Revisional jurisdiction and pending appeals: revision needs objective material showing error and revenue prejudice before it can stand.

Section 263 revision is not barred merely because an appeal against the assessment is pending; the pendency of appellate proceedings does not, by itself, remove revisional jurisdiction. However, the Commissioner must still have objective material showing that the assessment order is both erroneous and prejudicial to the interests of the revenue. On the facts noted, the officer had followed the appellate and tribunal view on identical facts, and no sufficient basis was shown to disturb that approach. The consequential rejection of the Section 264 application, being founded on the revisional action, could not stand once the revision was treated as without jurisdiction.

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Issues: (i) Whether the Commissioner could invoke revisional power under Section 263 of the Income-tax Act, 1961, while an appeal against the assessment was pending before the Appellate Assistant Commissioner; (ii) Whether the conditions for action under Section 263, namely that the assessment order was erroneous and prejudicial to the interests of the revenue, were satisfied; (iii) Whether the consequential order rejecting the assessee's application under Section 264 could stand.

Issue (i): Whether the Commissioner could invoke revisional power under Section 263 of the Income-tax Act, 1961, while an appeal against the assessment was pending before the Appellate Assistant Commissioner?

Analysis: The revisional power under Section 263 is controlled by the language of the section itself. Its exercise is not excluded merely because an appeal lies or is pending against the assessment order. The existence of appellate jurisdiction does not, by itself, bar revision where the statutory conditions for revision are otherwise met.

Conclusion: The pendency of the appeal did not, by itself, bar action under Section 263.

Issue (ii): Whether the conditions for action under Section 263, namely that the assessment order was erroneous and prejudicial to the interests of the revenue, were satisfied?

Analysis: The power under Section 263 can be exercised only when the Commissioner has relevant material to conclude that the order is both erroneous and prejudicial to the revenue. Here, the Income-tax Officer had followed the appellate and tribunal view on identical facts, and no material was shown to establish that that view was wrong or that the officer acted on an erroneous basis. Mere disagreement with the tribunal's approach, especially when the assessee's point had already been accepted in earlier years on the same facts, was insufficient to sustain revision.

Conclusion: The statutory preconditions for revision were not satisfied.

Issue (iii): Whether the consequential order rejecting the assessee's application under Section 264 could stand?

Analysis: The rejection of the Section 264 application was founded on the revision proceedings under Section 263. Once the revisional action was found to be without jurisdiction, the consequential refusal to consider the Section 264 application could not be sustained. The earlier interim restraint also prohibited giving effect to the revision order.

Conclusion: The consequential order could not stand and was set aside.

Final Conclusion: The writ petition succeeded, the impugned revision notice and consequential action were quashed, and the Commissioner was directed to proceed in accordance with law on the Section 264 application.

Ratio Decidendi: Section 263 can be invoked only where the Commissioner has objective material to conclude that the assessment order is both erroneous and prejudicial to the interests of the revenue, and a pending appeal does not by itself supply or replace that jurisdictional basis.

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