Court rules Commissioner lacked authority to revise tax decision; penalty dismissed due to upheld deductions.

The court held that the Commissioner was not justified in invoking revisional jurisdiction under Section 263 for disallowance under Section 80-IB of the Income Tax Act. Once the order passed by the Commissioner of Income Tax (Appeals) was upheld by the Tribunal, the Commissioner had no authority to initiate proceedings under Section 263. Consequently, since deductions under Sections 80IA and 80IB were permitted and upheld by the Tribunal, the penalty proceedings under Section 271(1)(c) were dismissed due to lack of basis.

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Issues: (i) Whether the Commissioner could invoke revisional jurisdiction under Section 263 after the disallowance relating to deduction under Section 80IA/80IB had been examined and decided in appeal; (ii) Whether the penalty under Section 271(1)(c) could survive once the underlying deduction issue stood upheld in appeal.

Issue (i): Whether the Commissioner could invoke revisional jurisdiction under Section 263 after the disallowance relating to deduction under Section 80IA/80IB had been examined and decided in appeal.

Analysis: The disallowance made by the Assessing Officer was challenged before the Commissioner (Appeals), and the Revenue's further appeal on the same disallowance was dismissed by the Tribunal on merits. Once the appellate authority and the Tribunal had examined the very items of disallowance and affirmed the assessee's entitlement, the earlier assessment order stood merged in the appellate order. In such a situation, revisional action under Section 263(1)(c) was unavailable, as the matter had already been considered and decided in appeal.

Conclusion: The invocation of Section 263 was invalid and the answer was in favour of the assessee.

Issue (ii): Whether the penalty under Section 271(1)(c) could survive once the underlying deduction issue stood upheld in appeal.

Analysis: The penalty order was consequential to the revisional disallowance. Since the deduction claim under Section 80IA/80IB had already been upheld in appeal, there remained no basis to sustain concealment penalty on the same items. The penalty could not stand independently of the failed revisional action and the affirmed allowance of deduction.

Conclusion: The penalty under Section 271(1)(c) could not be sustained and the answer was in favour of the assessee.

Final Conclusion: The revisional order under Section 263 and the consequential penalty order were both held unsustainable, and both appeals were dismissed.

Ratio Decidendi: Where the appellate authority and the Tribunal have already considered and decided the very issue on merits, the assessment order merges in the appellate order and revisional jurisdiction under Section 263 cannot be invoked on that issue; a penalty that is merely consequential to such disallowed revision also cannot survive.

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