CBDT circular on section 263 limitation binds the Department, making a contrary revisional order unsustainable.

A beneficial CBDT circular on limitation for revision under section 263 of the Income-tax Act bound the Department where the assessment order pre-dated the 1984 amendment. The circular required revision orders, as far as possible, to be passed within two years from the date of the order sought to be revised in such cases. Because the Department gave no justification for ignoring that instruction, the revisional order was unsustainable and the issue was answered in favour of the assessee.

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Issues: Whether the Commissioner's revisional order under section 263 of the Income-tax Act, 1961, passed in relation to an assessment made before the amendment brought by the Taxation Laws (Amendment) Act, 1984, was sustainable in view of Circular No. 402 dated 1 November 1984.

Analysis: The assessment years in question were prior to the amendment of section 263. Circular No. 402 clarified that, although the amendment could extend the limitation period in appropriate cases, orders under section 263 should, as far as possible, be passed within two years from the date of the order sought to be revised where that order was passed before 1 October 1984. The circular was beneficial to assessees and therefore binding on the Department. Since no reason was shown for disregarding it, the Department could not take a stand inconsistent with the circular.

Conclusion: The revisional order under section 263 was held to be unsustainable and the question was answered against the Revenue and in favour of the assessee.

Ratio Decidendi: A beneficial CBDT circular governing limitation for revision under section 263 binds the Department, and a revisional order passed contrary to that circular cannot be sustained.

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