Can the Commissioner revise on a ground that was not in the show cause notice?
Yes. Section 263 requires an opportunity of hearing, not a formal show cause notice, and the Commissioner is not confined to the issues listed in any notice. What he must give you is a full chance to answer before he finalises.
Decided by the Supreme Court (Ranjan Gogoi J and Prafulla C. Pant J) on 2016-05-11, reported as (2016) 384 ITR 200 (SC); (2016) 240 Taxman 221 (SC); (2016) 286 CTR 113 (SC); (2016) 69 taxmann.com 170 (SC); (2016) 11 SCC 748; Civil Appeal Nos. 5009 and 5010 of 2016. It bears on section 263 of the Income Tax Act 1961, in Revision & Rectification matters.
It is here because it goes against the taxpayer on a point many assume works the other way. The argument that survives is procedural: whatever ground the Commissioner ends up on, you must have had a real chance to answer it.
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For assessment year 2001-02 the assessee, by a re-revised return dated 31 March 2003, claimed additional expenses of 30 per cent of gross professional receipts, about Rs. 3.17 crores, explaining by letter of 13 February 2004 that these were paid to unnamed agencies and guards for his personal security and had been met out of available cash balances. By letter of 13 March 2004 he withdrew the claim, saying he would not be able to substantiate it. The Assessing Officer issued a notice to show cause why s.69C should not be invoked; on the assessee's reply that the claim had been withdrawn, the officer accepted that stand and pursued the matter no further, completing the assessment on 30 March 2004. On 7 November 2005 the Commissioner issued a notice under s.263 listing eleven grounds, and by order of 20 March 2006 set aside the assessment and directed a fresh one; he recorded no finding on seven or eight of the eleven grounds and recorded adverse conclusions on issues not mentioned in the notice, three issues being common to both. The Tribunal reversed the revision on 28 August 2007 for breach of natural justice, and the Bombay High Court summarily dismissed the Revenue's appeal on 7 August 2008.
The Revenue's appeal was allowed, the Commissioner's revisional order restored and the orders of the Tribunal and the High Court set aside. Section 263 requires an opportunity of hearing, not a show cause notice; nothing in the section raises such a notice to the status of a mandatory notice or confines the Commissioner to the grounds stated in it, provided the assessee gets a full opportunity to controvert the facts relied on before the decision is finalised. Failure to give that opportunity makes the revisional order legally fragile for breach of natural justice, not for want of jurisdiction. On the facts, the Commissioner had worked from the assessment record, which was open to the assessee's authorised representative throughout a hearing spread over many days, so no reasonable opportunity had been denied. On the second limb, the Court accepted that revision is not available merely because another view is possible, but held that a claim made in terms that prima facie showed the expenditure had been incurred, and then abandoned, gave rise to the necessity of further enquiry in the Revenue's interest, and that the s.69C notice could not simply be dropped because the claim was withdrawn. In the connected appeal the Court recorded that the fresh assessment made on 29 December 2006 had not been tested on merits and that the assessee remains free to do so (paras 10 to 14, 21 to 24).
The Court began from the structure of the Act: the Revenue has no power of appeal against an assessment, and must use s.147 or s.263, each within its own field (para 9). Under s.263 the twin conditions — that the order is erroneous and that it is prejudicial to the interests of the Revenue — must be conjointly satisfied, and once that satisfaction is reached jurisdiction exists subject to natural justice, which is what the statutory requirement of an opportunity of being heard imports. Unlike reopening under s.147, revision is not contingent on the giving of a notice to show cause; a prior notice detailing the grounds is a different thing from an opportunity of hearing, and only the latter is required (para 10, relying on Gita Devi Aggarwal v. CIT and CIT v. Electro House, the latter holding under the corresponding s.33B of the 1922 Act that breach of natural justice may affect the legality of the order but not the Commissioner's jurisdiction). It follows that the Commissioner is not confined to the terms of any notice he does issue, though he must give a full opportunity to controvert the facts he relies on before finalising his decision (para 11). The Tribunal had set the revision aside without any finding that the assessee had in fact been denied the chance to contest those facts; since the Commissioner had proceeded on the assessment record, which was available to the assessee's representative throughout, no breach could be shown (paras 13 to 14). On the second question, the Court accepted the principle in Malabar Industrial Co. Ltd. and Max India that a possible view of the Assessing Officer is not to be revised merely because another view exists, since that would confer an appellate power on the revisional authority, but held the principle inapplicable: the withdrawal of a claim that on its face indicated the expenditure had been incurred called for further enquiry into whether it had been incurred and, if so, from what source (paras 20 to 21).
It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause.
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Handle my notice → Ask a CA on WhatsAppYes. Section 263 requires an opportunity of hearing, not a formal show cause notice, and the Commissioner is not confined to the issues listed in any notice. What he must give you is a full chance to answer before he finalises. This was decided by the Supreme Court (Ranjan Gogoi J and Prafulla C. Pant J) and bears on section 263 of the Income Tax Act 1961. It is reported as (2016) 384 ITR 200 (SC); (2016) 240 Taxman 221 (SC); (2016) 286 CTR 113 (SC); (2016) 69 taxmann.com 170 (SC); (2016) 11 SCC 748; Civil Appeal Nos. 5009 and 5010 of 2016. It is here because it goes against the taxpayer on a point many assume works the other way. The argument that survives is procedural: whatever ground the Commissioner ends up on, you must have had a real chance to answer it. If it applies to you, the first step is this: Do not build the case on the notice being narrower than the final order; that argument was rejected.
For assessment year 2001-02 the assessee, by a re-revised return dated 31 March 2003, claimed additional expenses of 30 per cent of gross professional receipts, about Rs. 3.17 crores, explaining by letter of 13 February 2004 that these were paid to unnamed agencies and guards for his personal security and had been met out of available cash balances. By letter of 13 March 2004 he withdrew the claim, saying he would not be able to substantiate it. The Assessing Officer issued a notice to show cause why s.69C should not be invoked; on the assessee's reply that the claim had been withdrawn, the officer accepted that stand and pursued the matter no further, completing the assessment on 30 March 2004. On 7 November 2005 the Commissioner issued a notice under s.263 listing eleven grounds, and by order of 20 March 2006 set aside the assessment and directed a fresh one; he recorded no finding on seven or eight of the eleven grounds and recorded adverse conclusions on issues not mentioned in the notice, three issues being common to both. The Tribunal reversed the revision on 28 August 2007 for breach of natural justice, and the Bombay High Court summarily dismissed the Revenue's appeal on 7 August 2008. The matter was decided on 2016-05-11 by the Supreme Court (Ranjan Gogoi J and Prafulla C. Pant J). On those facts the Supreme Court held as follows. The Revenue's appeal was allowed, the Commissioner's revisional order restored and the orders of the Tribunal and the High Court set aside. Section 263 requires an opportunity of hearing, not a show cause notice; nothing in the section raises such a notice to the status of a mandatory notice or confines the Commissioner to the grounds stated in it, provided the assessee gets a full opportunity to controvert the facts relied on before the decision is finalised. Failure to give that opportunity makes the revisional order legally fragile for breach of natural justice, not for want of jurisdiction. On the facts, the Commissioner had worked from the assessment record, which was open to the assessee's authorised representative throughout a hearing spread over many days, so no reasonable opportunity had been denied. On the second limb, the Court accepted that revision is not available merely because another view is possible, but held that a claim made in terms that prima facie showed the expenditure had been incurred, and then abandoned, gave rise to the necessity of further enquiry in the Revenue's interest, and that the s.69C notice could not simply be dropped because the claim was withdrawn. In the connected appeal the Court recorded that the fresh assessment made on 29 December 2006 had not been tested on merits and that the assessee remains free to do so (paras 10 to 14, 21 to 24).
The Court began from the structure of the Act: the Revenue has no power of appeal against an assessment, and must use s.147 or s.263, each within its own field (para 9). Under s.263 the twin conditions — that the order is erroneous and that it is prejudicial to the interests of the Revenue — must be conjointly satisfied, and once that satisfaction is reached jurisdiction exists subject to natural justice, which is what the statutory requirement of an opportunity of being heard imports. Unlike reopening under s.147, revision is not contingent on the giving of a notice to show cause; a prior notice detailing the grounds is a different thing from an opportunity of hearing, and only the latter is required (para 10, relying on Gita Devi Aggarwal v. CIT and CIT v. Electro House, the latter holding under the corresponding s.33B of the 1922 Act that breach of natural justice may affect the legality of the order but not the Commissioner's jurisdiction). It follows that the Commissioner is not confined to the terms of any notice he does issue, though he must give a full opportunity to controvert the facts he relies on before finalising his decision (para 11). The Tribunal had set the revision aside without any finding that the assessee had in fact been denied the chance to contest those facts; since the Commissioner had proceeded on the assessment record, which was available to the assessee's representative throughout, no breach could be shown (paras 13 to 14). On the second question, the Court accepted the principle in Malabar Industrial Co. Ltd. and Max India that a possible view of the Assessing Officer is not to be revised merely because another view exists, since that would confer an appellate power on the revisional authority, but held the principle inapplicable: the withdrawal of a claim that on its face indicated the expenditure had been incurred called for further enquiry into whether it had been incurred and, if so, from what source (paras 20 to 21). In the words reproduced by the source cited on this page: "It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause." The decision followed or applied Gita Devi Aggarwal v. CIT [1970] 76 ITR 496 (SC); CIT v. Electro House [1971] 82 ITR 824 (SC); Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) and CIT v. Max India Ltd. [2007] 295 ITR 282 (SC) — the two-views principle accepted but held inapplicable.
It was decided by the Supreme Court on 2016-05-11 and is reported as (2016) 384 ITR 200 (SC); (2016) 240 Taxman 221 (SC); (2016) 286 CTR 113 (SC); (2016) 69 taxmann.com 170 (SC); (2016) 11 SCC 748; Civil Appeal Nos. 5009 and 5010 of 2016. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 263, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The Revenue's appeal was allowed, the Commissioner's revisional order restored and the orders of the Tribunal and the High Court set aside. Section 263 requires an opportunity of hearing, not a show cause notice; nothing in the section raises such a notice to the status of a mandatory notice or confines the Commissioner to the grounds stated in it, provided the assessee gets a full opportunity to controvert the facts relied on before the decision is finalised. Failure to give that opportunity makes the revisional order legally fragile for breach of natural justice, not for want of jurisdiction. On the facts, the Commissioner had worked from the assessment record, which was open to the assessee's authorised representative throughout a hearing spread over many days, so no reasonable opportunity had been denied. On the second limb, the Court accepted that revision is not available merely because another view is possible, but held that a claim made in terms that prima facie showed the expenditure had been incurred, and then abandoned, gave rise to the necessity of further enquiry in the Revenue's interest, and that the s.69C notice could not simply be dropped because the claim was withdrawn. In the connected appeal the Court recorded that the fresh assessment made on 29 December 2006 had not been tested on merits and that the assessee remains free to do so (paras 10 to 14, 21 to 24). It arises in Revision & Rectification matters, on section 263 of the Income Tax Act 1961, and was decided by Ranjan Gogoi J and Prafulla C. Pant J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do insist on a proper opportunity to answer any new point, and record it if none was given. Argue that the officer did make enquiries and took a permissible view — that remains the substantive defence.
Searched for later treatment; none was found. That is not the same as a source affirming it. Nothing doubting or overruling it was found, but no later decision applying or following it was located in the searches run for this entry either, so its later treatment is not established here. Read it with Explanation 2 to s.263, inserted by the Finance Act 2015 with effect from 1 June 2015, which deems an order erroneous where it is passed without making inquiries or verification which should have been made. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment also states that where two views are genuinely possible revision is inappropriate, because revising on that basis would give the revisional authority an appellate power. The Court reconciled that with its conclusion by holding that this was not a two-views case at all: a claim made in terms that prima facie showed the expenditure had been incurred, and then abandoned, called for further enquiry, and the s.69C notice could not be dropped merely because the claim was withdrawn (paras 20 and 21). Note also that the Court left the fresh assessment of 29 December 2006 open to challenge on merits. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Revenue's appeal was allowed, the Commissioner's revisional order restored and the orders of the Tribunal and the High Court set aside. Section 263 requires an opportunity of hearing, not a show cause notice; nothing in the section raises such a notice to the status of a mandatory notice or confines the Commissioner to the grounds stated in it, provided the assessee gets a full opportunity to controvert the facts relied on before the decision is finalised. Failure to give that opportunity makes the revisional order legally fragile for breach of natural justice, not for want of jurisdiction. On the facts, the Commissioner had worked from the assessment record, which was open to the assessee's authorised representative throughout a hearing spread over many days, so no reasonable opportunity had been denied. On the second limb, the Court accepted that revision is not available merely because another view is possible, but held that a claim made in terms that prima facie showed the expenditure had been incurred, and then abandoned, gave rise to the necessity of further enquiry in the Revenue's interest, and that the s.69C notice could not simply be dropped because the claim was withdrawn. In the connected appeal the Court recorded that the fresh assessment made on 29 December 2006 had not been tested on merits and that the assessee remains free to do so (paras 10 to 14, 21 to 24).
TaxSphere, “CIT v Amitabh Bachchan”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-amitabh-bachchan/ (validity last checked 2026-08-19)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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The Commissioner's show cause notice before revising my assessment was defective. Does that knock out his jurisdiction to revise at all?
