Revision of Orders Prejudicial to Revenue
Section 263 empowers the PCCIT/CCIT/PCIT/CIT to revise any order passed by the Assessing Officer or Transfer Pricing Officer, if such order is erroneous and prejudicial to the interests of the Revenue. The authorities may call for and examine the records (which are available at the time of examination) of any proceedings under the Income-tax Act.
If an assessee is aggrieved by an order and it is not covered under Section 263, they may apply for revision under Section 264.
- Impact of Revision– The authority may pass an order as circumstances justify, including:
o Enhancing or modifying the assessment;
o Cancelling the assessment and directing a fresh assessment;
o Modifying or cancelling the TPO’s order under Section 92CA and directing a fresh order.
The assessee must be given an opportunity to be heard before the order is passed.
- Orders Eligible for Revision– Revision can be undertaken for the following orders:
o Any order passed by the AO;
o Orders passed based on directions of the Joint Commissioner under Section 144A;
o Orders passed by the Joint Commissioner while acting as AO or TPO under delegated powers;
o TPO’s order under Section 92CA;
o Orders where some matters were not adjudicated in the appeal;
- When is an Order Deemed to be Erroneous?– An order is deemed erroneous and prejudicial if, in the opinion of revisionary authorities:
o Required inquiries or verification were not made;
o Relief was allowed without due inquiry;
o The order violates CBDT’s order, direction, or instruction under Section 119;
o It is contrary to decisions prejudicial to the assessee rendered by the jurisdictional High Court or the Supreme Court in the case of the assessee or any other person.
- Time Limit for Passing the Revisionary Order –The revision order must be passed within 2 years from the end of the financial year in which the original order was passed. However, no time limit applies where the revision is done to give effect to a direction of the order of the ITAT, High Court or Supreme Court.
While computing the limitation period, time taken for rehearing under Section 129, and time under stay by the court are excluded.
- Right to Appeal– An assessee aggrieved by a revision order under Section 263, including any rectification order under Section 154 made in respect of such revision, can file an appeal before the Income-tax Appellate Tribunal (ITAT).