CIT can exercise his/her revisionary powers u/s 263 only if

1. The order of the Assessing Officer should be erroneous and prejudicial to the interest of the Revenue.

2. Sec. 263 cannot correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous that the section will be attracted.

3. Orders passed on an incorrect assumption of facts or incorrect application of law or without application of mind or without making requisite inquiries would satisfy the requirement of the order being erroneous

4. Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue difference of view cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under law

5. Simply because AO’s order does not make an elaborate discussion is not erroneous

6. There is a distinction between lack of inquiry and inadequate inquiry and held that “if there is a lack of enquiry, then the assessment order can be branded as erroneous.” Sunbeam Auto Ltd case