Revision & Rectification

Revision & Rectification — the law in short

Every authority in this library on revision & rectification, with what each one decided.

• CIT v Paville Projects Pvt Ltd Supreme CourtHelps department
  The Assessing Officer allowed a deduction. Does the fact that a view was taken protect the assessment from section 263?
  Only if the view taken is one of two views genuinely open on the law. Where the Supreme Court is satisfied the assessment is both erroneous and prejudicial, the Commissioner's revision stands and the Tribunal and High Court orders setting it aside go.
• Godrej Sara Lee Ltd v Excise and Taxation Officer Supreme CourtHelps taxpayer
  The High Court dismissed my writ saying an appeal was available. Was it entitled to do that without looking at the point?
  It depends, and the Supreme Court drew the distinction that matters. Maintainability goes to the root — it decides whether the court can receive the case at all. Entertainability is discretion. The mere availability of an appeal or revision that the petitioner has not pursued does not oust the High Court's jurisdiction or make the writ petition 'not maintainable', and where the challenge is to the very jurisdiction of the authority, or is a pure question of law, the petition deserves consideration on merits.
• CIT v Amitabh Bachchan Supreme CourtHelps departmentNo later treatment found
  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.
• CIT v Greenworld Corporation Supreme CourtCuts both ways
  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?
  An assessment passed on the dictates of a higher authority is without jurisdiction and a nullity. And a Commissioner exercising section 263 cannot use that order to direct reopening of other assessment years; his revisional jurisdiction is confined to the year before him.
• CIT v Max India Ltd Supreme CourtHelps taxpayer
  What if the law itself was unsettled when the officer decided?
  Reported as following the two-views principle — where the provision was capable of more than one interpretation and the officer adopted one of them, revision under s.263 does not lie.
• CIT v Alagendran Finance Ltd Supreme CourtHelps taxpayer
  A reassessment was done in between. Does the two-year clock for s.263 restart from it?
  Not for an item the reassessment never touched. For that item, limitation runs from the ORIGINAL assessment order, because the doctrine of merger does not apply where the subject matter is different.
• Berger Paints India Ltd v. CIT, Calcutta (SC, 17 February 2004) — where the Revenue has accepted a High Court's statement of the law in one assessee's case it cannot challenge it in another without just cause Supreme CourtHelps taxpayer
  The department accepted a High Court decision in someone else's case and never appealed it, and is now arguing the opposite against my client. Can it?
  Not without just cause. The Supreme Court held that if the Revenue has not challenged the correctness of the law laid down by a High Court and has accepted it in the case of one assessee, it is not open to the Revenue to challenge its correctness in the case of other assessees, without just cause. The Gujarat High Court in Lakhanpal National Ltd had held that the whole of the excise and customs duty actually paid in a year is deductible under section 43B irrespective of how much of it is embedded in closing stock; that decision was never challenged, was followed by the Bombay and Madras High Courts and by a Special Bench of the Tribunal, and none of those was challenged either. The Court found no just cause for a departure, held that the Commissioner, the Tribunal and the Calcutta High Court had erred in permitting the Revenue to contend to the contrary, set aside the Calcutta High Court's judgments for all three assessment years and answered the questions in favour of the assessee.
• Sakthi Trading Co v CIT Supreme CourtHelps taxpayer
  Our firm dissolved when a partner died, but the remaining partners carried on the same business. Must the closing stock on the date of dissolution be revalued at market price?
  No. The Supreme Court held that where a firm is dissolved but the business is not discontinued, there is no warrant for revaluing the closing stock at market rate. The ordinary rule, cost or market price whichever is lower, continues to apply. Valuing stock at a market value higher than cost would tax notional profits the assessee has never realised. A.L.A. Firm and G.R. Ramachari, which required market valuation, were cases where the business itself came to an end. The Commissioner's order under section 263 was wrong and the question was answered for the assessee.
• Malabar Industrial Co Ltd v CIT Supreme CourtHelps department
  The Commissioner wants to revise my assessment. What does he actually have to establish?
  Both things, not one. The order must be erroneous AND prejudicial to the revenue. If the officer took one of two possible views, that is not an error.
• CIT v Shree Manjunathesware Packing Products Supreme CourtHelps department
  The Commissioner has issued a notice under section 263 on the strength of a Departmental Valuation Officer's report that reached the Assessing Officer only after my assessment was over. Can he revise on material that was not on the file when the order was passed?
  Yes, on these facts. The Supreme Court held that it was open to the Commissioner to take into consideration all the records available at the time of examination by him, and so to consider a valuation report that the Departmental Valuation Cell submitted after the assessment order had been passed. The Court read clause (b) of the Explanation to section 263(1), which declares that 'record' shall include and shall be deemed always to have included all records relating to any proceeding under the Act available at the time of examination by the Commissioner, and held that the Commissioner may look not only at the record of that proceeding but at the record relating to it. It also held that the narrower reading had never been the settled law, even for orders passed before the 1988 amendment.
• Central Provinces Manganese Ore Co. Ltd. v. CIT — interest under s.215 can be disputed in appeal only on the ground of total non-liability, and waiver must first be asked of the Assessing Officer Supreme CourtHelps department
  The assessment order charges interest under s.215 (or s.217, or s.139(8)). Can I appeal against the interest, and if not, how do I get it reduced?
  The Supreme Court held that because the levy of interest is a part of the process of assessment, an assessee may dispute it in appeal, but only if he limits himself to the ground that he is not liable to the levy at all; a complaint about the quantum, or about the refusal of relief on the merits, is not within the appeal. The route for reduction is the statutory waiver power — s.215(4), and the corresponding provision for s.139(8) interest — and the Court held that where the assessee has made no application to the Income-tax Officer for reduction or waiver, there has been no improper denial of relief, so no revision petition to the Commissioner can be maintained in that regard either.
• Tara Devi Aggarwal v CIT Supreme CourtHelps department
  Can an assessment be revised where the officer taxed income that was never yours?
  Yes. An assessment made merely because the assessee wanted the amount taxed in her hands, to help someone else escape a larger assessment, can be erroneous and prejudicial to the revenue — and may be cancelled in revision.
• CIT v Electro House Supreme CourtHelps department
  The Commissioner's show cause notice before revising my assessment was defective. Does that knock out his jurisdiction to revise at all?
  No. The Supreme Court held that the revision section, unlike the reassessment section, prescribes no notice at all. It requires only that the Commissioner give the assessee an opportunity of being heard before he reaches his decision, not before he begins the enquiry. That requirement belongs to natural justice, not to jurisdiction. A breach of it may make the resulting order illegal, but it does not take away the Commissioner's power to proceed. Since no notice was a condition precedent, the question what the notice should have contained did not arise. The Calcutta High Court's contrary view was set aside.
• T. S. Balaram, ITO v Volkart Brothers Supreme CourtHelps taxpayer
  What actually counts as a 'mistake apparent from the record' under s.154?
  An obvious and patent mistake. Not one that must be established by a long drawn process of reasoning on points where two opinions are conceivable. A decision on a debatable point of law cannot be rectified.
• Rampyari Devi Saraogi v CIT Supreme CourtHelps department
  The Commissioner set aside my assessments in revision relying on enquiries he never showed me. Is his order bad for want of a fair opportunity?
  No, on these facts. The Supreme Court dismissed the appeal. The Commissioner had used material from his own enquiries which was never put to the assessee, but the Court held that this was supporting material and not the basic ground of the order. On the face of the record the assessments were prejudicial to the revenue: a new assessee had filed nine years' voluntary returns at once, her own declaration about initial capital, marriage ornaments and gifts should have put any officer on his guard, no books or bank account existed, and short stereotyped orders followed within days without any enquiry.
• Dwarka Nath v Income-Tax Officer Supreme CourtHelps taxpayer
  The Commissioner dismissed my revision and the officer will not issue a demand notice so I cannot appeal. Is the revisional order beyond the reach of a writ because it is administrative?
  No. The Supreme Court held that the revisional jurisdiction is prima facie judicial: the order brought before the Commissioner affects the assessee's rights, it is implicit in a revisional power that the parties be heard, and the nature of the jurisdiction carries with it a duty to act judicially. Certiorari therefore lies. And even if the revisional order were administrative, that would not help the Revenue, because the officer's failure to issue the statutory demand notice would still be a failure of a statutory duty, correctable by mandamus. The Court quashed the revisional order and directed the officer to pass an order and issue notice according to law.
• Mirum Digital Pvt Ltd v PCIT High CourtHelps taxpayer
  The assessee did not appear before the Commissioner in the revision proceedings. Does that alone justify the revision order?
  No. Non-appearance before the Commissioner does not convert an assessment made after specific queries and full replies into an order passed without enquiry. The Commissioner still has to make his own enquiry and satisfy both conditions, and prejudice to the revenue must actually exist.
• CIT v Eastman Exports Global Clothing Pvt Ltd High CourtHelps taxpayerNo later treatment found
  The Commissioner has issued a s.263 notice saying the transferor companies had not been in business for three years, so the losses we took over cannot be carried forward. Our arrangement was a demerger, not an amalgamation. Does the three-year condition apply?
  No. The three-year condition is in s.72A(2), which governs amalgamation. A demerger is governed by s.72A(4), which contains no such condition. The Madras High Court held that a revision order built on the wrong sub-section, and which merely remitted the matter to the assessing officer for enquiry, did not satisfy the requirement that the order sought to be revised be erroneous.
• Optum Global Solutions India Pvt Ltd v PCIT High CourtHelps taxpayerNo later treatment found
  You signed an APA and filed a modified return under s.92CD. The Commissioner has now issued a s.263 notice on the old assessment order. Can he?
  Not on this reasoning. Once a modified return is filed under the APA it has to be treated as a return filed under s.139, and the earlier return and earlier assessment order lose their efficacy for all practical purposes; a fresh assessment order is what has to be passed. Allowing the s.263 notice on the superseded order to run would make the APA and the modified return inconsequential, and nothing stops the Assessing Officer from taking the very same points while re-scrutinising the modified return. Both writ petitions were allowed and the show cause notices set aside.
• PCIT v Sangeeta Jain High CourtCuts both waysNo later treatment found
  The Commissioner says my assessment was made without any inquiry. Is that by itself enough to revise it under s.263?
  It depends on which side of the line the file falls. The Delhi High Court restored a revision because the officer had accepted the claim that the land sold was agricultural without verifying it at all. The twin conditions still have to be met, but a complete absence of inquiry satisfies the first of them; an inquiry the Commissioner merely thinks was too thin does not.
• Bahar Infocons P Ltd v PCIT High CourtHelps taxpayer
  I over-reported income by mistake and the time to file a revised return has gone. Can it be fixed?
  The Commissioner cannot reject a revision application under s.264 solely because a revised return was not filed within the s.139(5) time. The power exists to relieve against over-assessment and reaches a mistake the assessee detects after the assessment is complete. Here provisions for bonus written back had been taxed twice across assessment years 2019-20 to 2021-22, and the revision applications were sent back to the Principal Commissioner to decide the adjustment on merits - the Court did not itself order relief.
• Munchener Ruckversicherungs Gesellshaft AG v CIT (International Taxation) High CourtHelps taxpayer
  The deductor credited the TDS late, so it turned up in 26AS only after I had filed. The department says I should have revised my return, and refuses credit because I never offered the income to tax. Is there a way back?
  Yes - s.155(14). The Delhi High Court held that s.155(14) places the Assessing Officer under a statutory obligation to amend the assessment or intimation once the certificate or the updated Form 26AS is produced, and that the sub-section neither contemplates nor mandates the original return being amended or revised. It also held that the Commissioner was wrong to require the income to be offered to tax where the assessee had consistently and uncontestedly said the receipt was not taxable in India.
• Gopal Vazirani v Principal Commissioner of Income Tax High CourtHelps taxpayerUnder appeal
  The Commissioner says the proviso to section 240 shows that returned income is sacrosanct, so he cannot give my client a refund below what he himself returned. Is that right?
  No. The proviso to section 240 bites only in the two situations it describes — an assessment set aside or cancelled with a fresh assessment directed, and an assessment annulled — and says nothing about a case where neither has happened. There is no provision in the Act denying a refund of excess tax where the income ultimately assessable is less than the returned income; an assessee can be asked to pay only such tax as is legally due and nothing more.
• PCIT v Mohak Real Estate Pvt Ltd High CourtHelps taxpayerNo later treatment found
  How much work must the Commissioner do before he can hold an assessment erroneous and prejudicial?
  At least a minimal enquiry, and he must record the reasons for his conclusion. A revision order that does not engage with the reply to the show cause notice and does not record why the assessment is erroneous is not sustainable in law.
• Reddy Vanga Ventures LLP v PCIT High CourtHelps taxpayerNo later treatment found
  The officer declared your return invalid for want of an audit report when your turnover was below the audit threshold. What is the remedy?
  The High Court quashed the orders invalidating the return and the order in revision, and remitted the matter to the Assessing Officer to re-examine the turnover. Where the record, including the officer's own finding, showed that the turnover was below the threshold at which audit is required, the premise on which the return had been held defective under s.139(9) did not stand.
• Pramod R Agrawal v PCIT High CourtHelps taxpayer
  I left a legitimate deduction out of my return and the assessment is over. Can the Commissioner allow it under s.264?
  Yes. The Bombay High Court held that s.264 confers wide jurisdiction, that it is not confined to correcting the errors of subordinate authorities, and that it covers a claim the assessee failed to make in the return and discovered only later. The rejection was quashed and the Commissioner was directed to decide the application afresh, by a reasoned order, after a hearing.
• Anil Kumar Malhotra v Union of India High CourtHelps departmentNo later treatment found
  My stay application was rejected on the 20% ground while my appeal is pending. Can I go straight to the High Court under Article 226 saying the assessment breached natural justice?
  This Court said no. Having already filed the statutory appeal, the assessee cannot simultaneously attack the assessment order in writ under the guise of challenging the rejection of his stay application; that is resort to two forums at once. The remedy against the rejection is the review route in clause 4(C) of the Office Memorandum dated 29.02.2016 read with a revision under s.264, and the writ petitions were dismissed with liberty to take that route.
• Aafreen Fatima Fazal Abbas Sayed v ACIT High CourtHelps taxpayer
  I let the 30 days to appeal my 143(1) intimation lapse. Can I still go to the PCIT under s.264?
  Yes. Section 264(4) bars revision only in the situations it lists, essentially where an appeal is pending or has been decided; letting the appeal period run out without filing is not one of them. The revision application had to be decided on merits, and no formal waiver of the right of appeal could be demanded, because a right not exercised does not need to be waived.
• Paradigm Geophysical Pty Ltd v CIT (International Taxation)-3 High CourtCuts both waysNo later treatment found
  For AY 2012-13 the officer moved us out of s.44BB into s.44DA. Does the Finance Act 2010 proviso really do that?
  Yes. From 1 April 2011, income falling within the scope of s.44DA(1) is excluded from s.44BB, and if a non-resident's income is royalty or fees for technical services it is taxable under s.44DA or s.115A. But the exclusion only bites if the receipt really is royalty or FTS, and services for a mining or like project are carved out of the FTS definition in Explanation 2 to s.9(1)(vii) altogether.
• PCIT v Shreeji Prints Pvt Ltd High CourtHelps taxpayer
  The Commissioner did not mention Explanation 2 in the show cause notice but relied on it in the revision order. Does that matter?
  Yes. The Tribunal held, and the High Court and Supreme Court left undisturbed, that invoking Explanation 2 in the order without having put it to the assessee in the show cause notice is not appropriate or sustainable in law. On the merits, the Assessing Officer had made full inquiries into the loans and taken a plausible view, so there was nothing to revise.
• M/s. Indira Industries v Principal Commissioner of Income Tax High CourtHelps taxpayer
  The Commissioner has issued a section 263 notice raising issues the reassessment never touched. Does the two-year limit run from the reassessment order or from the original assessment, and can I challenge the notice itself?
  From the original assessment, and yes. The Madras High Court held that where a section 263 notice raises issues that were not the subject matter of the reassessment, the two years in section 263(2) run from the end of the financial year in which the original assessment was passed, not the reassessment. Here scrutiny assessment was made on 25 February 2015, so time ran from 31 March 2015, and the notice of 16 August 2017 was out of time. Being barred by law, the notice suffered from lack of jurisdiction, and the settled principles allow a show cause notice to be assailed on that ground. The writ appeal was allowed and the notice quashed.
• R. Banumathy v Commissioner of Income Tax-I High CourtHelps taxpayer
  My client missed the s.10(10C) exemption in the original return, filed a revised return that the officer lodged as invalid, and the Commissioner rejected the s.264 revision. Is there anything left?
  Yes. The Madras High Court set aside the s.264 order and directed refund of the excess tax, holding that the exemption under s.10(10C) up to five lakh rupees was available to the employee of a bank under an early retirement option scheme and that Rule 2BA cannot cut down the section. It added that where an assessee pays excess tax it is the Department's bounden duty to tell him of the reliefs he is entitled to and to refund the excess.
• Naresh Bhavani Shah (HUF) v CIT High CourtHelps taxpayer
  The HUF's money was invested in the karta's own name, so the TDS certificate and the 26AS entry carry his individual PAN. The HUF offered the interest to tax and the karta claimed no credit. The department says PAN mismatch, no credit. What now?
  The credit was directed to be given to the HUF. The Court held that the ordinary route is Rule 37BA(2) - the deductee files a declaration with the deductor, and the deductor issues the certificate in the name of the person entitled to credit - and that this procedure must invariably be completed before credit can be claimed where the certificate shows someone else's name and PAN. But it also held there is no dearth of power in the department to give credit in a genuine case, and on these special facts it directed credit on the karta filing an affidavit that the money and the income were not his and that he had claimed no credit.
• Utanka Roy v Director of Income Tax High CourtHelps taxpayerNo later treatment found
  I am a non-resident. I worked on a foreign employer's ship outside India for most of the year and was paid by that foreign company. The department says the salary is taxable in India. Where does salary accrue?
  Where the services are rendered. The Calcutta High Court held that for a non-resident, whose total income is governed by s.5(2), the place of accrual has to be found, and for that purpose the place where the services were rendered is what matters; the source of the income is not relevant. A marine engineer who had rendered services outside India for 286 days and had received his remuneration from a foreign company had received income outside India, and both the s.143(1) intimation and the s.264 order were set aside.
• Rajmandir Estates P Ltd v PCIT High CourtHelps departmentNo later treatment found
  Can the officer look past my subscriber at where the subscriber's own subscribers got their money?
  It depends on what the file shows. This is the decision the department relies on for going up the chain. Upholding a revision under s.263, the Calcutta High Court quoted the Special Bench in Sophia Finance for the width of the words 'any sum found credited in the books' and held that the officer is not precluded from enquiring into the true nature and source of a credit even where it is entered as share application money; it recorded that the submission that the source of the source is irrelevant did not appear to be correct. What it decides is that the enquiry could be directed on this file, not that the credits were bogus.
• Vijay Gupta v CIT High CourtHelps taxpayer
  I made a mistake in my own return and paid tax I did not owe. The time to revise has gone. Can the Commissioner give me relief under section 264?
  Yes. The Delhi High Court held that the revisional power under section 264 is very wide and is not confined to correcting the officer's errors - it extends to errors made by the assessee, including a legitimate claim never made in the return and raised for the first time in the revision application. An intimation under section 143(1) is an "order" for section 264. Paying the Rs.500 fee late is a curable irregularity, not a bar. The Commissioner's rejection was set aside and the revision restored for fresh consideration on merits.
• CIT v Fr. Mullers Charitable Institutions High CourtHelps taxpayer
  One deposit of ours breaks the s.11(5) modes. Will the department tax the trust's entire income?
  No. Only the income from the investment or deposit made in violation of s.11(5) is taxed; a breach of s.13(1)(d) does not take the trust's total income out of s.11. On that footing the s.263 revision was held unsustainable.
• CIT v State Bank of Mysore High CourtHelps taxpayerNo later treatment found
  My VRS does not satisfy Rule 2BA. The Commissioner says that kills my s.35DDA deduction as employer. Does it?
  No. The Karnataka High Court held that Rule 2BA is a guideline for the purposes of s.10(10C) — the exemption in the retiring employee's hands — and has nothing to do with the employer's claim under s.35DDA. s.35DDA makes no mention of any rule. The employer's deduction is nevertheless confined to one-fifth in the year of payment, with the balance spread over the four succeeding years.
• DIT v Jyoti Foundation High CourtHelps taxpayer
  The Commissioner says the Assessing Officer's inquiry was not deep enough. Can he set the assessment aside and tell the officer to inquire further?
  No. Where inquiry was made but the Commissioner thinks it insufficient, the Commissioner must conduct the inquiry himself and record a finding that the order is erroneous. He cannot remit the question of whether the order is erroneous to the Assessing Officer.
• CIT v D.G. Housing Projects Ltd High CourtHelps taxpayer
  The Commissioner has set aside my assessment under section 263 saying the Assessing Officer did not examine an issue properly — can he do that without deciding the issue himself?
  No. The Delhi High Court held that a finding that the assessment order is erroneous is a jurisdictional precondition for section 263. Where the Assessing Officer has made an enquiry but the Commissioner thinks it inadequate, the Commissioner must himself examine or verify the matter and record a clear finding, supported by reasons, that the order is erroneous and unsustainable in law. He cannot remit the matter for the Assessing Officer to find out whether the order was erroneous. The revision order here, which said only that the point had not been properly examined, was rightly cancelled and the Revenue's appeal was dismissed.
• Dr. M. Manohar v. ACIT (Madras High Court) — the s.115H benefit does not extend to interest earned on interest that was re-deposited with the original sum; 'derived from' requires a direct nexus with the foreign exchange asset High CourtHelps departmentNo later treatment found
  My client, a returned NRI, keeps renewing his bank deposits by rolling the accrued interest back into the principal, and has claimed the concessional rate under section 115H on the whole of the interest each year. The Commissioner has revised the assessment under section 263. Is the claim on the interest-on-interest sustainable?
  No. The Madras High Court held that section 115H does not allow that elasticity: the concessional rate is available only to investment income DERIVED FROM the foreign exchange asset, and unless the interest income has a direct nexus with the foreign exchange asset the benefit cannot be extended. The section 263 revision and the Tribunal's order confirming it were upheld and the assessee's appeal was dismissed.
• Amrit Sales Promotion Pvt Ltd v Union of India High CourtHelps taxpayerNo later treatment found
  I applied under s.144A and the Additional Commissioner directed the Assessing Officer in my favour. Two years later the department has issued a s.148 notice on exactly the same point. Can it do that?
  No. A direction issued under s.144A binds the Assessing Officer, and once the assessment has been framed in accordance with it the department cannot reopen the same issue on the same facts under s.147/148 — that is a mere change of opinion. If the department thought the s.144A direction was prejudicial to the revenue its remedy was s.263; not having taken it, the direction became final.
• Lachman Dass Bhatia Hingwala (P) Ltd v ACIT High CourtCuts both ways
  The Tribunal has recalled its whole order on a rectification application. Does section 254(2) give it that power, or can it only amend the order?
  It has the power, in the right circumstances. A Full Bench of the Delhi High Court held that under section 254(2) the Tribunal can recall its order in its entirety where it is satisfied that prejudice has resulted to a party attributable to the Tribunal's own mistake, error or omission, and where that error is manifest. That has nothing to do with any inherent power of review. The Court held that its own earlier decisions in K.L. Bhatia, Deeksha Suri, Karan and Co, J.N. Sahni and Baljeet Jolly, which had laid down that the Tribunal can never recall an order in entirety, do not state the law correctly after the Supreme Court's decision in Honda Siel Power Products.
• Utkal Galvanizers P. Ltd. v ACIT High CourtHelps taxpayer
  The Assessing Officer has issued a section 154 notice on an item my CIT(A) appeal already dealt with. Can he do that?
  No. The Orissa High Court held that the scope of s.154(1A) is limited to mistakes apparent from the record and does not include a power to revise, review or reappraise the officer's own order, and that letting him rectify a matter already carried in appeal would let him override the appellate order. If the Revenue was dissatisfied with the CIT(A) it had to file a second appeal to the Tribunal.
• S.D.S. Mongia v Central Board of Direct Taxes — a receipt excluded by s.10(13) does not become taxable because the assessee offered it, and Article 226 can correct that even where the s.264 revision is time-barred High CourtHelps taxpayer
  My client offered a superannuation fund receipt to tax for several years before realising it was exempt. His section 264 revision has been rejected as time-barred and the assessment years are closed. Is there anything left?
  The Delhi High Court gave relief on exactly those facts. It upheld the Commissioner's rejection of the section 264 revision as barred by limitation, but held that the constraints felt by the Commissioner under section 264 do not impinge on the Court's powers under Article 226; that Article 265 mandates that no person shall be taxed without the authority of law; and that since there was no authority to tax the annuities the petitioner had received, it was appropriate to exercise the extraordinary jurisdiction to correct the injustice even though the injustice was of the assessee's own making.
• Commissioner of Income-Tax v Shambhu Investment Pvt Ltd High CourtHelps department
  I let furnished table space with security, electricity, water and common amenities for a single monthly charge. Is that business income or income from house property?
  Income from house property, on these facts. The Calcutta High Court held that the mere attachment of income to immovable property is not by itself decisive; what must be seen is the assessee's primary object in exploiting the property. If the main intention is to let the property or a portion of it, the receipt is rental income; if it is to exploit the property by way of complex commercial activities, it is business income. Here there was no separate charge or agreement for furniture, fixtures or services, the monthly rent was comprehensive, and interest-free security advances of Rs 4,25,000 had already recovered the whole cost of the let portion. Applying the Sultan Brothers tests, the letting was inseparable and the object was letting.
• CIT v Union Tyres — the Commissioner (Appeals) cannot bring in a new source of income High CourtCuts both ways
  Can the Commissioner (Appeals) use the enhancement power to tax a source of income the Assessing Officer never considered?
  No. The Delhi High Court held that the first appellate authority's power, wide as it is, carries one limitation: it cannot introduce into the assessment a new source of income that the Assessing Officer never considered. That is what this judgment decides, and it decides it under s.251(1)(a). It does not say where the Revenue must go instead — for that, see CIT v Sardari Lal & Co, the Full Bench decision two years later, which added that the route lies under s.147/148 or s.263.
• Sudhir Sareen v CIT High CourtHelps departmentNo later treatment found
  You never asked the Assessing Officer for more time, the return went invalid for want of proof of tax, and you have gone to the Commissioner under s.264. Will that work?
  No. The Delhi High Court held that the power to extend time and to condone the delay in rectifying a defect under s.139(9) is conferred on the Assessing Officer, and the Commissioner in revision under s.264 is not the forum in which to ask for it for the first time. Where the assessee had not applied to the Assessing Officer at all, no fault could be found with the officer's order or with the Commissioner's refusal.
• Kerala State Bamboo Corporation Ltd v CIT High CourtHelps taxpayerNo later treatment found
  You missed the fifteen days on a s.139(9) notice and the officer has written back that your return is invalid. Is there anything left to do?
  Yes. The proviso to s.139(9) lets the Assessing Officer condone the delay and treat the return as valid where the defect is cured after the fifteen days but before the assessment is made. The Kerala High Court held that the consequence of invalidity does not bite until the assessment is completed or the time for completing it runs out, so a cure filed before that date can still be accepted, and an application seeking reconsideration must be dealt with as a petition under the proviso even if it is not labelled one.
• CIT v M.K. Chandrakanth High CourtHelps taxpayer
  My client's trust deed says that if the purpose fails after twenty years the fund reverts to the settlor. Does that clause alone make the trust revocable, so that the income is taxed in the settlor's hands from day one?
  No. A clause that operates only on the failure of the settlement, after a fixed period, does not make the trust revocable while the settlement is running. For the years in which the contingency has not arisen the deed must be read without that clause, and if during the operation of the settlement the settlor can neither enjoy the income nor reassume power over the income or assets, s.63 is not attracted and s.61 does not apply.
• CIT v Sophia Finance Ltd High CourtHelps department
  My company received share application money. Can the Assessing Officer use section 68 on it at all, or is share capital simply a capital receipt he cannot touch?
  He can. The Delhi High Court, sitting as a Full Bench, held that section 68 is widely worded - it covers any sum found credited in the books, whatever colour the assessee gives it - so the officer has jurisdiction, and indeed a duty, to enquire whether the alleged shareholders actually exist. If they are identified and shown to have invested, the money is a capital receipt and nothing more happens. If they do not exist, there is no valid issue of share capital, because shares cannot be issued to non-existent persons, and the credit may be charged as the company's income.
• CIT v Gabriel India Ltd High CourtHelps taxpayer
  The Commissioner has issued a section 263 notice saying my assessment order does not discuss a deduction the officer allowed. Is a brief order by itself erroneous?
  No. The Bombay High Court held that an order is erroneous only if it is not in accordance with law, or was passed without any enquiry in undue haste. Where the officer raised a query, got a written explanation and allowed the claim on it, his order cannot be branded erroneous merely because he did not discuss the matter elaborately or because the Commissioner would have decided differently. And the Commissioner must himself reach a finding that the order is erroneous and prejudicial before he sets it aside; he cannot simply remit the point for the officer to look at again.
• Aamrakunj Realty Limited v PCIT, Ahmedabad-1 ITATHelps taxpayerNo later treatment found
  The Principal Commissioner has passed a s.263 order saying my AO was wrong not to initiate a s.271AAD penalty on a disallowed payment, and has directed him to initiate and levy it. Can he do that?
  No. The Tribunal held that s.271AAD names the Assessing Officer, the Commissioner (Appeals) and, since the Finance Act 2023, the Joint Commissioner (Appeals), and that even after those amendments it still does not empower the Principal Commissioner or the Commissioner to initiate or levy the penalty. What the Commissioner cannot do himself he cannot get done through the Assessing Officer by exercising revisional powers, and the s.263 order was quashed.
• Wadhwa Group Holdings Pvt Ltd v PCIT (Central), Mumbai-3 ITATHelps taxpayerNo later treatment found
  The Commissioner has revised your assessment for a year before AY 2024-25 saying the officer never verified MSME trade payables. Can s.43B(h) support that?
  No. Clause (h) of s.43B was inserted by the Finance Act 2023 with effect from 1 April 2024 and operates prospectively from AY 2024-25. For AY 2022-23 the Tribunal held the Commissioner could not found prejudice to the Revenue on the non-application of a provision that did not apply, and set the s.263 order aside.
• Thailammal Charitable Trust v Exemption Ward, Salem ITATHelps taxpayerNo later treatment found
  The CIT (Exemptions) has revised my AY 2022-23 assessment under s.263 because the Assessing Officer did not check whether the expenditure funded by the loan had already been claimed as application. Was he obliged to check?
  No. For AY 2022-23, Explanation 4(ii) to s.11(1) simply postponed recognition of the application from the year of expenditure to the year of repayment, and imposed no further condition requiring the Assessing Officer to revisit the end use of the borrowing or to verify whether it had already been claimed. The further provisos imposing those conditions were inserted only by the Finance Act 2023 with effect from 1 April 2023, so the s.263 order, which read them into AY 2022-23, was quashed and the assessment restored.
• ACIT v Reliance Industrial Investments and Holdings Ltd — a compound financial instrument needs a liability component before s.115JB(2C) bites ITATHelps taxpayer
  On conversion to Ind AS our convertible debentures were parked under "other equity" and a note called them the equity component of a compound financial instrument. The Assessing Officer has treated the whole amount as transition amount and is adding one-fifth a year to book profit. Can he?
  Not if the instrument has no liability component. Ind AS 32 requires a compound financial instrument to have both a liability component and an equity component, and where the balance sheet shows the debentures as an instrument entirely equity in nature, they are not a compound financial instrument, are therefore no part of the transition amount defined in s.115JB(2C), and no one-fifth adjustment can be made.
• ACIT v Transworld Garnet India Private Limited ITATHelps taxpayerNo later treatment found
  The officer took the TPO's adjustment straight into a final order without giving me a draft order. The department says s.292B cures it. Does it?
  It does not, on this line of authority. The Tribunal held that once the assessee answers the description of an 'eligible assessee' under s.144C(15)(b) and a variation prejudicial to it is proposed, s.144C(1) is mandatory, and passing the final order without first forwarding a draft is a failure of a jurisdictional condition precedent, not a procedural lapse. Section 292B cures only technical or clerical defects in proceedings otherwise validly initiated and cannot confer a jurisdiction that was never lawfully assumed. The Revenue's alternative plea for a remand to let the officer start again was also rejected: a nullity cannot be revived by remand.
• Neeraj v PCIT — a s.263 revision directing a s.68 addition against a s.44AD return quashed for want of jurisdiction ITATHelps taxpayerNo later treatment found
  The Principal Commissioner has revised my client's assessment under s.263 and directed the officer to tax his cash deposits under s.68, although he filed under s.44AD and keeps no books. Can that order stand?
  The Delhi Bench quashed it. Once an assessee has surrendered himself to a particular statute he becomes entitled to all its attending benefits; an assessee under s.44AD computes income as a percentage of turnover and is not required to maintain books of account, so the Principal Commissioner's direction to make a s.68 addition was questionable and the revision order suffered from a lack of requisite jurisdiction. The Bench recorded that it has consistently held that invocation of s.263 is not permissible in cases where the assessee files his return under s.44AD.
• Chintan Navnitlal Parikh v PDIT (Inv) ITATHelps taxpayerNo later treatment found
  I declared my interest in a foreign discretionary trust under s.59 and the assessment accepted it. Can the Principal Director now revise that order?
  Not where the point was examined at the assessment stage. The Tribunal set aside a revision under s.23 of the Black Money Act, holding that an order passed after due enquiry and verification is neither erroneous nor prejudicial to the interest of the Revenue within s.23(2) and cannot be called prejudicial under s.23(9). It also records the valuation route for a beneficiary's interest in a foreign trust: the trust's assets are valued as an association of persons under Rule 3(1)(g), with the shares held by the trust valued first under Rule 3(1)(c).
• Polynova Industries Limited v DCIT 14(1)(1), Mumbai ITATHelps taxpayerNo later treatment found
  An internal audit objection has produced a s.263 notice saying CSR spending is not voluntary and so is not a 'donation' at all for s.80G. Does that argument let the Commissioner revise my assessment?
  No, not while the point remains genuinely open. The Tribunal held that the eligibility of CSR expenditure for s.80G is a question on which Benches differ — the Bangalore and Kolkata Benches allow it, the Delhi Bench in Agilent Technologies disallows it — so an Assessing Officer who allows it has adopted one of two reasonably possible views and the s.263 jurisdiction does not arise.
• Bharti Airtel Limited v. PCIT, Delhi-1 (ITAT Delhi) — a section 263 revision holding a demerger was really an acquisition, and why it did not survive ITATHelps taxpayerNo later treatment found
  The Commissioner has revised our assessment under section 263 saying the scheme was an acquisition and not a demerger, so the section 72A(4) losses go. What did the Tribunal make of that argument?
  The Tribunal allowed the assessee's appeal. It held that the Principal Commissioner had drawn his inferences without taking cognizance of the Composite Scheme of Arrangement on the record, that a scheme of arrangement approved by the court carries the force of a statute, and that a restructuring in the telecom sector could not be branded an exercise to claim set-off of brought forward losses by a bald allegation. It recorded that section 2(19AA) refers to the provisions of the Companies Act for determining whether there is a demerger, and that the basic requirement for eligibility under section 72A(4) is that the transfer of the undertaking be in pursuance of a scheme of arrangement under the Companies Act by the demerged company. On the facts it found that the demerged company had been engaged in the consumer wireless mobile business, had been incurring loss since inception, that the entire business loss related to that undertaking alone, and that all the assets and liabilities relating to the demerged business had been transferred and vested in the assessee.
• Jaybhole Cold Storage v Pr. CIT — s.35AD(7) imports s.80-IA(7), so a specified business must file the accountant's report, and an Assessing Officer who never asked about it leaves the order open to s.263 ITATHelps departmentNo later treatment found
  The Principal Commissioner has revised my client's assessment under section 263 because no accountant's report was filed with the section 35AD claim for its agricultural warehouse. The section itself says nothing about a form. Can the revision stand?
  On this Tribunal's view, yes. On 31 July 2024 the ITAT Ahmedabad held that section 35AD(7), which applies section 80A(6) and section 80-IA(7) and (10) to section 35AD in respect of goods, services or assets held for the specified business, carries with it the obligation to furnish the report required by section 80-IA(7); and that an assessee claiming section 35AD is "required under law to furnish requisite form, duly certified by Chartered Accountant in terms of Section 80-IA(7) of the Act". The assessee, a firm operating a warehousing facility for storage of agricultural produce, had claimed Rs 7,75,12,899 under section 35AD for AY 2017-18. The Principal Commissioner revised the assessment under section 263 on the ground that no report in Form No. 10CCB had been filed and that the Assessing Officer had neither called for it nor verified it. The assessee's answer was that Form 10CCB and rule 18BBB make no reference to section 35AD, and that the auditors had certified the deduction in Form 3CD. The Tribunal did not decide whether the filing is mandatory or merely procedural. It rested on the failure to enquire: no specific query about the section 35AD claim had been raised in the assessment, the claim was substantial, and the Assessing Officer had not enquired whether the requisite form had been furnished. On that ground it held that the assessment order was erroneous in so far as it was prejudicial to the interests of the Revenue.
• Pricol Engineering Industries Ltd v ACIT ITATHelps taxpayer
  We gave away a loss-making division at zero consideration; its liabilities exceeded its assets. The Principal Commissioner has revised the assessment under s.263 saying the negative net worth should have been taxed. Is that revision sustainable?
  Not on those facts. The Chennai Tribunal accepted that a negative net worth is to be taken into account in computing the capital gain, but only where there is a positive consideration; where the slump sale consideration is nil, reducing a negative net worth from nil still produces nil, so no tax was lost. The revision failed the second limb of s.263 — no prejudice to the Revenue — and was quashed.
• M/s DFE Pharma India LLP v DCIT — AMT is charged on total income, so brought-forward losses are set off first ITATHelps taxpayerNo later treatment found
  The Assessing Officer accepted nil income under the normal computation after setting off brought-forward losses, but then charged AMT at 18.5 per cent on the net profit without allowing that set-off. Can he compute total income one way for the normal provisions and another way for AMT?
  No. Section 115JC charges the minimum tax on adjusted total income, and adjusted total income starts from the total income, which by s.2(45) is computed after giving effect to the provisions of the Act — including the set-off of brought-forward losses under s.72. The Assessing Officer's contrary interpretation, treating total income as net profit for AMT purposes only, was rejected.
• JMS Mining Pvt Ltd v PCIT-2, Kolkata ITATHelps taxpayer
  I added back my company's CSR spend under Explanation 2 to s.37(1) and then claimed 50 per cent of it under s.80G. The Commissioner says s.37 blocks that and has revised the assessment under s.263. Is he right?
  No. Explanation 2 to s.37(1) operates only while computing business income under Chapter IV-D; it says nothing about Chapter VI-A, so a CSR contribution that independently satisfies s.80G remains deductible under s.80G. Parliament carved out only two CSR items in s.80G itself — clauses (iiihk) and (iiihl), the Swachh Bharat Kosh and the Clean Ganga Fund — and by expressio unius that exclusion implies every other qualifying donation survives.
• Hi-Tech Estates and Promoters Pvt Ltd v PCIT — s.43CB cannot be used to revise an assessment for a year before AY 2017-18 ITATHelps taxpayerNo later treatment found
  The Commissioner has revised my client's assessment under s.263 saying he should have followed percentage of completion. The year is before AY 2017-18. Is that revision good?
  No. The Tribunal held that percentage of completion became mandatory for revenue recognition only from 1 April 2017, that is AY 2017-18, by the insertion of s.43CB, and that this method was not mandatory or compulsory for AY 2013-14; the Commissioner therefore could not revise or revisit the assessment order by pressing s.43CB into service. It quashed the s.263 order, the s.263 notice and all proceedings and orders passed in pursuance of it.
• Raipur Steel Casting India (P) Ltd v PCIT ITATHelps taxpayerUnder appeal
  The Commissioner has issued me a s.263 notice saying the Assessing Officer should have referred my s.40A(2)(b) payments to the TPO. Clause (i) of s.92BA was omitted in 2017. Can he still revise?
  No. Clause (i) of s.92BA was omitted by the Finance Act 2017 with effect from 1 April 2017 without any saving clause, and an omission is not a repeal, so s.6 of the General Clauses Act does not preserve anything built on it. The Tribunal held the provision must be treated as never having existed, and the Commissioner's revision order founded on a failure to refer specified domestic transactions to the TPO was quashed, the jurisdiction exercised being, in the order's own register, null in the eye of law.
• Technopolis Premises Co-operative Society Ltd v Pr. CIT — s.80P is expressly carved out of the AMT add-back ITATHelps taxpayerNo later treatment found
  The Commissioner has revised my co-operative society's assessment under s.263 because AMT on adjusted total income came out higher than the normal tax. The department's working grossed up my total income by the s.80P deduction. Is that right?
  It is not. Clause (i) of s.115JC(2) requires total income to be increased by deductions claimed under any section "other than section 80P" included in Chapter VI-A under heading C. The Assessing Officer's internal working had added back the s.80P deduction of Rs.56,16,242, producing an adjusted total income of Rs.1,13,55,916 instead of the correct Rs.57,39,674; on the correct figure the AMT was lower than the normal tax, so there was no prejudice to the Revenue and no ground for revision.
• Brahma Center Development P Ltd v PCIT ITATHelps taxpayerNo later treatment found
  The Commissioner has revised my assessment saying no inquiry was made, but the officer did ask about the very item. Is that revision good?
  No, on this Tribunal's view. The Delhi Bench quashed both revision orders because the Assessing Officer had put the point on the interest adjusted against project expenditure, the company had explained it and the officer had accepted the explanation - so there was an enquiry - while the Principal Commissioner made no independent enquiry of his own. The order also records, at para 13, a Mumbai Bench observation and a Delhi Bench decision that Explanation 2 to s.263 is prospective, but it states no view of its own on that, so this is not authority for the prospectivity point.
• Pankil Garg v PCIT ITATHelps taxpayer
  I received money from my HUF. Is it taxable because an HUF is not my 'relative'?
  No. A sum received by a member from his HUF, even out of its capital or estate, is a capital receipt in his hands and not income, and s.10(2) was also available. The s.263 revision built on the contrary view was set aside.
• M/s Divya Creation v Pr. CIT — AMT under s.115JC is not attracted where the deduction claimed is under s.10A ITATHelps taxpayerNo later treatment found
  The Commissioner has revised my assessment under s.263 saying the Assessing Officer never examined AMT. My only deduction is under s.10A. Does s.115JC even apply to me?
  It does not. Section 115JC(2) is a closed list: adjusted total income is the total income increased only by deductions under Chapter VI-A heading C other than s.80P, by a deduction under s.10AA, and by a deduction under s.35AD net of the notional depreciation. A deduction under s.10A is not in that list, so where that is the only claim the provisions of s.115JC are clearly not applicable and the Assessing Officer was under no duty to enquire into them.
• Torrent Pharmaceuticals Ltd v DCIT ITATHelps taxpayer
  After Explanation 2 to s.263, can the Commissioner revise simply by saying the enquiry was not thorough enough?
  No. Explanation 2 is clarificatory and does not dilute the basic requirements of s.263(1). Revision needs a gross inadequacy of enquiry, or an enquiry the record demanded and which was simply not made.
• EPCOS Electronic Components SA v UOI High CourtHelps taxpayerOverruled
  My return was accepted as filed and no demand was raised. Is a s.264 revision still open to me?
  Yes. An intimation under s.143(1) that simply accepts the return is still an order capable of revision, and 'prejudicial to the interest of the assessee' does not mean 'raised a demand'. The prejudice was that the assessee had paid more than the applicable treaty provisions required, even though the tax computed in the intimation was unchanged.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.