Section 263 revision unsustainable where proposed addition still qualified for Chapter VI-A deduction, leaving no real revenue prejudice.

Revision under section 263 was found unsustainable because the proposed disallowance of the NPA provision would only increase business income that remained deductible under section 80P(2)(a)(i). The ITAT Pune AT applied Circular No. 37/2016 and held that, where an assessment addition merely enhances income eligible for Chapter VI-A deduction, it causes no real prejudice to the revenue. The revisional direction was treated as an academic exercise and was set aside, with the assessee's appeal succeeding.

---

---

Issues: Whether revision under section 263 of the Income-tax Act, 1961 was sustainable in respect of disallowance of NPA provision of Rs. 42,51,668/-, where the resultant addition would still qualify for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: The addition proposed by the revisional authority would increase the assessee's business income, but that increased income would again be eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961. In the light of Circular No. 37/2016 dated 02-11-2016, additions made during assessment which enhance eligible income do not create any real tax prejudice where the deduction under Chapter VI-A remains available. On that basis, the revisional direction was treated as resulting only in an academic exercise and not as causing prejudice to the revenue.

Conclusion: The revision under section 263 of the Income-tax Act, 1961 was held unsustainable and was set aside; the issue was decided in favour of the assessee.

Final Conclusion: The assessee's appeal succeeded and the revisional order was annulled.

Ratio Decidendi: A revisional order under section 263 of the Income-tax Act, 1961 cannot be sustained where the proposed addition does not cause real revenue prejudice because the enhanced income remains deductible under the applicable Chapter VI-A provision.

---