BIFR-sanctioned amalgamation and section 72A relief defeat revision where the assessment is not erroneous in law.

A BIFR-sanctioned amalgamation was treated as satisfying the conditions relevant to carry forward loss and unabsorbed depreciation under section 72A of the Income-tax Act, 1961, because the statutory interplay with section 32(2) of the Sick Industrial Companies (Special Provisions) Act, 1985 had already been accepted in the assessee's earlier case. On that basis, the Assessing Officer's allowance of the claim was not regarded as erroneous merely because the Revenue disagreed with it. Revision under section 263 was therefore unavailable, as that power requires both error and prejudice to the Revenue.

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Issues: Whether the Revenue could succeed in challenging the Tribunal's order allowing the assessee's claim to carry forward loss and unabsorbed depreciation arising from a BIFR-sanctioned amalgamation, and whether revision under section 263 of the Income-tax Act, 1961 was justified.

Analysis: The claim for carry forward of loss was linked to an amalgamation scheme sanctioned by the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985. In the assessee's own earlier case, the same statutory interplay between section 32(2) of the SICA and section 72A of the Income-tax Act, 1961 had already been examined, and it had been held that BIFR sanction implies satisfaction of the conditions relevant for section 72A. The Court treated that earlier decision as governing the controversy and held that the Assessing Officer's allowance of the claim could not be termed erroneous when it followed the Supreme Court's exposition on the effect of BIFR sanction. Since section 263 can be invoked only when the assessment order is both erroneous and prejudicial to the interests of the Revenue, the absence of error in law defeated the revision.

Conclusion: The challenge failed, and the assessee was entitled to retain the benefit of the claim allowed in assessment; the revision under section 263 was not sustainable.

Ratio Decidendi: Where a BIFR-sanctioned amalgamation attracts section 32(2) of the Sick Industrial Companies (Special Provisions) Act, 1985, the conditions underlying section 72A of the Income-tax Act, 1961 are treated as satisfied, and revision under section 263 cannot lie unless the assessment order is both erroneous and prejudicial to the Revenue.

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