Revision of Orders by PCIT/CIT: Sections 377 and 378 of the Income Tax Act 2025

Revision is a power of senior tax officers to correct an order passed by an officer below them. Under the Income Tax Act 2025, section 377 lets the Competent Authority (Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner) revise an Assessing Officer's order that is erroneous and prejudicial to the revenue, within two years from the end of the financial year in which that order was passed. Section 378 covers every other order: the authority can revise it on its own motion within one year, or on the assessee's application (with a Rs 500 fee) made within one year, but never to the assessee's detriment.

This guide explains both sections, the deemed-error tests, the limitation periods and how revision sits next to an appeal. Every point is taken from sections 377 and 378 of the Act as amended by the Finance Act 2026 (tax year 2026-27 onwards). This is information, not advice on a specific case.

What is revision of an order under the Income Tax Act 2025?

Revision means a higher authority calls for the file of a completed proceeding, examines it and passes a fresh order. The "Competent Authority" is defined in section 377(8)(a) and section 378(11)(a) as the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner. The two sections work in opposite directions:

	Section 377	Section 378
Which orders	Orders of the Assessing Officer or Transfer Pricing Officer that are erroneous and prejudicial to revenue	Any other order of a subordinate authority
Who can start it	The Competent Authority only (calls for the record)	Competent Authority on its own motion, or the assessee by application
Effect on assessee	Can enhance or modify the assessment, or cancel it and direct a fresh one	Cannot pass an order prejudicial to the assessee
Time limit to start / pass	Two years from the end of the financial year of the order (s.377(4))	Own motion: order not more than one year old (s.378(2)). Application: within one year (s.378(3))
Fee	None	Rs 500 on an assessee's application (s.378(6))

When can the PCIT or CIT revise an order as prejudicial to revenue (section 377)?

Section 377(1) has three conditions, all of which must be met:

1. The Competent Authority examines the record of a proceeding.
2. It considers that the order passed by the Assessing Officer or Transfer Pricing Officer is erroneous and prejudicial to the interests of the revenue.
3. It gives the assessee an opportunity of being heard and makes, or causes to be made, such inquiry as it considers necessary.

It can then pass the order the circumstances justify, including an order enhancing or modifying the assessment, cancelling the assessment and directing a fresh one, or modifying or cancelling an order under section 166 (reference to the Transfer Pricing Officer) and directing a fresh one (section 377(1)(a) to (c)).

Which orders are covered?

Section 377(2)(a) says the covered orders include an assessment order made on the Joint Commissioner's directions under section 272, an order made by a Joint Commissioner exercising the powers of an Assessing Officer or Transfer Pricing Officer under section 241, and an order under section 166. "Record" includes all records of any proceeding under the Act available at the time of examination (section 377(2)(b)).

When is an order deemed erroneous and prejudicial to revenue?

Section 377(3) lists four situations in which the order is deemed erroneous, if in the opinion of the Competent Authority it:

• was passed without making inquiries or verification which should have been made;
• allowed a relief without inquiring into the claim;
• was not made in accordance with an order, direction or instruction issued by the Board under section 239; or
• was not passed in accordance with a decision of the jurisdictional High Court or the Supreme Court, rendered in the case of the assessee or any other person, that is prejudicial to the assessee.

What if the order was already appealed?

Where the order was the subject of an appeal, the Competent Authority's powers extend to the matters that were not considered and decided in that appeal (section 377(2)(c)). Matters the appellate authority decided are outside revision.

What is the time limit for revision under section 377?

No order can be made under section 377(1) after two years from the end of the financial year in which the order sought to be revised was passed (section 377(4)). Three adjustments apply:

• Tribunal, High Court or Supreme Court effect orders: a revision order made in consequence of, or to give effect to, a finding or direction of the Appellate Tribunal, High Court or Supreme Court may be passed at any time (section 377(5)).
• Excluded periods: the time taken to rehear the assessee under section 244(2) (after a change of incumbent), and any period a court stay on the revision proceeding was in force, ending when the certified copy of the vacating order reaches the jurisdictional Principal Commissioner or Commissioner (section 377(6)).
• Sixty-day floor: if, after those exclusions, less than sixty days remain, the remaining period is extended to sixty days (section 377(7)).

How does revision of other orders work (section 378)?

Section 378(1) lets the Competent Authority, for any order other than one covered by section 377 passed by a subordinate authority, either of its own motion or on the assessee's application, call for the record, make or cause an inquiry, and pass such order as it thinks fit, "not being an order prejudicial to the assessee". Declining to interfere is not treated as an order prejudicial to the assessee (section 378(11)(b)).

How does an assessee apply, and by when?

• Deadline: within one year from the date the order was communicated to the assessee, or the date the assessee otherwise came to know of it, whichever is earlier (section 378(3)).
• Late application: the Competent Authority may admit it if satisfied the assessee was prevented by sufficient cause (section 378(4)).
• Fee: Rs 500 must accompany every application (section 378(6)).
• Decision time: an order on the application must be passed within one year from the end of the financial year in which the application is made (section 378(7)). The same exclusions and sixty-day floor as in section 377 apply (section 378(8) and (9)), and an order giving effect to a Tribunal, High Court or Supreme Court direction may be passed at any time (section 378(10)).
• Own-motion cap: the authority cannot revise on its own motion an order made more than one year previously (section 378(2)).

When is revision under section 378 not available?

Section 378(5) bars revision in three cases: where an appeal lies to the Joint Commissioner (Appeals), the Commissioner (Appeals) or the Appellate Tribunal but has not been made and the time to appeal has not expired; where an appeal lies and the assessee has not waived the right of appeal; and where the order has already been made the subject of such an appeal. In practice, if an appeal is open or pending, revision under section 378 is closed.

What happens after a revision order is passed?

• Appeal to the Tribunal: an assessee aggrieved by a section 377 order of a Principal Commissioner or Commissioner can appeal to the Appellate Tribunal (section 362(1)(b)(ii)). The same right covers a section 377 order of a Principal Chief Commissioner or Chief Commissioner (section 362(1)(c)). The appeal must be filed within two months from the end of the month in which the order is communicated (section 362(3)), and the Tribunal may admit a late appeal for sufficient cause (section 362(5)).
• Fresh assessment: where the order cancels an assessment and directs a fresh one, the fresh assessment has a time limit of one year from the end of the financial year in which the section 377 or 378 order is passed (section 286(1), Table Sl. No. 5).
• Penalty: where the assessment is the subject of revision under section 377, a penalty order under section 298 cannot be made after six months from the end of the financial year in which the revision order is passed (section 298(5)(d)).

Which section applies to my order?

Worked example 1: time limit under section 377

Assumptions: the Assessing Officer passes two assessment orders. Both fall under section 377. Section 377(4) counts two years from the end of the financial year in which the order was passed, not from the order date. No stay and no section 244(2) rehearing applies.

Step	Order A	Order B
Date of order	12 June 2026	20 March 2027
Financial year of the order	2026-27	2026-27
End of that financial year	31 March 2027	31 March 2027
Add two years	31 March 2029	31 March 2029
Last date for a section 377 order	31 March 2029	31 March 2029

Both orders have the same deadline, because both were passed in the same financial year. An order passed on 12 June 2026 therefore stays open to revision for almost two years and nine months.

Worked example 2: the section 378 clock

Assumptions: an order that is not covered by section 377 is communicated to the assessee on 5 August 2026. The assessee files an application for revision on 20 January 2027 and pays the fee.

1. Application deadline (s.378(3)): one year from 5 August 2026 is 5 August 2027. The application on 20 January 2027 is in time.
2. Fee (s.378(6)): Rs 500.
3. Financial year of the application: 20 January 2027 falls in 2026-27, which ends on 31 March 2027.
4. Decision deadline (s.378(7)): one year from 31 March 2027 is 31 March 2028.

If the Competent Authority had instead wanted to revise the same order on its own motion, section 378(2) would have stopped it once the order was more than one year old, that is, if the order was made on 5 August 2026, after 5 August 2027.

Worked example 3: what a section 377 revision can do to income

Assumptions (tax year 2026-27, figures are illustrative): an assessment is completed at income of Rs 14,00,000. The Assessing Officer allowed a deduction claim of Rs 3,00,000 without making any inquiry. The Principal Commissioner finds the claim was never examined and, after hearing the assessee, disallows it.

Item	Rs
Income in the original assessment	14,00,000
Add: deduction allowed without inquiry, now disallowed	3,00,000
Income as modified under section 377(1)(a)	17,00,000

The order is deemed erroneous under section 377(3)(b), "relief allowed without inquiring into the claim". The tax on the extra Rs 3,00,000 would follow the usual computation for the assessee; that part is not shown here.

Real-life examples

Ravi, a trader. Ravi's assessment is completed with a large expense claim accepted after one email. In the following year the Principal Commissioner calls for the record, finds no verification of the claim, sends Ravi a notice and hears him. The Principal Commissioner then modifies the assessment. Ravi cannot argue that the officer had already "accepted" the claim, because under section 377(3)(a) and (b) an order passed without needed inquiry is deemed erroneous if, in the Competent Authority's opinion, it fits those tests.

Meena, a salaried taxpayer. An officer wrongly rejects Meena's claim in an order that is not an assessment. Meena has waived her right of appeal and has no appeal pending. She files a revision application within a year, with the Rs 500 fee. The Commissioner can correct the order in her favour under section 378, but cannot make it worse for her. If an appeal lay and she had not waived her right to appeal, section 378(5) would have blocked the revision.

Suresh, who appealed. Suresh appealed against an assessment on one issue. The Principal Commissioner later reviews the same file. The revision powers reach only matters the appeal did not consider and decide (section 377(2)(c)), so the issue decided in the appeal is out of reach.

Quick reference: limits and conditions

Point	Section 377	Section 378
Starting time limit	2 years from end of FY of order (377(4))	Own motion: order not older than 1 year (378(2)); application within 1 year of communication or knowledge, whichever earlier (378(3))
Condonation of delay	Not provided	Sufficient cause (378(4))
Decision time on application	Not applicable	1 year from end of FY of application (378(7))
Exclusions	s.244(2) rehearing, court stay (377(6))	Same (378(8))
Minimum remaining time	60 days (377(7))	60 days (378(9))
Order to give effect to Tribunal / High Court / Supreme Court	Any time (377(5))	Any time (378(10))
Fee	None	Rs 500 (378(6))

Common mistakes

• Counting two years from the order date. Section 377(4) counts from the end of the financial year of the order.
• Ignoring the hearing notice. Section 377(1) requires an opportunity of being heard. Reply on merits and on whether the order is really erroneous and prejudicial to revenue.
• Applying under section 378 while an appeal is open. Section 378(5) bars it where an appeal lies and the right of appeal has not been waived, or where an appeal has been filed. Check this before paying the fee.
• Missing the earlier of two dates. The one-year window under section 378(3) runs from communication or from the date the assessee otherwise came to know of the order, whichever is earlier.
• Mixing up the two sections. Section 378 cannot be prejudicial to the assessee, but section 377 can enhance the assessment, so identify which section applies first.

Where this is in the Act

• Section 377: revision of orders prejudicial to revenue (sub-sections (1) to (8))
• Section 378: revision of other orders (sub-sections (1) to (11))
• Related: section 362 (appeals to the Appellate Tribunal), section 286 (time limits), section 298 (penalty), section 166 (reference to Transfer Pricing Officer), section 239 (Board instructions), section 241 (jurisdiction), section 244(2) (rehearing after change of incumbent), section 272 (Joint Commissioner directions)

For the appeal route that runs alongside revision, see our guide to income tax appeals before the CIT(A), ITAT, High Court and Supreme Court, and for assessment stages see assessment procedure and scrutiny.

For a CA firm, the hard part is tracking the dates: two years from the end of the financial year for section 377, one year for section 378, and the appeal window that decides whether revision is open at all. Finexo's practice management software lets you keep these deadlines against each client's matter and get reminders before they pass. It does not draft replies or file applications for you.