Revision of deduction claim upheld where small scale industrial undertaking status was not satisfied for the relevant year.

Revision under section 263 can be invoked where the Assessing Officer allows deduction under section 80IB without examining whether the assessee qualified as a small scale industrial undertaking for the relevant year. Eligibility under section 80IB depends on satisfying the prescribed investment limit in plant and machinery as on the last day of the previous year, and a certificate alone is insufficient if that condition is not met. Prior allowance in earlier years does not create a vested right, because each assessment year is separate and res judicata does not apply. The assessment was therefore treated as erroneous and prejudicial to the Revenue, and the deduction was denied for the year under consideration.

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Issues: Whether the Commissioner was justified in invoking revision under section 263 to set aside the assessment allowing deduction under section 80IB on the ground that the assessee did not satisfy the requirement of being a small scale industrial undertaking under section 80IB(14)(g) read with section 11B of the Industries (Development and Regulation) Act, 1951.

Analysis: The deduction under section 80IB depended on the industrial undertaking being regarded as a small scale industrial undertaking as on the last day of the previous year. The assessee's investment in plant and machinery exceeded the prescribed limit, and the certificate relied upon was not sufficient to establish eligibility for the relevant year. The earlier allowance of deduction in prior years did not create a vested right, since tax assessments are year-specific and res judicata does not apply. The Assessing Officer had allowed the deduction without properly examining this essential condition, making the assessment order erroneous and prejudicial to the interests of the Revenue.

Conclusion: The revision under section 263 was valid, and the assessee was not entitled to deduction under section 80IB for the year under consideration.

Final Conclusion: The assessment could be reopened through revision because the statutory eligibility condition for the deduction was not satisfied for the relevant year.

Ratio Decidendi: For a deduction linked to small scale industrial undertaking status, the eligibility condition must be satisfied for the relevant assessment year itself, and an assessment allowing the deduction without examining that condition can be revised under section 263.

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