Section 263 revision fails where deduction on cooperative bank interest is supported by binding precedent and assessment is not erroneous.

Delay of 166 days in filing the appeal was condoned because the assessee showed that the delay arose from mistaken legal advice and was not deliberate. Revision under section 263 was held unsustainable because the assessment on deduction of interest income from deposits with a cooperative bank under section 80P(2)(d) was supported by binding jurisdictional precedent, so the order could not be treated as both erroneous and prejudicial to the interests of revenue. The revisionary order was quashed.

---

---

Issues: (i) Whether the delay of 166 days in filing the appeal deserved condonation. (ii) Whether revision under section 263 of the Income-tax Act, 1961 was valid in respect of deduction claimed on interest income from a cooperative bank under section 80P(2)(d) of the Income-tax Act, 1961.

Issue (i): Whether the delay of 166 days in filing the appeal deserved condonation.

Analysis: The delay was attributed to a mistaken legal advice that the order under section 263 would be challenged only after a fresh assessment order, and the appeal was filed once the assessee obtained correct advice. The explanation showed absence of deliberate or intentional delay.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): Whether revision under section 263 of the Income-tax Act, 1961 was valid in respect of deduction claimed on interest income from a cooperative bank under section 80P(2)(d) of the Income-tax Act, 1961.

Analysis: The assessment order was sought to be revised only on the question of deduction of interest from deposits with a cooperative bank. The Tribunal noted that the assessee-society's claim was supported by jurisdictional High Court precedent holding that interest earned from deposits with a cooperative bank is eligible for deduction under section 80P(2)(d). In that view, the assessment order could not be treated as erroneous merely because it did not discuss the issue in detail, and the prerequisite twin conditions for revision were not satisfied.

Conclusion: The revisionary order under section 263 was not sustainable and was quashed in favour of the assessee.

Final Conclusion: The assessee succeeded both on the preliminary delay issue and on the challenge to the revisionary jurisdiction, resulting in restoration of the original assessment position.

Ratio Decidendi: Revision under section 263 cannot be sustained where the assessment is in accordance with binding jurisdictional precedent and the order is not shown to be both erroneous and prejudicial to the interests of revenue.

---