Section 377 Income Tax Act 2025: When Can an Assessment Be Revised?
Section 377 permits specified senior income-tax authorities to revise an order of the Assessing Officer or Transfer Pricing Officer when it is both erroneous and prejudicial to the interests of the revenue. It requires an opportunity of hearing, provides specified grounds for treating orders as erroneous, and generally imposes a two-year limitation period.
Source: Section 377 of the Income-tax Act, 2025, as amended by the Finance Act, 2026. Read official Section 377 text.
When can the Commissioner revise an assessment?
Under Section 377(1), the Competent Authority may call for and examine the record of proceedings under the Act. Revision requires a finding that an order of the Assessing Officer or Transfer Pricing Officer is erroneous insofar as it is prejudicial to the interests of revenue. Before passing a revision order, the authority must give the assessee an opportunity of being heard and make, or cause to be made, such inquiry as necessary.
Possible outcomes include enhancement or modification of the assessment, cancellation and direction for a fresh assessment, modification of an order under Section 166, or cancellation of that order with a direction to pass a fresh order. A mere difference of opinion, without satisfying the statutory conditions, does not itself establish jurisdiction to revise.
Section 377: Subsection-wise explanation
| Subsection | Rule | Practical implication |
|---|---|---|
| 377(1) | Revision of erroneous orders prejudicial to revenue after hearing and necessary inquiry. | Authority may enhance, modify, cancel or direct fresh assessment; special powers cover Section 166 orders. |
| 377(2) | Clarifies included orders, meaning of record and effect of earlier appeals. | Only issues not considered and decided in an appeal remain open for revision. |
| 377(3) | Specifies circumstances in which an order is deemed erroneous and prejudicial to revenue. | Includes missing inquiry, unexamined relief, failure to follow Board directions or binding adverse court decisions. |
| 377(4) | General time limit: two years from end of financial year in which order sought to be revised was passed. | Time runs from the financial year-end, not simply the date of assessment. |
| 377(5) | Exception for orders giving effect to findings or directions of the Appellate Tribunal, High Court or Supreme Court. | Such revision may be passed at any time in the specified circumstances. |
| 377(6) | Excludes statutory rehearing time and qualifying court-stay periods from limitation calculation. | Relevant excluded periods are not counted in the two-year window. |
| 377(7) | Minimum 60-day remaining period after statutory exclusions. | If less than 60 days remain, the limitation period is extended to 60 days. |
| 377(8) | Defines Competent Authority and Transfer Pricing Officer. | Identifies authorised officers and refers to Section 166(17). |
When is an order deemed erroneous and prejudicial?
Under Section 377(3), the Competent Authority may treat an order as erroneous insofar as it is prejudicial to revenue when, in the authority's opinion, it:
- was passed without inquiries or verification that should have been made;
- allowed relief without inquiry into the claim;
- did not follow an applicable order, direction or instruction of the Board under Section 239; or
- did not follow a decision adverse to the assessee by the jurisdictional High Court or Supreme Court in the assessee's or another person's case.
Effect of an earlier appeal: Section 377(2)(c) restricts the revision power to matters not considered and decided in that appeal. The defined record includes all records relating to the proceeding available when the Competent Authority examines the matter.
How is the two-year limitation calculated?
Ordinary rule - Section 377(4): A revision order must be made within two years from the end of the financial year in which the order sought to be revised was passed.
Judicial direction exception - Section 377(5): The two-year limit does not restrict an order passed in consequence of, or to give effect to, a finding or direction of the Appellate Tribunal, High Court or Supreme Court.
Excluded periods - Section 377(6): Exclude (a) time taken to give the assessee an opportunity to be reheard under Section 244(2); and (b) the period from the date of a court stay until the jurisdictional Principal Commissioner or Commissioner receives a certified copy of the order vacating that stay.
Minimum balance - Section 377(7): Where less than 60 days remain after these exclusions, the remaining period is extended to 60 days.
| Rule | Time or effect |
|---|---|
| Normal revision deadline | 2 years from end of financial year of original order |
| Qualifying appellate/court direction | Revision may be passed at any time under Section 377(5) |
| Rehearing and court-stay exclusions | Excluded from computation under Section 377(6) |
| Short residual period | Extended to at least 60 days under Section 377(7) |
Relevant statutory definitions and expressions
- Competent Authority - Section 377(8)(a)
- The Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner.
- Transfer Pricing Officer - Section 377(8)(b)
- Has the same meaning as in Section 166(17).
- Record - Section 377(2)(b)
- All records relating to a proceeding under the Act that are available when the Competent Authority examines it.
- Order of Assessing Officer or Transfer Pricing Officer - Section 377(2)(a)
- Includes specified assessments based on directions under Section 272, certain orders of Joint Commissioners acting under Section 241, and orders under Section 166.
- Erroneous and prejudicial to the interests of revenue
- Two cumulative statutory conditions for the exercise of revision power; Section 377(3) identifies specified situations in which an order is deemed to meet them.
Practical illustrations
1. Deduction allowed without inquiry
The Assessing Officer allows a substantial deduction without examining supporting records. If the Competent Authority finds the order erroneous and prejudicial to revenue, Section 377(3)(b) may support revision, subject to hearing and limitation requirements.
2. Ordinary limitation period
An assessment order is passed on 15 July 2026, during financial year 2026-27. The ordinary two-year period under Section 377(4) runs from 31 March 2027 and ends on 31 March 2029, subject to the statutory exception and exclusions.
3. Issue already decided on appeal
If the appellate authority has considered and decided a particular deduction issue, the Competent Authority cannot use Section 377 to revise that decided issue merely because it disagrees. Revision may extend to other matters not considered and decided in the appeal, subject to Section 377(2)(c).
Frequently asked questions
Can an assessment be revised merely because the Commissioner disagrees with it?
Not merely on disagreement. Section 377(1) requires the order to be erroneous insofar as prejudicial to the interests of revenue.
Must the assessee be heard before revision?
Yes. Section 377(1) expressly requires an opportunity of being heard.
What is the normal time limit for revision?
Two years from the end of the financial year in which the order sought to be revised was passed, subject to Sections 377(5)-(7).
Can a Transfer Pricing Officer's order be revised?
Yes. Section 377 expressly includes the Transfer Pricing Officer and specified orders under Section 166.
Does Section 377 cover revisions favourable to the assessee?
Section 377 concerns orders prejudicial to revenue. Section 378 separately addresses revision of other orders and includes a rule against passing an order prejudicial to the assessee under that provision.
Related provisions
Section 166 - Reference to Transfer Pricing Officer; Section 239 - Board instructions; Section 241 - Jurisdiction; Section 244 - Change of incumbent; Section 272 - Joint Commissioner directions; Section 378 - Revision of other orders.
Legal note: This article is an explanatory guide to the statutory text. The precise effect of appellate orders, limitation exclusions and applicable transition provisions should be assessed on the facts of each case.