Section 264

Section 264(1): The Commissioner may, either on their own motion or on an application by the assessee, call for the record of any proceeding under this Act in which any order has been passed by any authority subordinate to them, and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as the Commissioner thinks fit.

Section 264(2): The Commissioner shall not revise any order under this section in the following cases:

• Where an appeal against the order lies to the Commissioner (Appeals) or the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired, or in the case of an appeal to the Commissioner (Appeals) or the Appellate Tribunal, the assessee has not waived their right of appeal.
• Where the order has been made the subject of an appeal to the Commissioner (Appeals) or the Appellate Tribunal.

Section 264(3): An application for revision under this section shall be made within one year from the date on which the order in question was communicated to the assessee or the date on which they otherwise came to know of it, whichever is earlier.

Section 264(4): The Commissioner may, on an application by the assessee for revision under this section, make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as the Commissioner thinks fit.

Section 264(5): Every application by an assessee for revision under this section shall be accompanied by a fee of twenty-five rupees.

Purpose and Objective of Section 264

The primary objective of Section 264 is to provide a remedy for taxpayers who believe that an order passed by a subordinate authority is erroneous or unjust. It ensures that taxpayers have a mechanism to correct such mistakes without resorting to expensive and time-consuming litigation processes. It also enables the Commissioner to rectify errors and ensure fair treatment of taxpayers.

Proper Reasoning

When a taxpayer applies for a revision under Section 264, it is essential to provide a well-reasoned application. Key points to consider include:

1. Clarity and Precision: Clearly state the specific order being contested and the grounds for seeking revision.
2. Evidence and Documentation: Provide all relevant documents and evidence supporting the claim that the order is incorrect or unjust.
3. Legal Grounds: Cite relevant sections of the Income Tax Act and other applicable laws to substantiate the claim for revision.
4. Timeliness: Ensure the application is filed within the stipulated time frame of one year from the date of the order or the date the assessee became aware of it.

Legal Recourse and Legal Proceedings

If an assessee is aggrieved by an order passed by a subordinate authority, they can seek revision under Section 264 by following these steps:

1. Filing the Application: The application must be filed within one year from the date the order was communicated or came to the knowledge of the assessee. It should be accompanied by a fee of twenty-five rupees.
2. Submission of Documents: All supporting documents and evidence must be submitted along with the application.
3. Inquiry by Commissioner: The Commissioner may conduct an inquiry or direct a subordinate authority to do so to verify the facts presented in the application.
4. Order by Commissioner: After considering the application and the inquiry report, the Commissioner may pass an order which is not prejudicial to the assessee.

Do’s and Don’ts

Do’s:

• Ensure timely filing of the revision application.
• Clearly state the grounds for seeking revision.
• Provide all necessary documents and evidence.
• Seek professional advice if needed to strengthen the application.

Don’ts:

• Do not file an application if an appeal is pending before the Commissioner (Appeals) or the Appellate Tribunal.
• Avoid presenting vague or unsubstantiated claims.
• Do not miss the one-year deadline for filing the application.

Example

Subject: Application for Revision under Section 264 of the Income Tax Act, 1961

To, The Commissioner of Income Tax, [Name of the City], [Address of the CIT Office].

Date: [Date of Application]

From, [Name of the Assessee], [Address of the Assessee], [Permanent Account Number (PAN)], [Email Address], [Contact Number].

Ref: Assessment Year: [Year], Order Date: [Date of the Order], Order Passed by: [Name and Designation of the Assessing Officer]

Application for Revision of Assessment Order under Section 264

Respected Sir/Madam,

I, [Name of the Assessee], respectfully submit this application under Section 264 of the Income Tax Act, 1961, seeking revision of the assessment order dated [Date] passed by [Name and Designation of the Assessing Officer] for the assessment year [Year]. The order was communicated to me on [Date].

Grounds for Revision:

1. Incorrect Computation of Income: The Assessing Officer has incorrectly computed my total income by disallowing certain genuine business expenses amounting to INR [Amount]. These expenses were incurred wholly and exclusively for the purpose of my business, and the necessary supporting documents were provided during the assessment proceedings.
2. Disallowance of Depreciation: The Assessing Officer has disallowed depreciation of INR [Amount] on [Asset Description]. The asset in question was duly put to use for business purposes during the relevant previous year, and the depreciation claim was made in accordance with the provisions of the Income Tax Act.
3. Incorrect Addition of Income: An addition of INR [Amount] was made to my income on account of unexplained cash deposits. These deposits were duly explained during the assessment proceedings as receipts from my business operations, supported by relevant documentary evidence.

Facts and Circumstances:

1. Business Expenses: During the assessment proceedings, I provided detailed explanations and documentary evidence for the business expenses incurred. Despite this, the Assessing Officer disallowed these expenses without providing any valid reasons. Attached herewith are copies of the invoices, payment receipts, and a detailed explanation of the expenses (Annexure A).
2. Depreciation Claim: The asset for which depreciation has been disallowed was acquired and put to use in the relevant previous year. The disallowance was made without considering the factual details and the relevant provisions of the Income Tax Act. Enclosed herewith is a copy of the invoice and proof of usage of the asset (Annexure B).
3. Cash Deposits: The cash deposits were duly explained as business receipts, supported by sales invoices and receipts. The Assessing Officer’s addition of this amount as unexplained income is unjustified. Attached herewith are copies of the sales invoices and bank statements (Annexure C).

Prayer:

In view of the above grounds and the supporting documents, I humbly request you to kindly revise the assessment order dated [Date] for the assessment year [Year] under the provisions of Section 264 of the Income Tax Act, 1961. I pray for the following reliefs:

1. Allowance of the disallowed business expenses amounting to INR [Amount].
2. Allowance of the depreciation claim of INR [Amount] on [Asset Description].
3. Deletion of the addition of INR [Amount] on account of unexplained cash deposits.

I affirm that no appeal against the said order is pending before the Commissioner (Appeals) or the Income Tax Appellate Tribunal, and I have not waived my right of appeal.

Thank you for your consideration.

Yours sincerely,

[Name of the Assessee]
[Signature]

Enclosures:

1. Copy of the assessment order dated [Date].
2. Annexure A: Details and supporting documents for business expenses.
3. Annexure B: Details and supporting documents for depreciation claim.
4. Annexure C: Details and supporting documents for cash deposits.
5. Proof of filing fees payment of INR 25.

Conclusion

Section 264 of the Income Tax Act, 1961, serves as a vital mechanism for taxpayers to seek redressal against erroneous or unjust orders passed by subordinate authorities. By understanding the provisions, objectives, and proper procedures associated with Section 264, taxpayers can effectively utilize this tool to ensure fair and just treatment under the law. Proper reasoning, timely action, and adherence to legal requirements are key to successfully navigating the revision process under this section.