Section 264 of ITA, 1961 : Section 264: Revision Of Other Orders

Explanation using Example

Imagine that Mr. Sharma, a small business owner, receives an assessment order from his local Income Tax Officer (ITO) which he believes incorrectly disallows certain business expenses, leading to a higher tax liability. Mr. Sharma discusses this with his tax consultant and realizes that the ITO might have misinterpreted the tax rules regarding expense claims.

Since the order was passed by an authority subordinate to the Commissioner of Income Tax (CIT), and Mr. Sharma believes it is not in accordance with the law, he decides to file an application for revision under Section 264 of the Income-tax Act, 1961. He does this within one year of receiving the order, thus meeting the condition mentioned in subsection (3).

Mr. Sharma's application is accompanied by the required fee of five hundred rupees as per subsection (5). The CIT calls for the record of the proceeding and after conducting an inquiry, finds that the ITO did indeed err in disallowing the legitimate business expenses claimed by Mr. Sharma. As per subsection (1), the CIT revises the order in favor of Mr. Sharma, reducing his tax liability accordingly.

However, it's important to note that if Mr. Sharma had already filed an appeal to the Commissioner (Appeals) or the Income Tax Appellate Tribunal, or if the time for filing such an appeal had not yet expired, the CIT would not have been able to revise the order under Section 264, as per the restrictions laid out in subsection (4).