Section 263 revision cannot override BIFR-sanctioned amalgamation benefits when section 72A conditions are deemed satisfied.

Section 263 revision requires an order to be both erroneous and prejudicial to the interests of the Revenue, and that jurisdiction cannot be invoked merely because the assessment order is brief. In an amalgamation sanctioned by the BIFR under the Sick Industrial Companies (Special Provisions) Act, section 32(2) brings section 72A of the Income-tax Act into play with the BIFR exercising the relevant approval function. The legal position, as reflected in Supreme Court authority, is that such sanction implies satisfaction of the conditions ordinarily required under section 72A. On that basis, allowance of carry forward and set-off of losses in the assessment could not be treated as an erroneous order for revision purposes.

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Issues: Whether the Commissioner could invoke revisionary jurisdiction under section 263 of the Income-tax Act, 1961 to revise the assessment order allowing carry forward and set-off of losses under section 72A in the case of an amalgamation sanctioned by the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: The claim for carry forward of losses arose from a scheme of amalgamation sanctioned by the BIFR in proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985. Section 32(2) of that Act provides that where a sick industrial company is amalgamated under a scheme sanctioned under the Act, section 72A of the Income-tax Act, 1961 applies to such amalgamation with the modification that the power otherwise exercised by the Central Government is exercised by the BIFR. The Court relied on the Supreme Court's exposition that sanction of such a scheme necessarily implies satisfaction of the conditions that would otherwise be required under section 72A. On that basis, the Assessing Officer's allowance of the claim could not be treated as erroneous merely because the assessment order was brief or unreasoned. For section 263 to apply, the order must be both erroneous and prejudicial to the interests of the Revenue, and both conditions must co-exist. Since the Assessing Officer had followed the binding legal position flowing from the Supreme Court decision on the effect of BIFR sanction, the jurisdictional requirement for revision was absent.

Conclusion: The invocation of section 263 was unsustainable and the assessee's entitlement to carry forward and set off the losses was upheld.

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