The Commissioner has issued a s.263 show-cause notice. Can I go to the High Court now, or do I have to wait for the order and appeal to the Tribunal?
Usually you have to wait. The statutory route is an appeal to the Tribunal under s.253(1)(c) against the revision order, and a High Court will normally send you back to it. The writ is available where the challenge is to jurisdiction rather than to merits — where a fact the section makes a precondition is simply absent, most obviously where the two-year limitation in s.263(2) has already run, or where the notice proceeds against an order that does not exist or against a person who is not the assessee. Framing matters more than anything else here.
Start with what the statutory route actually is. There is no appeal to the CIT(A) against a revision order — s.246A does not list orders under s.263. The appeal is to the Tribunal. So the choice at the show-cause stage is between waiting for the order and appealing it, and going to the High Court under Article 226 now.
The general rule is against you. In CIT v. Chhabil Dass Agarwal the Supreme Court held that the Income-tax Act provides a complete machinery for assessment and reassessment and that an assessee 'cannot be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226'. That was said of a reassessment order, but it is the passage a standing counsel reads out against any writ that bypasses an appeal, and it is the reason most writs against s.263 notices are dismissed with liberty to reply to the notice.
The rule is not absolute, and the Supreme Court has been careful about how it is stated. In Godrej Sara Lee Ltd v. Excise and Taxation Officer the Court separated maintainability from entertainability: an objection to maintainability 'goes to the root of the matter', while entertainability is 'entirely within the realm of discretion of the high courts'. The mere availability of an appeal that the petitioner has not pursued does not make the petition incompetent. The Court restated the four categories from Whirlpool Corporation — enforcement of fundamental rights, violation of natural justice, proceedings wholly without jurisdiction, and a challenge to the vires of an Act — and added that a controversy which is purely legal, turning on interpretation rather than on disputed facts, should be decided by the High Court.
The third leg is older and is the one that fits a notice rather than an order. Calcutta Discount Co. Ltd v. ITO, already in this library, is authority that the existence of an alternative remedy is not a sufficient reason for refusing quick relief by writ against an authority acting without jurisdiction. That is the doctrinal basis on which a notice — as opposed to an order — is challengeable at all: the complaint is not that the officer will decide wrongly, it is that he has no power to embark on the enquiry.
So what does that look like on a s.263 notice? The realistic jurisdictional points are these. Limitation: s.263(2) bars an order after two years from the end of the financial year in which the order sought to be revised was passed, and where that period has already expired on the face of the notice, nothing the Commissioner does in the enquiry can cure it — there is no fact left to find. Non-existence of the order sought to be revised, or a notice directed at an order passed by an authority who is not subordinate to the Commissioner. A notice in the name of a dead person or a dissolved entity. A notice on an issue that was the subject matter of an appeal already decided, where the doctrine of merger takes the issue outside the record the Commissioner may examine. Each of those is a precondition rather than a merits question, and each can be argued without the High Court having to weigh whether the assessment order was in fact erroneous.
What does not work is the point most assessees actually want to take — that the Assessing Officer did apply his mind, that the enquiry was adequate, that two views were possible. Those are the merits of the revision. They belong to the reply to the notice and then to the Tribunal, and a High Court will say so.
The commentary on s.263 records three decisions to the same effect, and they should be treated for what they are. The itatonline article 'S. 263: Guide To The Law On Revision Of Assessments' at section 10.6 digests Pankaj Goyal v. CIT [2004] 270 ITR 201 (HP) for the proposition that where the Commissioner has recorded a prima facie opinion that the order is erroneous and prejudicial to revenue, a court in its writ jurisdiction 'cannot pre-empt proceedings under section 263'; CIT v. B&A Plantation and Industries Ltd [2013] 212 Taxman 137 (Mag.)(Gau.) for a writ against a s.263 order being rejected in view of the alternate remedy; and John George Vettath v. CIT [2007] 162 Taxman 134 (Ker.) for the proper course being to approach the Tribunal and not the High Court. That is a one-line digest of each. None of those judgments was read in the research for this entry, and the only other page carrying the same text is a verbatim reproduction of the same article on a different site. Verify each before citing it.
One practical point that is independent of all this. Filing a writ does not stop the two-year clock in your favour — s.263(2) excludes periods during which the proceeding is stayed by an order or injunction of any court. A stay obtained on a s.263 notice extends the Commissioner's time. That is a real cost of the tactic and it is often overlooked.
The tactical question at the notice stage is whether to spend money on a writ that will probably be returned, or to reply, take the order and go to the Tribunal where the merits will be decided anyway. The answer turns entirely on whether the point is jurisdictional. If it is limitation, or a notice against a non-existent order or a dead assessee, the writ is worth filing because the Tribunal appeal costs you a year and the defect is complete on the face of the notice. If it is 'the AO did enquire', the writ is a waste and the Tribunal is the forum.
My society runs a college and ended the year with a surplus. Does that surplus mean we no longer exist solely for educational purposes and not for profit?
A reassessment was done in between. Does the two-year clock for s.263 restart from it?
Can the Commissioner revise on a ground that was not in the show cause notice?
Can I go straight to the High Court against an income-tax order instead of filing the statutory appeal?
The Commissioner's show cause notice before revising my assessment was defective. Does that knock out his jurisdiction to revise at all?
The Assessing Officer passed the assessment after being told what to do by the Commissioner. What happens to that assessment, and to a later section 263 order on it?
How wide are the first appellate authority's powers when it disposes of an appeal?
What if the law itself was unsettled when the officer decided?
Every page in this library links to what it was written from, so you can check it rather than take our word for it.