Budget 2015 - Extended revisional powers to CIT under section 263 - V. K. Subramani - Article published in Business Advisor, dated March 10, 2015 http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/

1. Volume X Part 5 March 10, 2015 23 Business Advisor
Budget 2015: Extended revisional powers
to CIT under section 263
V. K. Subramani
The hierarchical structure of any Government
department, like a corporate, must provide that the field-
force works in compliance with the prescribed procedure.
The Income tax Department is no exception that the
assessing officers (AOs) who carry out assessments must
be more in tune with the realities of business and
commercial world. However, to ensure that the
assessment made by them in exercise of the powers
vested in them is used in a fair and reasonable manner,
adequate powers are given to the higher authorities to make performance
review.
Commissioner, under section 263, has the power to review the assessment
orders passed by the AOs and revise the same if it is erroneous or
prejudicial to the interests of Revenue. The Finance Bill, 2015, proposes to
widen the powers of the commissioner for any other omission of the AO.
Present provision
As per section 263(1), the principal commissioner or commissioner may call
for and examine the record of any proceeding under this Act, on suo moto
basis. If he considers that any order passed by the AO is erroneous or
prejudicial to the interests of Revenue, he can pass an order enhancing or
modifying the assessment or cancelling the assessment and directing a
fresh assessment.
However, while exercising the powers in terms of section 263, an
opportunity of hearing must be given to the assessee, and after making or
causing to be made such enquiry as he deems fit, such revision order could
be passed.
Explanation and other sub-sections to section 263 deal with time limitation
and meaning of „record‟.
Finance Bill, 2015
It proposes to insert Explanation 2 to expand the scope for revision by
providing that an order passed by the AO shall be deemed to be erroneous

2. Volume X Part 5 March 10, 2015 24 Business Advisor
insofar as it is prejudicial to the interests of Revenue in the opinion of the
principal commissioner or commissioner in the following cases:
a) The order is passed without making enquiries 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 CBDT under section 119.
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 assessee or any other person.
Impact of the amendment
The scope of review of the order passed by the AO by the CIT is widened.
If the background of assessment made, i.e., papers on record, do not show
any enquiry or verification, then the CIT can assume jurisdiction under
section 263 by deeming that the order passed by the AO as erroneous or
prejudicial to the interests of Revenue. For example, if the AO has not
verified the agricultural income admitted by the assessee with reference to
the extent of the land, nature, crop cultivated etc., then in the absence of an
enquiry the order would be a vulnerable order eligible for revision under
section 263.
Not only absence of enquiry but also providing relief without inquiring into
the same and failure to follow binding High Court decision or Supreme
Court decision would provide elbow room to the Commissioner for making
the revision under section 263.
This amendment in the present scenario of Commissioners reviewing
scrutiny assessments made by the AOs would improve the quality of
assessments made and bring in internal accountability mechanism on the
field-force.
(V. K. Subramani is Chartered Accountant, Erode)
If the background of assessment made, i.e., papers on record,
do not show any enquiry or verification, then the CIT can
assume jurisdiction under section 263 by deeming that the
order passed by the AO as erroneous or prejudicial to the
interests of Revenue.