Revision of orders prejudicial to revenue
Section 263 of the Income-tax Act, 1961 deals with revision of orders prejudicial to revenue. The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer or the Transfer Pricing Officer, as the case may be, is er The Act came into force on 01 Apr 1962. Repealed by the Income-tax Act, 2025 with effect from 1 April 2026, but conduct before that date is still charged, tried and appealed under it.
(1) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer or the Transfer Pricing Officer, as the case may be, is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including,—
(i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section.
Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,—
(a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall include—
(i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the direc- tions issued by the Joint Commissioner under section 144A;
(ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer or the Transfer Pricing Officer, as the case may be, conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120;
(iii) an order under section 92CA by the Transfer Pricing Officer;
(b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner;
(c) where any order referred to in this sub-section and passed by the Assessing Officer or the Transfer Pricing Officer, as the case may be, had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.
Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,—
(a) the order is passed without making inquiries or verification which should have been made;
(b) the order is passed allowing any relief without inquiring into the claim;
(c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.
Explanation 3.—For the purposes of this section, "Transfer Pricing Officer" shall have the same meaning as assigned to it in the Explanation to section 92CA.
(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.
(3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court.
Explanation.—In computing the period of limitation for the pur-poses of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and the period commencing on the date on which stay on any proceeding under this section was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by the jurisdictional Principal Commissioner or Commissioner shall be excluded.
Revision of other orders.
Section 263, The Income-tax Act, 1961 (Act 43 of 1961).
Now in the Income-tax Act
INCOME-TAX-ACT-2025 377 Revision of orders prejudicial to revenue Official correspondence
Measured by comparing the text of the two provisions, not taken from an official correspondence table — there is no machine-readable one. See both texts side by side before relying on it.
Both regimes are live. The repealed enactment still governs what happened while it was in force. We never redirect one to the other.
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
This section refers to
Referred to by 25
- Finance Act s. 44 Amendment of section 263
- Finance Act s. 23 Amendment of section 193
- Finance Act s. 67 Amendment of section 263
- Finance Act s. 87 Amendment of section 263
- Finance Act s. 73 Amendment of section 263
- Finance Act s. 77 Amendment of section 263
- Finance Act s. 66 Amendment of section 263
- s. 115JAA Tax credit in respect of tax paid on deemed income relating to certain companies
- s. 139 Return of income
- s. 153 Time limit for completion of assessment, reassessment and recomputation
- s. 155 Other amendments
- s. 158BFA Levy of interest and penalty in certain cases
and 13 more
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Commissioner of Income Tax, Mumbai v. Amitabh Bachchan
Court's Decision & Legal Precedent
s.263 requires opportunity of hearing but not a mandatory formal show-cause that freezes the CIT to listed grounds; CIT may revise on record-based issues if the assessee had a real chance to contest. Withdrawing a re-revised claim of large cash expenses does not end the enquiry—AO failure to probe sources can render the assessment erroneous and prejudicial to revenue.
On this section: s.263 twin conditions (erroneous + prejudicial) and hearing requirement are the operative rules restoring the CIT revision against the assessee.
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Dayawanti through Smt. Sunita Gupta (legal Heir) vs Commissioner of Income Tax
Court's Decision & Legal Precedent
In case of search under Section 132 or requisition under Section 132A of the Income Tax Act, 1961: (i) All pending assessments/reassessments shall abate and merge into assessment under Section 153A, permitting Assessing Officer to assess 'total income' for the entire six assessment years; (ii) In respect of abated/pending assessments, the AO can assess total income incorporating both disclosed income and undisclosed income found during search or available from other sources; (iii) However, in respect of completed/unabated assessments where no assessment was pending at the date of search initiation, the AO can only assess or reassess by reopening such assessment when incriminating material is found relating to that specific assessment year; (iv) Where no incriminating material whatsoever is found during the search for a particular assessment year, the AO cannot assess or reassess a completed assessment for that year under Section 153A, and the completed assessment remains final and protected; (v) In such cases, the Revenue's only remedy is to resort to reassessment under Sections 147/148, subject to fulfillment of the conditions stated therein, and these powers are expressly saved; (vi) The assessment under Section 153A is fundamentally linked to the search or requisition under Sections 132/132A, and its object is to bring to tax undisclosed income detected through such search - foundation for Section 153A assessment is the existence of incriminating material.
On this section: Power to revise assessment order in certain circumstances - alternative remedy for Revenue besides Section 147
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Pr Commissioner of Income Tax (c) 1 vs Rehab Housing PVT LTD
Court's Decision & Legal Precedent
In case of search under Section 132 or requisition under Section 132A of the Income Tax Act, 1961, the Assessing Officer assumes jurisdiction for block assessment under Section 153A. All pending assessments/reassessments shall stand abated. In case any incriminating material is found/unearthed during the search, even in case of unabated/completed assessments, the Assessing Officer would assume jurisdiction to assess or reassess the total income taking into consideration the incriminating material unearthed during the search and other material available with the Assessing Officer including income declared in returns. However, in case no incriminating material is unearthed during the search, the Assessing Officer cannot assess or reassess taking into consideration other material in respect of completed assessments/unabated assessments. Therefore, in respect of completed/unabated assessments, no addition can be made by the Assessing Officer in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. The completed/unabated assessments can be re-opened by the Assessing Officer in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under Sections 147/148.
On this section: Power to revise assessment - cited as potential remedy available to Revenue for completed assessments subject to conditions
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Pr Commissioner of Income Tax (c) 1 vs Rehab Housing PVT LTD through Its Md
Court's Decision & Legal Precedent
In Case Of Search Under Section 132 Or Requisition Under Section 132A, The Assessing Officer Assumes Jurisdiction For Block Assessment Under Section 153A For Six Assessment Years. While All Pending Assessments/Reassessments Shall Stand Abated, In Case Of Completed/Unabated Assessments, The Assessing Officer Can Only Assess Or Reassess The Total Income Taking Into Consideration Incriminating Material Unearthed During The Search And Other Material Available. In Case No Incriminating Material Is Unearthed During The Search, The Assessing Officer Cannot Assess Or Reassess Taking Into Consideration Other Material In Respect Of Completed/Unabated Assessments. The Assessment Under Section 153A Is Inextricably Linked With The Search And Requisition Under Sections 132 And 132A, And The Object Is To Bring Under Tax The Undisclosed Income Which Is Found During The Course Of Search Or Pursuant To Search Or Requisition. Only In Cases Where Undisclosed Income Is Found Based On Incriminating Material, The Assessing Officer Assumes Jurisdiction To Assess Or Reassess Total Income For The Entire Six-Year Block Assessment Period Even In Case Of Completed/Unabated Assessments.
On this section: Revision Power; Referenced As Possible Alternative Remedy Subject To Satisfaction Of Jurisdictional Conditions
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Assistant Commissioner of Income Tax Circle 1(1) vs Kerala State Beverages (manufacturing and Marketing) Corporation Limited
Court's Decision & Legal Precedent
The term 'exclusively' in Section 40(a)(iib) of the Income Tax Act, 1961 must be interpreted based on the nature of the undertaking on which the levy is imposed and not on the number of undertakings on which the levy is imposed. Gallonage fees, licence fees, and shop rental paid by a State Government Undertaking for licences fall within Section 40(a)(iib) and are non-deductible. However, surcharge on sales tax and turnover tax, being taxes and not fees or charges, fall outside the scope of Section 40(a)(iib) and remain deductible. The distinction between 'fee' and 'tax' carefully maintained throughout Section 40 must be preserved.
On this section: Provision granting the Principal Commissioner power of revision when an order is erroneous and prejudicial to the interest of revenue
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The Commissioner of Income Tax vs Kaveri Thimmaiah
Court's Decision & Legal Precedent
When a capital asset is acquired by way of succession, inheritance, or devolution, the indexed cost of acquisition for computing capital gains must be calculated with reference to the year in which the previous owner first held the asset (or 1981, whichever is later), not with reference to the year in which the assessee actually became the owner through succession. This is because Section 49 deems the cost of acquisition to be the cost for which the previous owner acquired it, and therefore the indexation benefit must be applied from the date the previous owner held the asset.
On this section: Provides revisionary jurisdiction to Commissioner of Income Tax to revise orders of Assessing Authority if order is erroneous and prejudicial to revenue; court examined whether Commissioner was justified in exercising this power
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Questions about Section 263
What have the courts held on Section 263 of the Income-tax Act?
Commissioner of Income Tax, Mumbai v. Amitabh Bachchan (11 May 2016) is the leading judgment on this section among those set out below: s.263 twin conditions (erroneous + prejudicial) and hearing requirement are the operative rules restoring the CIT revision against the assessee. Another 5 judgments on this section are set out below, 5 of them from the Supreme Court. They run from 2014 to 2023.
How do I find court cases under Section 263 of the Income-tax Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Income Tax Act 263, section 263 Income Tax Act, section 263 of the Income-tax Act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 6 reported judgments on this section are set out on this page, beginning with Commissioner of Income Tax, Mumbai v. Amitabh Bachchan (11 May 2016).
What should I read with Section 263 of the Income-tax Act, and has it changed?
Its own text turns on section 92CA (Reference to Transfer Pricing Officer), section 119 (Instructions to subordinate authorities), section 120 (Jurisdiction of income-tax authorities), section 129 (Change of incumbent of an office), and on 1 further provision, so none of them can safely be read on its own. 25 other provisions in this corpus refer back to it. For anything done on or after 1 April 2026 the provision to read is Income-tax Act, 2025, section 377 (Revision of orders prejudicial to revenue), which replaced it; conduct before that date is still charged, tried and appealed under this section.
When did Section 263 of the Income-tax Act come into force?
Section 263 of the Income-tax Act, cited as Income Tax Act 263, came into force on 01 Apr 1962, having been enacted on 13 Sep 1961. It is no longer in force.
Other sections of this Act
- 10. Incomes not included in total income30885 words
- 2. Definitions11419 words
- 80HHF. Deduction in respect of profits and gains from export or transfer of film software, etc7148 words
- 80-IB. Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings5474 words
- 155. Other amendments5451 words
- 139. Return of income5400 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Recovered from the consolidated text published by the Income Tax Department, as amended by the Finance Act, 2026. India Code holds no record of this Act in any form. This page is not a substitute for legal advice.