Section 264 of the Income Tax Act
Income-tax Act, 2025: s.378
Section 264 of the Income-tax Act, 1961 corresponds to section 378 (Revision of other orders) of the Income-tax Act, 2025.
Read section 378 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 264 is Swadeshi Cotton Mills Co. Ltd. v. CIT (171 ITR 634), cited in 102 of the 338 judgments on BharatTax that turn on this section.
Leading authorities on Section 264
The Assessing Officer's power to direct a special audit under Section 142(2A) requires an objective assessment of account complexity, not subjective satisfaction. Accounts are 'complex' only if they are genuinely difficult to understand, and the AO must first make a genuine attempt to comprehend them before ordering a special audit.
When an assessee possesses sufficient interest-free funds, it is presumed that any interest-free advances or investments made are from these funds, preventing disallowance of interest under Section 36(1)(iii). This principle applies if own capital and interest-free loans exceed the interest-free advances given.
An assessment order is invalid if it relies on adverse material collected by the Assessing Officer without providing the assessee an opportunity to confront and rebut it, as this constitutes a serious violation of the principles of natural justice, specifically *audi alteram partem*.
A higher authority's approval for an income tax proposal must reflect an application of mind to the facts and cannot be deemed from a mere nomination. An assessment made without providing reasonable opportunity to the assessee violates principles of natural justice and is therefore invalid.
Employees of Public Sector Undertakings (PSUs) and nationalized banks are not considered government employees for the purpose of exemption under Section 10(10AA) of the Income Tax Act.
The determination of Arm's Length Price (ALP) for international transactions involving debt requires consideration of both the amount on which interest should be charged and the arm's length rate for that interest. Guidelines are provided for computing the ALP of the international transaction of 'debt arising during the course of business.'
Retention money is considered deferred payment and is not taxable in the year it is retained if it is contingent upon the satisfactory completion of the contract work and the assessee has no vested right to receive it.
The Delhi High Court's decision in PCIT v. Anuj Bansal affirms a tribunal's view, suggesting its authority lies in establishing or confirming principles related to assessment proceedings, potentially concerning reassessment or search and seizure.
Deemed dividends under Section 2(22)(e) can only be taxed in the hands of shareholders who are both registered and beneficial owners of shares in the paying company.
Employees of a statutory corporation are not considered employees of the State or Central Government, making them ineligible for exemption under Section 10(10AA)(i) and rendering the employer liable for tax deduction at source.
