1. A) Revision of order prejudicial to revenue
(Sec.263).
B) Revision in favour of assessee (Sec. 264)
2. Revision of order prejudicial to revenue (Sec.263):- The
provisions of section 263 are as follows:
1) The Commissioner (CIT) may call for records and examine the
proceedings under the Act.
2) The CIT thinks the
i) the order passed by the Assessing Officer (A.O.) is erroneous
and
ii) the error must be such that it is prejudicial to the interest of
revenue.
3) If both the conditions 2(i) & 2(ii) are satisfied, the CIT can pass
such order enhancing the assessment or may modify or cancel the
assessment & direct a fresh assessment. Conversely, if the order is
erroneous but not prejudicial to the interest of revenue or if the
order is not erroneous but prejudicial to the revenue, CIT can not
take action u/s.263(1). However, before passing an order u/s.263,
the assessee should be given a reasonable opportunity of being
heard.
3. Record meaning of (includes record of other persons):- The term “record”
means record as it stands at the time of examination by the CIT. It includes the
materials which were not in existence at the time of assessment and come into
existence afterwards which can also be taken in to consideration by the CIT for
the purpose of sec.263(1). Moreover, CIT may make enquiry on the basis of any
other person’s record [Express Newspaper (P) Ltd. Vs. CIT (2002) 255 ITR] or
a statement in search operation [CIT Vs. Vallabhdas Vithaldas (2002) 253 ITR
543].
Prejudicial to the interest of revenue:- Although it has not been defined in the
Act, having general meaning losing tax lawfully payable by an assesse.
However, every loss of revenue as a consequence of an order of the A.O. can not
be treated as prejudicial to the interest of the revenue. For instance, when an
A.O. adopts one of the causes permissible in law & it resulted in the loss of
revenue or where two views are possible & the A.O. has taken one view with
which the CIT does not agrees, can not be treated as an erroneous order
prejudicial to the interest of revenue unless the view taken by the A.O. is
unsustainable in law.
4. Orders which can be revised by the Commissioner u/s. 263:- Apart
from the order passed by an Assessing Officer [including order
u/s.143(1)] following orders can also be revised by the CIT:
i) An order of assessment made by the Assistant Commissioner (AC) or
Dy. Commissioner (DC) or Income tax Officer (ITO) on the basis of
direction from Joint Commissioner of Income-tax (JCIT) u/s.144A.
ii) An order made by the JCIT in exercise of the power of an A.O.
conferred on him under the order issed by the Board or CCIT or DG
u/s.120.
Order which is subject matter of appeal can not be revised:- If an order
passed by the A.O. has been subject matter of any appeal, it can not be
revised by the CIT. However, the powers of the CIT u/s.263(1) shall
extend to such matter as has not been considered and decided in such
appeal. Thus, the CIT has jurisdiction & powers to initiate proceedings
u/s.263 in respect of issues not touched by the CIT(A) in his appellate
order [ CIT Vs. Jaykumar B. Patil (1999) 236 ITR 469 (SC)].
5. Procedure to be adopted by the CIT:- For making a valid order u/s.263, following
procedure may be adopted:-
i) CIT must examine personally the assessment record before initiating
proceeding u/s.263 & to record the finding that the order sought to be revised is erroneous
& prejudicial to the interest of the revenue.
ii) CIT must disclose, in his notice to the assessee, the grounds on which he
desires to revise.
iii) The assessee should be given a reasonable time, depending up on the facts of
each case, to show cause as to why the assessment order should not be revised.
iv) CIT is entitled to make his own enquiries for the purpose of revision u/s.263.
The materials collected on enquiry must generally be disclosed to the assessee if he (CIT)
wants to use the material against the assessee.
v) When some of the several grounds disclosed in the notice fail, even then the
revision of assessment may be made on grounds, which are substantiated.
vi) CIT must not proceed against the assesse on undisclosed grounds or even on
undisclosed basic materials collected against the assessee. He must give notice, to even an
absent assessee before proceeding on the basis of new grounds & undisclosed basic
materials collected against the assessee. Moreover, where the assessee has filed written
submission, oral hearing is still required to be given [ Acme Fabric Plastic Co. Vs. ITO
(1995) 125CTR(MP)339.
If the CIT disclosed one or more grounds in the notice but revises the order on an entirely
different ground, not disclosed to the assessee, that order cannot be sustained.
6. Time Limit:- CIT can pass order u/s.263 within 2years from the end
of the financial year in which the order sought to be revised was
made. In computing the period of limitation, the time taken in giving
an opportunity to the assessee to be re-heard under the proviso to the
sec. 129 or any period during which any proceeding under sec.263 is
stayed by an order or injunction of any Court shall be excluded. This
time limit is, however, not applicable in the case of revisional order
passed on the direction of the Appellate Tribunal, the High Court or
Supreme Court.
7. B) Revision in favour of assessee (Sec. 264):- The followings are the provisions of
sec. 264:
i) An assessee can file appeal against order passed by the A.O. to the CIT(A) or
ii) He can prefer an appeal to the CIT for revising order passed by the A.O.
iii) Moreover, those cases which are not appellable before CIT(A) can be referred
by the assessee to the CIT for revision or modification.
iv) Revision u/s.264 can be made by the CIT either on his own motion or on an
application made by the assessee, which are not covered by sec.263.
v) No order u/s.264 can be passed which is prejudicial to the assessee.
Orders which can be revised by the CIT u/s.264:- CIT can take action u/s.264 only
on an order passed by the following subordinate authorities.
i) An Assessing Officer,
ii) Dy. Commissioner (Appeal) [CIT(A) is not subordinate to the CIT] sec. 264
(Explanation 2)
8. Order which can not be revised by the CIT u/s.264:- Following
orders can not be revised by the CIT:
i) The CIT can not revise an order till the time within which the
appeal may be made before CIT(A) or the Tribunal expires. If,
however, the right of appeal is waived by the assessee, the CIT may
revise the order even before the time for appeal has expired.
ii) Where the order has been made the subject of an appeal to the
CIT(A) or Tribunal (whether by the assessee or Deptt.), the revisional
power of CIT u/s.264 comes to an end. The assessee has either to
choose the appellate forum or revisional forum and can not avail of
both the forum with regard to the same order.
The CIT does not have the power to revise an order u/s.264 if the
same order has been made subject to an appeal to the Tribunal, even
though the relief claimed in revision is different from the relief
claimed in appeal before the tribunal irrespective of fact whether the
appeal is by the assessee or by the Deptt. [Hindustan Aeronautics
Ltd. Vs. CIT (2000) 243 ITR 808 (SC).
9. Time Limit:-
i) When CIT acts sau motu u/s.264, he must revise the order within
one year from the date of original order.
ii) An application by the assessee must be made within one year
from the date of communication of order, or the date on which he
otherwise came to know of it, whichever is earlier. However, CIT
may condone the delay if he is satisfied that the assessee was
prevented by “sufficient cause” from making an application within
the specified period.
The CIT may pass an order u/s.264 within a period
of one year from the end of the financial year in which the
application is made. This time limit shall not apply in the cases of
orders to give effect to any finding or direction of the Tribunal or
High Court or Supreme Court. Moreover, in computing the period of
limitation, the time taken in giving an opportunity to the assessee to
be re-heard under the proviso to the sec.129 or any period during
which any proceeding u/s.264is stayed by an order or injunction of
any Court shall be excluded.
10. Scope of CIT’s power u/s.264:-
i) CIT can interfere both on question of fact & law as his power is
co-extensive with that of the original & the 1st appellate authority.
ii) Second time revision by CIT is not possible.
iii) Overall order u/s.264 not to be prejudicial to the assessee
.
iv) The assessee should be given an opportunity of being heard by
fixing a date of hearing even where a written submission is there.
v) CIT’s power u/s.264 is discretionary. CIT may even refuse to
interfare in a case where, for reasons to be stated, the assessee has
disentitled himself to get the relief at the revisional stage by his
own conduct.
11. Other points:-
i) A fee of Rs.500/- shall accompany every application by an assessee for
revision u/s.264.
ii) An order by the CIT declining to interfere shall be deemed not to be an order
prejudicial to the assessee.
iii) Order u/s.264 is not appellable to Tribunal (u/s.253) or High Court
(u/s.260A). However, a petition for a writ under article 226 for quashing the
order of the CIT is maintainable which does not satisfy the well settled tests of
“judicial acts”.
iv) Power u/s.264 are much wider than those u/s.263. CIT is empowered
u/s.264 to entertain even fresh pleas and new grounds and claims, which could
not be made by the assessee before the lower authorities.
v) The assessee can not claim the right of revision in respect of an earlier year
on the basis of a finding of tribunal from a subsequent years [Namdang Tea Co.
Ltd. Vs. CIT (1982)138 ITR 326(Cal.).
THANKS