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THE CHAMBER OF

TAX CONSULTANTS
REVISION AND RECTIFICATION
UNDER INCOME-TAX ACT

CA Ketan L. Vajani
caketanvajani@gmail.com
3rd March, 2014

Agenda







Provisions of section 263


Concepts and Issues under section 263
Provisions of section 264
Concepts and Issues under section 264
Provisions of section 154
Concepts and Issues under section 154

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Revision

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Provisions of Section 263





Commissioner is having power to call for and


examine the record of any proceeding under the Act
CIT may pass the order for revision if any order
passed by the AO is :







erroneous in so far as it is ;
Prejudicial to the interest of revenue

Opportunity of hearing is to be granted to the


assessee before making the revision order.
CIT shall make or cause to be made such inquiry as
may be deemed necessary.
Revision order can have the effect of :





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Enhancing the assessment


Modifying the assessment
Cancelling the assessment
Directing a fresh assessment
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Provisions of Section 263







The term order includes order passed by


Asst CIT or Dy. CIT on the basis of directions
issued by Jt. CIT u/s. 144A
order includes order made by Jt. CIT acting
in the capacity of the AO
record includes all records relating to any
proceeding under the Act at the time of

examination by the Commissioner.




If the order is subject to appeal, the CITs


power u/s. 263 shall extend to such matters
as had not been considered and decided in
such appeal.

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Section 263 Time Limit




Time Limit : 2 years from the end of the financial year


in which the order sought to be revised was passed

However in the case of an order which has been


passed in consequence of or to give effect to any
finding or decision in an order of ITAT/HC/SC the
above time limit does not apply and in such a situation
the order can be passed at any time.

Following periods shall be excluded in computing the


time limit



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Time taken in giving opportunity to the assessee to be


reheard under proviso to section 129
Any period during which the proceeding under the section
is stayed by an order of injunction of any court.

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Section 263 - Relevant


Concepts and Issues

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Any Order in any proceeding





Not confined to Assessment Orders


It can also extend to




Rectification order
Order passed u/s. 143(3) r.w.s. 147
Communication u/s. 195(2) determining tax liability
u/s. 195(1)
Order u/s. 197(1)

Whether it applies to following orders ?





Order giving effect to Appellate Orders


Order u/s. 143(3) r.w.s. 263 ??

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Whether intimation u/s. 143(1)


can be Revised u/s. 263





The order to be revised shall be an order passed in a


proceeding
Meaning of Proceeding whether 143(1) can be said
to be an order arising out of any proceeding ?
CIT Vs. Rajkumar Dipchand Phade (2001) 249 ITR
520 (Bom) (None represented Assessee)
CIT Vs. Anderson Marine & Sons P. Ltd. (2004) 266
ITR 694 (Bom)


Intimation is same as order It is deemed to be a notice


of demand u/s. 156 and all consequences of the Act
follows
Difference in earlier 143(1)(a) and present 143(1)

Laxmi Enterprises Vs. DCIT(1998) 64 ITD (Del) 1

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Meaning of Record



Explanation Record shall mean all the records


at the time of examination by the Commissioner
Valuation Report submitted by Departmental
Valuation Cell post the assessment is part of the
record


CIT Vs. Shree Manjunathesware Packing Products &


Camphor Works (1998) 231 ITR 53 (SC)

CIT has power to take action under s. 263 in the


case of an assessee even on the basis of the
records in the cases of other persons


CIT Vs. Arunaben Sumankumar (2003) 259 ITR 386


(Guj)

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Twin Conditions
Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC)

The CIT has to be satisfied of twin conditions, namely, (i) the


order of the AO sought to be revised is erroneous; and (ii) it is
prejudicial to the interests of the Revenue. If one of them is
absentif the order of the ITO is erroneous but is not prejudicial
to the Revenue or if it is not erroneous but is prejudicial to the
Revenuerecourse cannot be had to s. 263(1) of the Act.

The phrase prejudicial to the interests of the Revenue is not an


expression of art and is not defined in the Act. Understood in its
ordinary meaning it is of wide import and is not confined
(conferred) to loss of tax.

The scheme of the Act is to levy and collect tax in accordance with
the provisions of the Act and this task is entrusted to the Revenue.
If due to an erroneous order of the ITO, the Revenue is losing tax
lawfully payable by a person, it will certainly be prejudicial to the
interests of the Revenue.

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Malabar Industrial Contd.




The phrase prejudicial to the interests of the Revenue has to


be read in conjunction with an erroneous order passed by the
AO. Every loss of revenue as a consequence of an order of
AO cannot be treated as prejudicial to the interests of the
Revenue, for example, when an ITO adopted one of the
courses permissible in law and it has resulted in loss of
revenue; or where two views are possible and the ITO has
taken one view with which the CIT does not agree, it cannot
be treated as an erroneous order prejudicial to the interests
of the Revenue unless the view taken by the ITO is
unsustainable in law.

It has been held by this Court that where a sum not earned
by a person is assessed as income in his hands on his so
offering, the order passed by the AO accepting the same as
such will be erroneous and prejudicial to the interest of the
Revenue. Rampyari Devi Saraogi vs. CIT (1968) 67 ITR 84

(SC) and Smt. Tara Devi Aggarwal vs. CIT (1973) 88 ITR 323
(SC)
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Change of Opinion






One of the two possible views followed by AO


Order though may be prejudicial but can not be
said to be erroneous
CIT Vs. Arvind Jewellers 259 ITR 502 (Guj)
CIT Vs. Max India Ltd. (2007) 295 ITR 282 (SC)


Where two views are possible and the ITO has taken
one view with which the CIT does not agree, it
cannot be treated as an erroneous order prejudicial to
the interest of the Revenue, unless the view taken by
the ITO is unsustainable in law

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Meaning of Erroneous


As per Blacks Law Dictionary, erroneous


means involving error ; deviating from the
law
"Erroneous assessment" refers to an
assessment that deviates from the law and
is, therefore invalid.
Erroneous judgment" means one rendered
according to course and practice of Court but
contrary to law, upon mistaken view of law,
or upon erroneous application of legal
principles.

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Erroneous Orders
CIT Vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom.)


An order can not be called erroneous unless it is not


in accordance with law.

If an ITO acting in accordance with law makes certain


assessment, the same cannot be branded as
erroneous by the Commissioner simply because
according to him the order should have been written
more elaborately.

This section does not visualise a case of substitution


of judgment of the Commissioner for that of the ITO,
who passed the order, unless the decision is held to
be erroneous.

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Gabriel India Bom HC Contd




A conclusion cannot be termed to be erroneous


simply because the Commissioner does not feel
satisfied with the conclusion. It may be said in such
a case that in the opinion of the Commissioner the
order in question is prejudicial to the interest of the
Revenue. But that by itself will not be enough to
vest the Commissioner with the power of suo motu
revision because the first requirement, namely, the
order is erroneous, is absent.

Similarly if an order is erroneous but not prejudicial


to the interest of the Revenue, then also the power
of suo motu revision cannot be exercised. Any and
every erroneous order cannot be subject-matter of
revision because the second requirement also must
be fulfilled.

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Erroneous Orders


CIT Vs. Jawahar Bhatacharjee (2012) 341 ITR 434


(Gau.)(FB) Assessment made on





wrong assumption of facts or


on incorrect application of law or
without due application of mind or
without following the principles of natural justice would
be 'erroneous

Failure to apply the correct provision of law as


may be applicable in given facts of the case will be
resulting in an erroneous order CIT Vs. Emery

Stone Manufacturing Co. (1995) 213 ITR 843 (Raj)


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Non-erroneous Orders


Where the AO accepts the claim of an assessee based


on the present law but latter on the law is amended to
plug the lacuna in the law, the order of the AO can
not be termed as erroneous CIT Vs. Vikram Aditya &

Associates P. Ltd. (2006) 287 ITR 268 (Del.)

Where AO follows the decision of an appellate


authority, it cannot be said that his decision is
erroneous merely because the decision of the
appellate authority is the subject-matter of a further
appeal - CIT Vs. Orissa State Financial Corporation

(1993) 203 ITR 747 (Ori)

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Lack of Inquiry by AO


Order of AO can be treated as erroneous


where the AO does not make any inquiry
about a particular issue
Difference between Lack of inquiry and
inadequate inquiry
CIT Vs. Sunbeam Auto Ltd. (2011) 332 ITR
167 (Del.)
 CIT Vs. Vikas Polymers (2012) 341 ITR 537
(Del)


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Lack of Inquiry


AO is required to apply his mind to the facts of


the assessees case
If from the records, it can be seen that no
inquiry is made by the AO on a particular issue
then the order is prone to Revision
Where AO made applied his mind to a particular
issue but did not apply his mind to any other
issue the Revision is permissible for the area
where there is not application of mind - CIT Vs.

Hindustan Lever Ltd. (2012) 343 ITR 161 (Bom.)


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Further or Deep Inquiry




Lack of Inquiry is different than possible further


inquiries
Possibility of further inquiries will not be a
reason for revision



Baljees Vs. ACIT (2004) 85 TTJ (Chd) 543


Salora International Ltd. Vs. Addl. CIT (2005) 2 SOT
705 (Del.)
Amrik Singh Vs. ACIT (2010) 36 DTR (Chd)(Trib) 111

CIT can also not make fishing or roving inquiry


in revision proceedings

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Non-Initiation of Penalty


Favourable view : Penalty proceedings are separate


proceedings and they do not form part of the
assessment proceedings.


Addl CIT Vs. J. K. Dcosta (1982) 133 ITR 7 (Del.)

- SLP

dismissed at [(1984) 147 ITR (St.) 1]





CIT Vs. Keshrimal Parasmal (1985) 157 ITR 484 (Raj)


Surendra Prasad Singh & Others Vs. CIT (1988) 173 ITR 510
(Gau.)
CIT Vs. Subhash Kumar Jain (2011) 335 ITR 364 (P & H)

CIT can not set aside the assessment order for sole
purpose of initiation of penalty proceedings CIT Vs.
Parmanand M. Patel (2005) 278 ITR 3 (Guj)

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Non-Initiation of Penalty


Contrary view : The AO has to initiate the penalty proceedings


during the assessment proceedings. Failure to initiate penalty means
that AO has not decided an issue which ought to have been decided
by him during the assessment proceedings




Addl CIT Vs. Indian Pharmaceuticals (1980) 123 ITR 874 (MP)
CIT Vs. Surendra Prasad Agrawal (2005) 275 ITR 113 (All)
CIT Vs. Ashok Construction Co. (2006) 280 ITR 368 (All.)

C.A. Abraham vs. ITO (1961) 41 ITR 425 (SC) and CIT vs. Bhikaji
Dadabhai & Co. (1961) 42 ITR 123 (SC) has held that the
assessment does not mean only computation of income but
consideration of all facts including the liability for penalty that may
attract the provisions contained in s. 271(1)(a) of the Act.

Agreed additions or conditional offer and the effect of Mak Data P.


Ltd. Vs. CIT (2013) 358 ITR 593 (SC)

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Dropping of Penalty


Order dropping Penalty is a separate order


by itself and if the penalty is leviable on
merits of the case then CIT is empowered
to use his powers u/s. 263
Section 263 applies to any order under
any proceedings.
CIT Vs. Braj Bhushan Cold Storage (2005)
275 ITR 360 (All.)
 R. A. Himmatsingka & Co. Vs. CIT (2012) 340
ITR 253 (Pat.)


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Retrospective Amendment






Retrospective Amendment made after the AO passes the


order whether revision permissible
Position on date of order Vs. Position on date of
examination by CIT
Revision held permissible CIT Vs. Vincast Engineering
(2006) 280 ITR 385 (All) None appeared for Assessee
Law shall be seen as on the date when the AO passed
the order Revision held not permissible CIT Vs. Saluja Exim Ltd.
(2010) 329 ITR 603 (P & H) following CIT Vs. Max India

Ltd. (2007) 295 ITR 282 (SC)




In Max India, the fact was that two views were possible at the
time of passing of the revision order by CIT and the
retrospective amendment was made after the order u/s. 263 by
CIT.

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Subsequent Order of HC/ SC




AO decides an issue in favour of the assessee on


the basis of a Tribunal Order / HC decision
Latter on HC /SC reverses the Tribunal / HC
order
CIT passes the revision order





Before the HC / SC Order - following view of some


other HC
On the basis of appeal pending before HC / SC
Subsequent to the HC/SC order

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Subsequent Order of HC/ SC




Before the order of Higher forum




Pending appeal before Higher forum





CIT Vs. G. M. Mittal Stainless Steel P. Ltd. (2003) 263


ITR 255 (SC)
K. N. Agarwal Vs. CIT (1991) 189 ITR 769 (All)
CIT Vs. Paul Brothers (1995) 216 ITR 548 (Bom HC
Nag. Bench)

Subsequent to the order from HC /SC




CIT Vs. Seshasayee Paper Boards Ltd. (1996) 217 ITR


358 (Mad.)

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HC / SC order Vs Circular





AO passes order following HC / SC decision in


favour of the assessee
CBDT circular on the issue is against the
assessee
Whether the order of the AO is erroneous
Bhartia Industries Ltd. Vs. CIT (2013) 353 ITR
486 (Cal.)


While acting in capacity of quasi judicial authorities,


law laid down by HC / SC shall be followed and
circulars shall be ignored if they are conflicting with
such decisions of courts Hindustan Aeronautics Ltd.

Vs. CIT (2000) 243 ITR 808 (SC) followed

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Transfer Pricing Order




AO refers the matter to TPO and passes assessment order in


pursuance of the same whether the order of AO can be revised

If AO fails to refer the case to in a case where it is necessary as


per CBDT instruction then the order is subject to revision

Ranbaxy Laboratories Ltd. Vs. CIT (2012) 345 ITR 193 (Delhi)


There can not be any error in the order of AO since he has


followed the requisite procedure and applied to ALP computed by
TPO Essar Steel Ltd. Vs. Addl CIT (2013) 55 SOT 1

(Mumbai)(URO)


Order passed by TPO can not be subject to section 263 CIT does
not have a power to revise TPOs order Tata Communications

Ltd. Vs. Dy. CIT ITA (TP) No. 3121 & 3122/Mum/2013 order
dated 20-12-2013 itatonline.org
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Doctrine of Merger



Clause (c) of Explanation to sub section (1)


Once the issue was considered and decided by
CIT (A), revision can not be done on the same
issue Ranka Jewelllers Vs. Addl CIT (2010) 328

ITR 148 (Bom)




Confined to only those items which were subject


matter of appeal and not other items


CIT Vs. Shree Arbuda Mills Ltd. (1998) 231 ITR 50


(SC)
CIT Vs. Jaykumar B. Patil (1999) 236 ITR 469 (SC)

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Partial Vs. Complete Merger


CIT Vs. Ratilal Bacharilal & Sons (2006) 282 ITR
457 (Bom)





Deduction claimed u/s. 35B Rs. 8,90,676/AO allowed Rs. 5,63,350/Appeal for balance dismissed by CIT (A)
Latter CIT invoked revision in respect of Rs. 5,63,350/for the reason that same was allowed without verifying
the details.
Held Revision possible


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Assessee could not have been aggrieved for the amount


allowed and hence appeal was only in respect of amount not
allowed
Merger not in respect of the amount allowed by AO

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Partial Vs. Complete Merger


CIT Vs. Shashi Theatre Pvt. Ltd. (2001) 248
ITR 126 (Guj)





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AO allowed investment allowance on some


of the items of Fixed Assets
CIT (A) allowed on the remaining items
CIT proposed revision for the deduction
allowed by AO
Held revision not possible since the order of
AO has merged with the order of CIT (A)
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Revision when Appeal is Pending


 Same


Subject Matter

CWT
Vs.
Sampathmal
Chordia,
Executor to the Estate of Late Neni
Kavur Bai (2002) 256 ITR 440 (Mad)

 Different


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Subject Matter

Aerens Infrastructure & Technology


Ltd. Vs. CIT (2004) 271 ITR 15 (Del.)
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Prejudicial to Revenue


Dawjee Dadabhoy & Co. Vs. S.P. Jain (1957) 31 ITR 872 (Cal)

"The words prejudicial to the interests of the Reveune' have not been
defined, but it must mean that the orders of assessment challenged are
such as not in accordance with law, in consequence whereof the lawful
revenue due to the State has not been realized or cannot be realized. It can
mean nothing else."


Venkatakrishna Rice Co. Vs. CIT (1987) 163 ITR 129 (Mad)

The expression "prejudicial to the interests of the Revenue" must be


regarded as involving a conception of acts or orders which are subversive of
the administration of Revenue. There must be some grievous error in the
order passed by the ITO, which might set a bad trend or pattern for similar
assessments which on a broad reckoning the CIT might think to be
prejudicial to the interests of Revenue administration

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Notice and Time Limit etc.




Notice must mention the areas of revision

Notice must also mention the reasons as to why the order is treated as
erroneous 341 ITR 537 (Del) / Brahma Builders Vs. DCIT (2012) 77

DTR 249 (Pune)




Revision can not be made on any point other than the one mentioned
in the notice CIT Vs. Ashish Rajpal (2009) 320 ITR 674 (Del.)

The order passed by the Commissioner must be a speaking order

Jewel of India Vs. Asst. CIT (2010) 325 ITR 92 (Bom)

Opportunity should be reasonable giving adequate time to reply to


query raised Peerless General Finance & Investment Co. Ltd. Vs. ACIT

(2005) 5 SOT 17(Kol.)

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Notice and Time Limit etc.


Time Limit of 2 years shall be reckoned
from the order sought to be revised
 CIT Vs. Allagendran Finance Ltd.(2007)
293 ITR 1 (SC)


Reassessment made u/s. 147


 CIT sought to revise the issues dealt in the
original assessment
 Time Limit to be reckoned from original order


Rectification order u/s. 154

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Remedy and Subsequent actions




Appeal can be filed to ITAT against the


order of the CIT u/s. 263
AO will pass an order u/s. 143(3) r.w.s.
263 of the Act as per the directions given
in the order u/s. 263
Time Limit for AO : Section 153 (2A)
Within one year from the end of the
financial year from the date of order u/s.
263

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Assessment in pursuance of 263




Can assessee seek a new benefit in such assessment







Section 263 applies to only order which are prejudicial to


revenue
Alternate remedies are available to assessee for the areas
where it is aggrieved
Hindu Bank Karur Ltd. Vs. Addl. CIT (1976) 103 ITR 553
(Mad)
Asst. CIT Vs. ITW India (P) Ltd. (2010) 40 SOT 348 (Hyd)

No appeal filed against Revision order Whether appeal


can be filed against order u/s. 143(3) r.w.s. 263


Crew B.O.S. Products Ltd. Vs. ACIT (2012) 138 ITD 542
(Del.)

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Revision Vs. Reassessment


CIT shall be certain that the order
is erroneous. Mere doubt that
order may be erroneous is not
sufficient for invoking section 263.
It is necessary for the CIT to point
out the exact error in the order
which he proposes to revise - CIT

Vs. G. K. Kabra 211 ITR 336 (AP)

For Reassessment there shall be


reason to believe that the income
has escaped assessment. The
Reasons must be based on some
tangible material. However level of
certainty is not necessary at the
time
of
initiation
of
the
proceedings.

The revision can be only with


respect to the items listed in the
Notice issued by CIT. No other
item can be the subject matter of
revision - CIT Vs. G. K. Kabra 211

The AO is having power to make


addition for any other income
which has escaped assessment
other than the one mentioned in
the reason and the same is
ITR 336 (AP) ; CIT Vs. D. N. noticed by him latter on during the
Dosani 280 ITR 275 (Guj)
course of the assessment.
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Revision Vs. Reassessment


Failure
to
make
necessary
inquiries by the AO can result in
an
erroneous
order
and
accordingly it can result in
Revision u/s. 263

Reassessment does not permit a


review of the order passed by the
AO unless there is some fresh
tangible material. Failure on the
part of the AO can not result in
Reassessment

Notice of Revision shall itself Reasons for reassessment will be


mention the reasons for the same made available to the assessee
; CIT Vs. Vikas Polymers 341 ITR post filing the Return in response
537 (Del.) ; Shyam Biri Works P. to the notice u/s. 148

Ltd. Vs. ACIT 84 ITD 124 (All.) ;


Brahma Builders Vs. DCIT 77 DTR
249 (Pune)
Mere Change of Opinion can neither result in Revision nor
Reassessment
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Revision U/s. 264

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Provisions of Section 264




Applies to any order










other than an order to which section 263 applies


Passed by an authority subordinate to the CIT

CIT may act suo motu or on application made by the


assessee
CIT may call for the record of any proceeding under the
Act in which such order has been passed
CIT may make such inquiry or cause such inquiry to be
made
CIT may pass such order, not being an order
prejudicial to the assessee, as he thinks fit.


An order declining to interfere is not an order prejudicial to the


assessee

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Time Limit - Section 264




Time Limit : For suo motu action within one


year from the date of the order sought to be
revised
Application must be made within one year from
the date on which the order was communicated
or made known to the assessee


Delay can be condoned if CIT is satisfied that the


assessee was prevented by sufficient cause

CIT must pass order within one year from the


end of the finanical year in which such
application is made

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Time Limit - Section 264




Following periods shall be excluded in computing


the time limit



Time taken in giving opportunity to the assessee to


be reheard under proviso to section 129
Any period during which the proceeding under the
section is stayed by an order of injunction of any
court.

However in the case of an order which has been


passed in consequnece of or to give effect to
any finding or decision in an order of
ITAT/HC/SC the above time limit does not apply
and in such a situation the order can be revised
at any time.

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Orders that can not be revised




If appeal is possible before CIT (A) or


ITAT and time for filing the same has not
expired possible if the assessee waives
right of appeal
If appeal is pending before the Dy. CIT
(A)
If the order has been subject of an appeal
before CIT (A) or ITAT
Appeal and Revision are alternate
remedies

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Section 264 Misc.




Filing Fees for the 264 petition is Rs. 500/-

No prescribed form for making the revision petition - It


can be in the form of a letter

Supporting documents can be attached to the petition


also attach copy of the order which is to be revised.

Only Remedy available against an order u/s. 264 is to


file a writ petition in High Court if the order is not in
accordance with law or if the CIT does not pass the
order within the prescribed time.

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Section 264 Fundamental


Concepts

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Powers of CIT


Power of CIT u/s. 264 is not an arbitrary power


It has to be exercised judicially in an objective
manner



Sirpur Paper Mills Ltd. Vs. CWT (1970) 77 ITR 6 (SC)


OCM Ltd. (London) Vs. CIT (1982) 138 ITR 689 (All)

The power is coupled with duty to do justice to


the assessee



J. J. Corporation Vs. CIT (1995) 211 ITR 925 (Guj)


Aparna Ashram Vs. DIT (E) (2002) 258 ITR 401 (Del)

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Fundamental Concepts


Reasonable opportunity shall be allowed to the


assessee in proceedings under section 264


Revision is must when subsequent decision of


HC/SC supports case of the assessee



Sukhmal Kumar Vs. CIT (1991) 190 ITR 205 (Del.)

Parshuram Pottery Works Co. Ltd. Vs. WTO (1975) 100


ITR 651 (Guj)
Karamchand Premchand P. Ltd. Vs. CIT (1975) 101 ITR 46
(Guj)

There can be multiple revision for the same year





Nanhemal Jankinath Vs. CIT (1940) 8 ITR 437 (Lah)


Pt. Sheo Nath Prasad Sharma Vs. CIT (1967) 66 ITR 647
(All)

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Condonation of Delay


CIT has power to condone the delay in


filing the revision petition.
Power available to CIT for condonation
shall be exercised in a liberal manner so
as to advance the cause of justice
Parijat Chemicals Pvt. Ltd. Vs. ITO (1995) 216
ITR 221 (MP)
 Pravin V. Ashar Vs. CIT (2001) 247 ITR 828
(Guj)


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Section 264 Issues

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Fresh Evidence





Whether fresh evidence can be admitted


in the revision proceedings
Power to get the inquiry done
Rule 46A in context of appeal proceedings
Favourable View Smt. Phool Lata Somani
Vs. ITO (2005) 276 ITR 216 (Cal)
 Contra View M.S. Raju Vs. DCIT (2008) 298
ITR 373 (AP)


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Record for the purpose of section 263 is different


then record for the purpose of section 264
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Mistakes in the Return




Whether the assessee can seek a deduction in respect of


any item if such deduction is not claimed in the Return

Effect of SC decision in the case of Goetz India (2006)


284 ITR 323 (SC)



M. Chettaypan & Ors. Vs. CIT ((1977) 110 ITR 684 (Mad)
Digvijay Cement Co. Ltd. Vs. CIT (1994) 210 ITR 797 (Guj)

Whether revision can be made in respect of Income


wrongly offered in Return



C. Parikh & Co. Vs. CIT (1980) 122 ITR 610 (Guj)
Chandrakant J. Patel Vs. V. N. Srivastava 339 ITR 310 (Guj)

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Subject of Appeal Meaning




When appeal is not decided on merits but


dismissed for (a) either time barred (b) non
payment of tax u/s. 249(4) etc whether
revision can be made
Subject to Appeal means subject to Effective
Appeal C.C. Jayaram Vs. CIT (1994) 207 ITR

662 (Ker.)


Order dismissing appeal is also an order in the


appeal following SC decision in the case of
Melaram & Sons 29 ITR 607 (SC) Manmala

Exhibitors Vs. CIT (2002) 257 ITR 563 (Bom)




CBDT Circular No. 367 dated 26-7-1983

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Appeal on Dismissal of Revision




Can appeal be filed in a case where the revision petition


is dismissed in following situation



Revision is dismissed on merits


Revision is dismissed for being delayed

CIT Vs. D. Lakshminarayanapathi (2001) 250 ITR 187


(Mad) No bar under appeal provisions converse to
revision provisions
Contra View Orissa Rural Housing Development Corpn

Ltd. Vs. Asst. CIT (2012) 343 ITR 316 (Orissa)




Doctrine of Merger Order of CIT merges in the order of AO on


revision
Assessee has to waive his right of appeal to take benefit of
section 264

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One issue in Appeal Other in


Revision





If one of the issue is decided in appeal


whether it is possible for the assessee to
take the other one in 264 proceedings.
Section 263 only the issue subjected to
appeal can not be subjected to 263 due to
clause (c) of Explanation
Absence of such provision in section 264

Hindustan Aeronautics Ltd. Vs. CIT (2000)


243 ITR 808 (SC)

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No Prejudice to Assessee


Meaning of Prejudice


Prejudice can be said when the assessee as a result


of passing such order is in a different and worse
position than the order under review Tessy Kuruvilla
Vs. Agricultural ITO 163 ITR 240 ; S. A. Wahab V. CIT 232 ITR
624

Benefit given by CIT Rs. 10 Lakhs on one issue CIT also proposes an addition on another Issue
for Rs. 8 Lakhs - Whether order is prejudicial to
assessee


K. C. Lukose Vs. ITO (1973) 92 ITR 450 (Ker) and


also (1976) 105 ITR 418 (Ker)

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Subsequent order of AO
N. Seetharaman Vs. CIT (2008) 298 ITR 210 (Mad)




AO has to confine himself to the directions given in the


order of CIT u/s. 264
AO can not consider other issues for the first time in an
assessment in pursuance to section 264
AO can not pass an order which is prejudicial to the
assessee as compared to his earlier order even in a case
where the CIT has directed him to consider the matter
afresh.
Since CIT can not pass an order prejudicial to the
assessee, AO can also not do so in the order in
pursuance of section 264.

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Appeal Vs. Revision U/s. 264


Who can begin The Assessee only
the Proceedings

The Assessee or the CIT


suo motu

Adjudicating
Authority

CIT

CIT (A)

Possible against Orders


specified
which order
section 246A

in Order in Any Proceeding


under the Act passed by a
sub-ordinate authority

Time Limit for Within 30 days of


filing
receipt of the order to
be appealed against
Condonation of Delay
possible

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Within one year of the


communication
or
knowledge of the order
sought to be revised
Condonation
of
Delay
possible

60
60

Fees Payable

Ranging from Rs. 250/- Rs. 500/to Rs. 1,000/-

Possible Results Assessment may either


be
confirmed
or
reduced or enhanced
or annulled
Penalty
can
be
confirmed or cancelled
or
reduced
or
enhanced

Order can not be either


status quo or in favour of
the assessee No power
of enhancement

Payment of Tax Section 249(4) applies. No such condition of


as per Returned Tax has to be paid as making payment of tax as
Income
per Returned Income per Returned Income
before filing appeal
Remedy against Appeal to ITAT
the order
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Writ Petition to HC

61
61

Rectification U/s. 154

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62

Provisions of Section 154







Any Income-tax authority can rectify a mistake which is


apparent from the record.
For this purpose, he may amend any order or intimation
u/s. 143 or intimation u/s. 200A (1)
If the original order is subjected to appeal or revision,
the authority can amend the order in relation to any
matter other than the matter which has been subjected
to appeal or revision
The authority may amend the order suo muto
The authority shall amend the order for rectifying such
mistake which has been brought to his notice by the
Assessee

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63

Provisions of Section 154








The CIT (A) shall also amend the order for rectifying
such mistake which has been brought to his notice by
the Assessing Officer
If the amendment has the effect of enhancing
assessment or reducing a refund or increasing the
liability of assessee in any manner then notice shall be
issued to the assessee and proper opportunity shall be
allowed
Order shall be in writing.
If the order results in demand then notice of demand
shall be issued u/s. 156.
If the order results in refund to the assessee, the same
shall be granted.

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64

Provisions of Section 154




No amendment shall be made after the expiry of four


years from the end of the financial year in which the
order sought to be amended was passed


This is subject to certain exceptions as provided in section


155(4) and section 186 of the Act.

Where an application is made by the assessee or the


deductor, the authority shall pass an order within a
period of six months from the end of the month in which
the application is made by either



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Making the amendment or


Refusing to allow the claim

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65

Section 154 Fundamental


Concepts

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66

Powers U/s. 154




Power of rectification is available to all the


authorities as mentioned in section 116 of the Act
Power is given to rectify any order passed by the
authority
The Authorities include CBDT, Chief CIT, CIT (A),
Tax Recovery Officer etc.
Power given u/s. 154 is not a discretionary power.
Power is given to ensure that injustice to parties
may be avoided L. Hriday Narayan Vs. CIT (1970)

78 ITR 26 (SC)
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Meaning of Record


Record is not confined to the assessment


order. It includes entire proceeding. It
includes all the documents and material
produced by the parties
For the purpose of Rectification, the
record shall be record as available at the
time of passing of the relevant order.

Gamon India Ltd. Vs. CIT (1995) 214 ITR


50 (Bom)
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68

Meaning of Record


Authorities can not consider fresh material or


evidence. Documents outside record can not
be referred for the purpose of rectification -

CIT Vs. Keshari Metal P. Ltd. (1999) 237 ITR


165 (SC)


Record of any period of the same assessee


can be looked into



CIT Vs. MRM Plantations Pvt. Ltd. (1999) 240 ITR


660 (Mad)
Upasana Hospital & Nursing Home Vs. CIT (2002)
253 ITR 507 (Ker)

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69

Mistake Apparent from Records


T.S. Balaram ITO Vs. Volkart Brothers (1971) 82
ITR 50 (SC) / 65 ITR 179 (Bom.)
 A mistake apparent on the record must be an
obvious and patent mistake
 It should not be something which can be
established by a long drawn process of
reasoning
 It should not be a mistake on points on which
there may conceivably be two opinions
 The mistake can be either mistake of fact of
fact or mistake of law. However it must be an
error which is apparent on the examination of
the record itself without entering into any fresh
or additional investigation.
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70

Mistake arising from


Interpretation of Law


If only one interpretation is possible and the same


is not followed while passing the order then the
mistake is a mistake apparent from records


ITO Vs. Raleigh Investment Co. Ltd. (1976) 102 ITR


616 (Cal)

If however one of the two possible views have


been adopted while passing original order then the
mistake is not apparent from the records and
accordingly the rectification is not permissible.


Travancore Rayons Ltd. Vs. ITO (1977) 109 ITR


43(Ker)

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71

Debatable Issue / Review




Rectification can be made only in case


of glaring mistake of fact or law
apparent from the record and where
question is not debatable CIT Vs. Hero

Cycles P. Ltd. (1997) 228 ITR 463 (SC)




Review of the earlier decision is not


permissible in the form of Revision

CIT Vs. United Mercantile Co. P. Ltd.


(1986) 158 ITR 41 (Raj)
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72

Few Relevant Concepts




Once a notice is issued u/s. 143(2) of the Act,


rectification can not be made for the same
assessment year.



Mistaken Impression on the part of the counsel


about the facts of the case can not be subject to
rectification


Lakhanpal National Ltd. Vs. DCIT (1996) 222 ITR 151 (Guj)
CIT Vs. Coventry Spring & Co. Ltd. (2002) 257 ITR 632 (Cal)

Joseph Thomas Vs. Agricultural ITO (1981) 127 ITR 764 (Ker.)

Recovery proceeding may be


rectification application is pending


stayed

when

Sultan Leather Finishers P. Ltd. Vs. ACIT (1991) 191 ITR 179
(All)

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73

Section 154 Issues

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74

Diff in Stock Valuation Effect


in subsequent year


A.Y. 2010-11 - Addition of Rs. 10 Lakhs is


made for difference in closing stock in
assessment. Similarly the opening stock of
A.Y. 2011-12 is increased by 10 Lakhs.
Assessees appeal against the addition is
allowed by the ITAT in 2014 and the addition
is deleted.
The AO wishes to carry out the rectification
for A.Y. 2011-12 and reduce the value of
opening stock Whether permissible u/s.
154
Mahendra Mills Ltd. Vs. ACIT (1975) 99 ITR
135 (SC)

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Effect of Latter SC order




Supreme Court interprets the law as it always stood


and hence the order passed earlier is having
mistake if it is not as per the ratio of the SC
decision.
SC decision is on similar footing as retrospective
amendment to law.





CIT Vs. Smt. Aruna Luthra (2001) 252 ITR 76


(P&H)(FB)
CIT Vs. Bindal Industries Ltd. (2010) 328 ITR 160 (All.)
Circular No. 68 Dated 17th November, 1971
M.K. Kuppuraj Vs. ITO (1995) 211 ITR 853 (Mad) for
subsequent HC order

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76

Effect of Latter SC order


Contra view


There was no error at the time of passing


the order since the decision of the SC is a
latter decision Hence no rectification
CIT Vs. Bhooratnam & Co. (1999) 238 ITR
674 (AP)
 CIT Vs. Mahavir Drilling Co. (2005) 273 ITR
201 (MP)
 Neither of decision has considered the CBDT
Circular No. 68


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77

Jurisdictional HC Vs. Other HC




The view expressed by Jurisdictional HC is


binding in the state and hence the same
has to be followed.
Omega Sports & Radio Works Vs. CIT (1982)
134 ITR 28 (All)
 CIT Vs. Upper India Steel Manufacturing &
Engineering Co. Pvt. Ltd. (1996) 218 ITR 179
(P&H)
 Manarkattu Bros P. Ltd. Vs. CIT (1997) 227
ITR 586 (Ker)


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78

Jurisdictional HC Vs. Other HC




The fact that there are difference in views of


different High Courts establishes that the
issue is debatable and hence it can not be
subject to rectification


CIT Vs. T. N. Viswanatha Reddy (1991) 190


266 (AP)
CIT Vs. Orient Paper Industries Ltd. (1994)
ITR 158 (Cal)
CIT Vs. Rajesh Talkies (1996) 220 ITR
(P&H)

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ITR
208
107

79
79

Relief not claimed in Return




Goetz India Ltd. Vs. CIT (2006) 284 ITR


323 (SC) Relief has to be claimed by
way of Revised Return
CIT Vs. Pruthvi Brokers & Shareholders
Pvt. Ltd. (2012) 349 ITR 336 (Bom) - CIT
(A) and Tribunal can consider a new claim
The ratio of Goetz India Ltd. Is not
applicable to the appellate authorities.

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Time Limit




Assessment Order dated 27-3-2010


Rectification Application made on 31-1-2014
Rectification not done by AO upto 31-3-2014.
Latter on dismissed on the ground that the
time limit is expired. Whether justified.
Sree Ayyanar Spinning & Weaving Mills Ltd.
Vs. CIT (2008) 301 ITR 434 In context of
section 254

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81

Multiple Rectifications


There can be successive Rectifications if the


rectification order also contains some
mistakes either on the same issue or on any
other issue.


Hiralal Sutwala Vs. CIT (1965) 56 ITR 339 (All)

Time Limit


When second rectification is on the same issue

Hind Wire Industries Vs CIT 212 ITR 639(SC)




When it is on issue which was not subjected to


first rectification

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Dismissal of Rectification


Whether fresh application can be made on


the same issue.

CIT Vs. J. K. Bankers (2000) 245 ITR 844


(All)
Proper remedy will be to file an appeal
against the rectification order

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Chartered Accountants
Phone : 2375 9876 / 2374 0792
Handphone : 98205 25972
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