Direct Tax Laws & International Taxation · Appeals and Revision

Revision by Principal Commissioner (Sections 377 and 378)

Updated 5 October 2026 · Fact-checked

Revision lets the Principal Commissioner or Commissioner correct orders of subordinate authorities. Section 377 fixes orders that are both erroneous and prejudicial to revenue, after hearing the assessee. Section 378 covers other orders and can only help the assessee, never harm them. To solve, check the order type, conditions, limitation and bars, then conclude.

Understand Revision by Principal Commissioner or Commissioner

Revision is a supervisory power. A senior officer, the Principal Commissioner or Commissioner, looks at the record of an order passed by a junior officer, usually the Assessing Officer. If something is wrong, the senior officer can fix it. It is different from an appeal. In an appeal the assessee goes to a higher authority. In revision the Commissioner reviews the record, either on their own or on the assessee's application.

The Income-tax Act, 2025 gives two separate revision powers. The first is section 377, which works against the assessee's interest. The Commissioner can revise an order that is erroneous and also prejudicial to the interests of revenue. Both words must be satisfied together. An order is erroneous when it is wrong on facts or law, for example when the Assessing Officer accepted a claim without the inquiry that was needed. It is prejudicial to revenue when it causes a loss of tax. The Supreme Court in Malabar Industrial Co. Ltd. v. CIT held that both conditions must exist. It also held that an order is not erroneous merely because the Commissioner prefers another view, when the Assessing Officer took one of two legally possible views.

The second power is section 378, revision of other orders. Here the Commissioner can call for the record of a proceeding and pass an order. It can be on their own motion or on an application by the assessee. The order must not prejudicially affect the assessee. So it is a power to give relief, for example to correct a mistake in an order or to grant a claim wrongly refused.

The powers come with limits. There is a time limit for each. Orders already under appeal, or open to appeal, are protected in certain ways. Before passing an order that hurts the assessee, the Commissioner must give a hearing and make an inquiry. Once the order is erroneous and prejudicial to revenue, no additional ground is needed to enhance, modify, or cancel and direct a fresh assessment. But the limitation, the appeal bar and the hearing requirement must still be met. Exam questions test whether you can match the facts to the right power, and then check limitation and bars.

Key rules to remember

Section 377: revision against assessee (erroneous and prejudicial): Erroneous AND prejudicial to the interests of revenue → Commissioner may revise; Both conditions are cumulative. If either is missing, the power cannot be used. Malabar Industrial Co. Ltd. v. CIT (SC) is the key case.
Meaning of erroneous (typical cases): No inquiry that should have been made | Claim allowed without inquiry | Order against law or binding decision | Order against Board instruction; These are typical cases in which an order is treated as erroneous under section 377. Use them as examples in your answer, linked to the facts given.
Procedure before adverse revision: Opportunity of being heard + inquiry → then order; Under section 377 the Commissioner may enhance or modify the assessment, or cancel it and direct a fresh assessment. No ground beyond erroneous and prejudicial is needed for this. The limitation, the appeal bar and the hearing requirement must still be met.
Limitation for section 377 revision: Two years from the end of the financial year in which the order was passed; Time spent on stay or appeal is excluded as provided in the section.
Bar on section 377 revision: No revision on any matter that has been considered and decided in an appeal; Do not apply section 377 to a point already decided in appeal. An order that is the subject of an appeal is also protected as to the matter being appealed.
Section 378: revision of other orders: Own motion or assessee's application → order must not prejudicially affect the assessee; It is a relief-oriented power. An order harmful to the assessee cannot be passed under it.
Limitation for assessee's application under section 378: One year from the date the order was communicated or the assessee came to know of it, whichever is earlier; This follows the position carried over from the old section 264. Confirm the exact wording against the Income-tax Act, 2025 text. Under that position, the Commissioner may admit a late application if the assessee shows sufficient cause.
Bars on section 378 revision: No revision if: appeal lies, time has not expired and right not waived in writing | order is the subject of an appeal to Commissioner (Appeals) | order is the subject of an appeal to ITAT; These bars are stated as carried over from the earlier position. Confirm them against the 2025 Act text. A pending appeal is a bar. Waiver in writing matters only where an appeal lies but has not been filed and the time to file has not expired.

How to solve Revision by Principal Commissioner or Commissioner questions

Use the same sequence for every revision question. Writing in provision-facts-conclusion form earns marks even when the final answer is partly wrong.

1Identify who is acting and on which order. Note the officer who passed the order, its date and the date it was communicated.
2Decide which power applies. If the Commissioner wants to increase tax or reverse a favourable order, it is section 377 (erroneous and prejudicial). If the assessee wants relief or the Commissioner is correcting an order in the assessee's favour, it is section 378.
3For section 377, test both conditions separately. Ask whether the order is erroneous, for example no inquiry, wrong law or wrong facts. Then ask whether it is prejudicial to revenue, meaning a loss of tax.
4Check whether two views were possible. If the Assessing Officer took one legally permissible view after inquiry, the order is not erroneous.
5Check limitation. Count two years from the end of the financial year of the order for section 377. For the assessee's application under section 378, count one year from communication (or knowledge, whichever is earlier), as carried over from the old section 264 position. Confirm against the 2025 Act text.
6Check the bars. For section 378, see whether an appeal is pending, or is available within time and not waived in writing, or has been filed with the Tribunal. For section 377, check whether the matter has been considered and decided in an appeal.
7Check the procedure. For an adverse order, a hearing and inquiry are needed. For section 378, the order must not prejudice the assessee.
8State the conclusion in one clear sentence. Say whether the revision is valid and what order the Commissioner can pass.

Quickest way: Two questions, two checks

When to use it: Use this when you have a few minutes in a case-scenario MCQ or a short written answer.

Question 1: Who benefits from the revision? Revenue means section 377. Assessee means section 378.
Question 2: Is the order within time? Two years from the end of the financial year for section 377. One year from communication for section 378.
Check A: For section 377, do you see both words, erroneous and prejudicial? If one is missing, the revision fails.
Check B: For section 378, is there a pending appeal, or an open appeal that has not been waived in writing? If yes, the revision is barred.
Write the conclusion as: the Commissioner can or cannot revise because of the condition or bar you found.

Common mistakes in Revision by Principal Commissioner or Commissioner

Treating any order that loses tax as revisable.
Students read only the word prejudicial and forget that the order must also be erroneous.
Fix: Always test both conditions. If the Assessing Officer took a permissible view after inquiry, the order is not erroneous even if revenue is worse off.
Saying the Commissioner can enhance tax under section 378.
Students mix up the two revision powers and treat both as revenue-friendly.
Fix: Section 378 covers other orders and cannot prejudicially affect the assessee. Only section 377 can increase the assessment.
Using one limitation period for both powers.
Both periods feel similar, and students memorise one number.
Fix: Remember the pair: two years from the end of the financial year for section 377 and one year from communication for the assessee's application under section 378. Count each from its own starting point.
Ignoring appeal bars.
Students focus on the merits of the order and miss that an appeal is pending or still open.
Fix: For section 378, list the appeal position first. A pending appeal, an open appeal not waived in writing, or a Tribunal appeal means the Commissioner cannot revise. For section 377, check that the matter was not considered and decided in an appeal.
Skipping the hearing before an adverse order.
Students think revision is an administrative act and not a quasi-judicial one.
Fix: Write that the assessee must get a reasonable opportunity of being heard, and that the Commissioner must make or cause an inquiry before the order.
Looking for extra grounds before the Commissioner can cancel the order and direct a fresh assessment.
Students think cancellation is a separate step that needs reasons beyond the revision conditions.
Fix: No ground beyond erroneous and prejudicial is needed. Once both are met, section 377 lets the Commissioner enhance, modify, or cancel and direct a fresh assessment. But the limitation, the bar on matters decided in appeal and the hearing requirement must still be met.

Worked examples

Example 1

The Assessing Officer completed an assessment on 20 December 2026. He allowed a business expense of ₹25,00,000 without asking for any bills or explanation, even though the claim was very large compared with earlier years. The Principal Commissioner reads the record and wants to revise the order. Can he do so, and by when?

Show the solution

Provision: Under section 377 the Commissioner may revise an order that is erroneous and prejudicial to the interests of revenue, after giving the assessee a hearing and making an inquiry.
Erroneous: The Assessing Officer allowed a large claim without inquiry or verification that should have been made. This makes the order erroneous.
Prejudicial: Allowing a ₹25,00,000 expense reduces income and so tax. This is a loss of revenue.
Both conditions are met. This is not a case of two possible views, because no inquiry took place.
Limitation: The order was passed on 20 December 2026, in the financial year 2026-27. Two years from the end of that year gives 31 March 2029. Revision must be completed by this date.
Note: This two-year limit follows the position carried over from the old section 263. Confirm the section 377 limitation against the Income-tax Act, 2025 text before relying on it, as you would for section 378.
Procedure: The Commissioner must give the assessee a reasonable opportunity of being heard, and cause an inquiry. He can then enhance or modify the assessment, or cancel it and direct a fresh assessment.

Answer: Yes. The order is erroneous and prejudicial to revenue. The Principal Commissioner can revise it under section 377 after a hearing and inquiry, up to 31 March 2029, on the two-year limit carried over from the old position. Confirm that limit against the 2025 Act text.

Example 2

An Assessing Officer passed an order on 10 June 2026 and wrongly rejected a deduction claim of ₹3,00,000. The assessee has filed an appeal before the Commissioner (Appeals) against that order, and the appeal is pending. On 5 September 2026 the assessee also applies to the Commissioner under section 378 for revision. Can the Commissioner revise the order?

Show the solution

Provision: Under section 378 the Commissioner can revise other orders on application by the assessee. The order must not prejudicially affect the assessee.
Limitation: The application was made on 5 September 2026. It is within one year from communication of the order dated 10 June 2026, so time is not a problem.
Bar: The Commissioner cannot revise where the order has been made the subject of an appeal to the Commissioner (Appeals). A pending appeal is a bar.
Application of the bar: The assessee has already filed that appeal, and it is pending. The bar applies even though the application is in time.
Practical result: Waiver in writing does not help here, because it applies only where an appeal lies but has not yet been filed. The remedy for the ₹3,00,000 claim lies in the appeal. Do not assume that withdrawing the appeal would open the way to revision. The effect of withdrawal is doubtful.

Answer: No. The application is within the one-year time, but revision is barred because an appeal against the same order is pending before the Commissioner (Appeals). The assessee's remedy lies in that appeal.

Exam tips

Write the section 378 limit as one year from communication and the section 377 limit as two years from the end of the financial year. Examiners often build a case on the wrong period.
Whenever a scenario says the Assessing Officer took a view after inquiry, think about the two-views rule before agreeing that the order is erroneous.
For section 378 cases, always list the appeal position. A pending or open appeal is the most common trap in case-scenario MCQs.
In written answers, use provision-facts-conclusion. Quote the Malabar Industrial case only for the cumulative conditions and the two-views point.
Name section 377 for the erroneous and prejudicial power and section 378 for other orders. Link each to the facts before you conclude.

Practice questions from Appeals and Revision

Revision by Principal Commissioner or Commissioner in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ProfessionalPowers of Joint Commissioner (Appeals) or Commissioner (Appeals)

Revision by Principal Commissioner or Commissioner: frequently asked questions

What does erroneous and prejudicial to the interests of revenue mean?

Erroneous means the order is wrong on facts or law, for example passed without a needed inquiry. Prejudicial means it causes a loss of tax. Both must be present together before the Commissioner can use the revision power under section 377.

What is the difference between revision in favour of the assessee and against the assessee?

Revision against the assessee is under section 377, used when an order is erroneous and prejudicial to revenue, and it can raise the assessment after a hearing. Revision in favour of the assessee is under section 378, and the order passed must not prejudicially affect the assessee. The first protects revenue and the second gives relief.

What is the limitation for revision by the Commissioner?

For section 377, the limit is two years from the end of the financial year in which the order was passed. For the assessee's application under section 378, the time is one year from communication or knowledge of the order, whichever is earlier. This follows the position carried over from the old section 264, so confirm it against the 2025 Act text. Under that position, a late application can be admitted if there is sufficient cause.

Can the Commissioner revise an order that is under appeal?

Under section 378 the Commissioner cannot revise an order if it is the subject of an appeal before the Commissioner (Appeals) or the Tribunal. Revision is also barred where an appeal lies but time has not expired, unless the assessee has waived the right of appeal in writing. Confirm these bars against the 2025 Act text. Under section 377, the Commissioner cannot revise on any matter that has been considered and decided in an appeal.