktijit Dey & Shri Arun Khodpiahapag Lloyd India Private Limited Pr. Cit Room No. 515, 5Th Floor, 501, Satellite Gazebo, B-Wing, 5Th Floor, Guru Hargovindaji Marg, Aayakar Bhawan, M.K. Road, Vs. Andheri (E), Chakala Mide S.O., Mumbai-400 020 Mumbai-400 093 Pan/Gir No. Aabch 7319 B (Appellant) : (Respondent) : Shri Paras Savla, Adv. A/W Appellant By Shri Pratik Poddar, Adv. & Shri Shreyas Sardesai Respondent By : Shri Ritesh Misra, Cit Dr Date Of Hearing : 23.09.2025 Date Of Pronouncement : 25.09.2025 O R D E R Per Saktijit Dey: The Captioned Appeal Has Been Filed By The Assessee, Assailing The Order Dated 11.03.2025 Passed By Learned Principal Commissioner Of Income Tax (‘Ld. Pcit’ For Short), Mumbai U/S. 263 Of The Income Tax Act, 1961 (‘The Act’ For Short), Pertaining To The Assessment Year (A.Y.) 2020-21. 2. The Grounds Raised By The Assessee Are As Under: Validity Of Revision Proceedings Under Section 263 Of The Act 1. On Facts & Circumstances Of The Case & In Law, The Leamed Pcit Erred In Passing An Order Under Section 263 Of The Act Without Appreciating That The Assessment Order Dated 5 September 2022 Passed By The Learned Assessing Officer ('Ao') Under Section 143(3) Read With Section 144B Of The Act Was Neither Erroneous Nor Prejudicial To The Interest Of The Revenue & Thus, The Order Under Section 263 Of The Act Is Without Jurisdiction & Bad-In-Law.

For Respondent: Shri Ritesh Misra, CIT DR
Section 143(3)Section 144BSection 263Section 37(1)Section 41(1)Section 80G

Kamadev Behera, Khurda vs. National Faceless Assessment Centre, Delhi

In the result, appeal of the assesee is dismissed

ITA 97/CTK/2025[2017-2018]Status: DisposedITAT Cuttack24 Sept 2025AY 2017-2018

Bench: Shri George Mathan & Shri Rajesh Kumarआयकर अपील सं/Ita No.97/Ctk/2025 (नििाारण वर्ा / Assessment Year : 2017-2018) Kamadev Behera Vs Pcit-1, Bhubaneswar At:- Narendrapur, P.O:- Nirakarpur, Khurda, 752019 Pan No. : Axxpb 9473 G (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) नििााररती की ओर से /Assessee By : Shri N.R.Biswal, Ca राजस्व की ओर से /Revenue By : Shri Vijay Singh, Sr. Dr सुनवाई की तारीख / Date Of Hearing : 24/09/2025 घोषणा की तारीख/Date Of Pronouncement : 24/09/2025 आदेश / O R D E R Per Bench : This Is An Appeal Filed By The Assessee Against The Order Of Ld. Pcit, Bhubaneswar-1, Passed U/S. 263 Of The Act Dated 24.03.2024 For The Assessment Year 2017-2018. 2. It Was Submitted By The Ld. Ar That All The Details Have Been Produced Before The Ld.Cit(A) & The Ao & That The Details Have Been Provided Before The Ld.Pcit. It Was Submission That The Ld. Pcit Has Not Set Aside The Assessment Order And, Therefore, Order U/S.263 Of The Act Is Liable To Be Quashed. It Was Submission That The Assessee Is Only A Dealer In Banana & The Transactions Are All By Cheque. It Was Submission That In The Original Assessment Order, The Ao Had Estimated The Income Of The Assessee At 8%, But The Ld. Pcit Has Asked The Ao To Examine The Sources Of The Cash Deposits, Which Has Remained Unverified & To Apply The Provisions Of Section 69A & 115Bbe Of The Act. It Was Submission

For Appellant: Shri N.R.Biswal, CAFor Respondent: Shri Vijay Singh, Sr. DR
Section 263Section 69A