Section 263 revision fails where exemption claimed under the wrong provision causes no prejudice to the Revenue.

Revision under section 263 was held unsustainable where the assessment allowed exemption under section 10B although the assessee said the correct claim was under section 10A. The assessment could be treated as erroneous for applying the wrong provision, but section 263 requires both error and prejudice to the Revenue. As the record did not show ineligibility for section 10A, and the deduction amount would have remained the same if examined under the correct provision, the Commissioner was required to verify eligibility under section 10A before finding prejudice. The twin statutory conditions for revision were therefore not satisfied.

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Issues: Whether the Commissioner was justified in invoking revisionary jurisdiction under section 263 of the Income-tax Act, 1961 where the assessment allowed exemption under section 10B though the assessee claimed that the correct relief was under section 10A and the claim under the wrong section was inadvertent.

Analysis: The assessment could be regarded as erroneous because exemption had been allowed under a different provision from the one said to be applicable. However, the essential requirement for revision under section 263 is that the order must be both erroneous and prejudicial to the interests of the Revenue. The record did not contain a finding that the assessee was ineligible for relief under section 10A, and the amount of deduction would have remained the same if the claim had been examined under the correct provision. In these circumstances, the Commissioner was required to examine eligibility under section 10A before concluding that the assessment caused prejudice to the Revenue.

Conclusion: The invocation of section 263 was not sustainable because the twin statutory conditions were not satisfied.

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