Case Law Details
RELEVANT PARAGRAPH
9 . From the plain reading of the above provision it is manifestly clear that an order can be revised if and only if the twin conditions, viz., one that the order is erroneous and two – that to that extent it is prejudicial to the interest of the Revenue co-exist. Or in other words, an order can be revised if it is both erroneous as well as prejudicial to the interests of the Revenue. An order, which is only erroneous but not prejudicial, cannot be revised. Likewise an order, which is only prejudicial to the interest of the Revenue but not erroneous, cannot be revised. To put it in, still simpler words, it is mandatory for the Commissioner to revise an order that both the above conditions must “co-exist”. An order which is not “erroneous” cannot be revised even if it is prejudicial to the interest of the Revenue, and the vice-versa.
10. The subject of “revision U/s 263” has been vastly examined and analysed by various Courts including that of Honourable Apex Court. The revisional power conferred on the Commissioner vide S. 263 is of vide amplitude. It enables the Commissioner to call for and examine the records of any proceeding under the Act. It empowers the Commissioner to make or cause to be made such an enquiry as he deems necessary in order to find out if any order passed by Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. The only limitation on his powers is that he must have some material(s) which would enable him to form a prima- facie opinion that the order passed by the Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. Once he comes to the above conclusions on the basis of the ‘material’ that the order of the A.O. is erroneous and also prejudicial to the interests if the Revenue, the Commissioner is empowered to pass an order as the circumstances of the case may warrant. He may pass an order enhancing the assessment or he may modify the assessment. He is also empowered to cancel the assessment and direct to frame a fresh assessment. He is empowered to take recourse to any of the three courses indicated in S. 263. So, it is clear that the Commissioner does not have unfettered and unchequred discretion to revise an order. The Commissioner is required to exercise revisional power within the bounds of the law and has to satisfy the need of fairness in administrative action and fair- play with due respect to the principle of audi alteram partem as envisaged in the Constitution of India as well in section 263. An order can be treated as “erroneous” if it was passed in utter ignorance or in violation of any law; or passed without taking into consideration all the relevant facts or by taking into consideration irrelevant facts. The “prejudice” that is contemplated under S. 263 is the prejudice to the Income Tax administration as a whole. The revision has to be done for the purpose of setting right distortions and prejudices caused to the Revenue in the above context. The fundamental principles which emerge from the several cases regarding the powers of the Commissioner under section 263 may be summarised below:-
(i) The Commissioner must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interests of the revenue. Both the conditions must be ful-filled
(ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted
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