Section 263 revision fails where finalized block assessment findings already accept the transactions as genuine and disclosed.

Section 263 revision cannot be used to disturb regular assessments when the very transactions relied on have already been examined in final block assessment proceedings and found to be disclosed and genuine. The article notes that the revisional notice treated lease and buy-back transactions as sham, but the block assessment Tribunal had held that they were recorded in the books, did not generate undisclosed income, and could not justify denial of depreciation on that basis. Because those findings had attained finality, there was no surviving material to show that the regular assessments were erroneous and prejudicial to the Revenue on the same issues.

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Issues: Whether the Commissioner could invoke revisional jurisdiction under section 263 to disturb the regular assessments for the assessment years 1995-96 and 1996-97 on the basis of findings recorded in the block assessment, when the block assessment findings on the genuineness of the transactions had already attained finality.

Analysis: The revision notice and the revisional order rested substantially on the premise that the assessee's lease and buy-back transactions were sham and bogus, and therefore the deductions for margin money, hire management fee and depreciation had been wrongly allowed in the regular assessments. The block assessment proceedings, however, had already examined the same transactions and the appellate Tribunal, by majority, had held that the transactions were reflected in the books of account, did not give rise to undisclosed income, and that the assessee's claim to depreciation could not be denied on that footing. The Department did not challenge that outcome, and the findings had become final. In that backdrop, the Court held that the very foundation of the section 263 action had fallen away. Once the transactions were accepted as disclosed and genuine in the final block assessment proceedings, there was no surviving material to support the conclusion that the regular assessment orders were erroneous and prejudicial to the interests of the Revenue on those very issues.

Conclusion: The Commissioner had no material basis to exercise jurisdiction under section 263 to deny the deductions and depreciation granted in the regular assessments.

Final Conclusion: The revisional order could not be sustained, and the assessee succeeded in the appeals.

Ratio Decidendi: Where the revisional action under section 263 is founded on issues already concluded in final block assessment proceedings, and those findings negate the allegation of undisclosed or bogus transactions, the Commissioner cannot revise the regular assessment on the same basis without independent material showing error and prejudice to the Revenue.

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