Chapter XVIII - Appeals, Revisions and Alternate Dispute Resolutions
Section 377
Section 377: revision of orders prejudicial to revenue
Section 377 gives the "Competent Authority" - the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner - power to call for and examine any proceeding's record, and revise an order of the Assessing Officer or Transfer Pricing Officer that is erroneous and prejudicial to the interests of the revenue, after giving the assessee a hearing. It also deems certain kinds of orders (such as those passed without proper inquiry) to be automatically prejudicial to revenue, and sets a two-year limitation period.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) The Competent Authority may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer or the Transfer Pricing Officer, as the case may be, is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including— (a) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; (b) an order modifying the order under section 166; or (c) an order cancelling the order under section 166 and directing a fresh order under the said section.
(2) For the purpose of sub-section (1),— (a) an order passed by the Assessing Officer or the Transfer Pricing Officer, shall include— (i) an order of assessment made on the basis of the directions issued by the Joint Commissioner under section 272; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer or the Transfer Pricing Officer, conferred on, or assigned to, him by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board under section 241; and (iii) an order under section 166; (b) “record” shall include all records relating to any proceeding under this Act available at the time of examination by the Competent Authority; (c) where any order referred to in this section and passed by the Assessing Officer or the Transfer Pricing Officer, had been the subject matter of any appeal filed, the powers of the Competent Authority, shall extend to such matters as had not been considered and decided in such appeal.
(3) An order passed by the Assessing Officer or the Transfer Pricing Officer, shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Competent Authority, the order— (a) is passed without making inquiries or verification which should have been made; or (b) is passed allowing any relief without inquiring into the claim; or (c) has not been made in accordance with any order, direction or instruction issued by the Board under section 239; or (d) 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 the assessee or any other person.
(4) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.
(5) Irrespective of anything contained in sub-section (4), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in the order of the Appellate Tribunal, the High Court, or the Supreme Court.
(6) In computing the period of limitation under sub-section (4), the following period shall be excluded,–– (a) the time taken in giving an opportunity to the assessee to be reheard under section 244(2); and (b) the period commencing on the date on which stay on any proceeding under this section has been granted by an order or injunction of any court and ending on the date on which certified copy of the order or injunction vacating the stay is received by the jurisdictional Principal Commissioner or Commissioner.
(7) If after the exclusion of the period provided in sub-section (6), the time limit for completion, as provided in sub-section (4) is less than sixty days, such remaining period shall be extended to sixty days and such period of limitation shall be deemed to have been extended accordingly.
(8) For the purposes of this section,–– (a) “Competent Authority” means the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; and (b) “Transfer Pricing Officer” shall have the same meaning as in section 166(17).
Introduction
Revision under section 377 concerns an Assessing Officer or Transfer Pricing Officer order that the competent authority considers erroneous and prejudicial to revenue. The power includes an inquiry and a hearing before a revision order is made.
The provision also limits revision after an appeal: matters actually considered and decided in the appeal are outside the competent authority’s revision reach. The normal two-year clock runs from the end of the financial year of the order sought to be revised, with stated exceptions and excluded periods.
Key takeaways
Error and revenue prejudice
Revision requires the Assessing Officer or Transfer Pricing Officer order to be erroneous so far as it prejudices revenue.
Hearing and inquiry
The competent authority gives the assessee an opportunity to be heard and makes or causes necessary inquiry.
Possible orders
The authority may enhance, modify or cancel and direct a fresh assessment or relevant section 166 order.
The revision power
The Competent Authority may call for and examine the record of any proceeding under the Act, and if it considers an order passed by the Assessing Officer or Transfer Pricing Officer erroneous and prejudicial to the interests of the revenue, it may - after giving the assessee an opportunity of being heard and making such inquiry as it considers necessary - pass such order as the circumstances justify, including:
- An order enhancing or modifying the assessment, or cancelling it and directing a fresh assessment
- An order modifying the order under section 166
- An order cancelling the order under section 166 and directing a fresh order under that section
What counts as an 'order' and 'record'
An order of the Assessing Officer or Transfer Pricing Officer for this purpose includes: an assessment order made on directions issued by a Joint Commissioner under section 272; an order made by a Joint Commissioner exercising the powers or functions of an Assessing Officer/Transfer Pricing Officer conferred by the Board or authorised senior officers under section 241; and an order under section 166.
"Record" includes all records relating to a proceeding available at the time of the Competent Authority's examination.
Where an order has already been the subject of an appeal, the Competent Authority's revision power extends only to matters not considered and decided in that appeal.
When an order is deemed 'erroneous and prejudicial to revenue'
An order is deemed erroneous and prejudicial to revenue, in the Competent Authority's opinion, if it:
- Was passed without making inquiries or verification that should have been made
- Allowed relief without inquiring into the claim
- Was not made in accordance with an order, direction or instruction issued by the Board under section 239
- Was not passed in accordance with a decision prejudicial to the assessee rendered by the jurisdictional High Court or Supreme Court, in the case of that assessee or any other person
Time limit for revision
No order under this section can be made after two years from the end of the financial year in which the order sought to be revised was passed.
This time limit does not apply to a revision order passed to give effect to, or in consequence of, a finding or direction in an order of the Appellate Tribunal, High Court or Supreme Court - such a revision may be passed at any time.
In computing the two-year limitation, the time taken to give the assessee a fresh hearing under section 244(2), and any period a court stay was in force, is excluded. If the remaining time after such exclusion is less than sixty days, it is extended to sixty days.
Step-by-step flow for revision under Section 377
- 1
Is the order one passed by the Assessing Officer or the Transfer Pricing Officer?
Under Section 377(2)(a) this includes an assessment made on directions of the Joint Commissioner under section 272, an order made by a Joint Commissioner exercising Assessing Officer or Transfer Pricing Officer powers under section 241, and an order under section 166.
- No: Section 377 does not apply. Section 378 may be relevant.
- Yes: Go to the next step.
- 2
Is the revision within time?
Under Section 377(4), no order can be made after two years from the end of the financial year in which the order was passed. Exclude the periods in Section 377(6); if less than sixty days then remain, the time is extended to sixty days (Section 377(7)). Under Section 377(5) a revision may be made at any time for an order passed to give effect to a finding or direction of the Appellate Tribunal, High Court or Supreme Court.
- Out of time: No revision order can be made.
- Within time: Go to the next step.
- 3
Was the matter considered and decided in an appeal against the order?
Under Section 377(2)(c), the Competent Authority's power extends only to matters not considered and decided in the appeal.
- 4
Is the order erroneous in so far as it is prejudicial to the interests of the revenue?
Under Section 377(3), it is deemed so if, in the Competent Authority's opinion, it was passed without inquiries or verification that should have been made, allowed relief without inquiring into the claim, did not follow a Board order, direction or instruction under section 239, or did not follow a jurisdictional High Court or Supreme Court decision prejudicial to the assessee.
- No: No revision under Section 377.
- Yes: Go to the next step.
- 5
Hear the assessee and pass the order
After giving the assessee an opportunity of being heard and making any inquiry needed, the Competent Authority may enhance, modify or cancel the assessment and direct a fresh one, or modify or cancel an order under section 166 (Section 377(1)).
Practical checklist
Do
- Identify the exact order and issue proposed for revision, and compare it with the questions already considered and decided on appeal.
- Respond to the hearing notice with the assessment record, the inquiries made, and support for the relief or treatment challenged.
- Calculate limitation from the end of the financial year of the original order, accounting for any statutory exclusion or appellate-direction exception.
Avoid
- Do not assume a disputed conclusion by itself establishes both error and prejudice; test the stated statutory basis.
- Do not overlook a section 166 order or the included classes of Joint Commissioner orders.
Illustrative example
Worked example: relief allowed without inquiry
Hypothetical facts (illustration only, not a real taxpayer): An assessment order for a company is passed on 15 December 2027. It allows a deduction claim of ₹6,00,000 without any inquiry into the claim. The company appealed against a different addition in the same order, and that appeal has been decided. The amount and dates are assumed for illustration.
Time limit
The order was passed in the financial year ending 31 March 2028. Two years from that date is 31 March 2030, so revision is possible until then, subject to the exclusions and extension in Section 377(6) and (7).
Scope after appeal
The appeal decided only the other addition. The ₹6,00,000 deduction was not considered in that appeal, so under Section 377(2)(c) the Competent Authority can examine it.
Deemed error
Allowing relief without inquiring into the claim is deemed erroneous and prejudicial to the revenue under Section 377(3)(b).
Hearing and order
The Competent Authority gives the company a hearing, makes any inquiry needed, and may modify the assessment or cancel it and direct a fresh assessment.
Outcome
- The Competent Authority can revise the order on the ₹6,00,000 deduction up to 31 March 2030, subject to Section 377(6) and (7).
- The addition already decided in appeal cannot be reopened under Section 377.
Glossary
- Competent Authority
- The Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner identified in subsection (8).
- Record
- All records relating to a proceeding available when the competent authority examines it.
Frequently asked questions
What is the time limit for the Commissioner to revise an order under Section 377?
Two years from the end of the financial year in which the order sought to be revised was passed - except where the revision gives effect to a finding or direction of the Appellate Tribunal, High Court or Supreme Court, in which case there is no such time limit.
When is an assessment order automatically treated as prejudicial to revenue?
Section 377(3) deems it so if it was passed without necessary inquiries/verification, allowed relief without inquiring into the claim, did not follow a Board instruction under section 239, or did not follow an assessee-prejudicial decision of the jurisdictional High Court or Supreme Court.
Do I get a hearing before my order is revised under Section 377?
Yes - the Competent Authority must give the assessee an opportunity of being heard before passing a revision order under Section 377(1).
Need help applying this provision to your situation?
Get help responding to a revision notice under Section 377Last updated 10 October 2026