Validity of revision under section 263 and quashing of consequential assessment restores original assessment, revenue appeal dismissed

Revisionary jurisdiction under section 263 was challenged and the revision was quashed, which operated to restore the original assessment; consequent actions by the assessing authority framed as a final assessment under section 143(3) read with the revised exercise were held non-operative and were quashed as well. The Commissioners taxation of income from offshore supply under the special scheme for non-resident operations was treated as erroneous and prejudicial to the interests of revenue, but the appellate process resulted in the revenue appeal being dismissed and the pre-revision assessment position reinstated.

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Issues: Whether the Commissioner of Income-tax (Revisionary Authority) and the Assessing Officer's subsequent order under section 143(3) read with section 263 could be sustained where the revisionary order under section 263 was quashed by the Appellate Tribunal, and whether the Commissioner of Income-tax (Appeals) erred in quashing the assessment order by following the Tribunal's quashal of the section 263 order without deciding merits.

Analysis: The Tribunal had quashed the revisionary order under section 263 on the ground that the conditions for invoking section 263 were not fulfilled, noting absence of change in facts and absence of demonstration that the assessment order was erroneous and prejudicial to revenue. Where a revisionary order under section 263 is quashed by the Tribunal, a consequential order passed by the Assessing Officer pursuant to the quashed revisionary order loses operative effect. The Commissioner of Income-tax (Appeals) acted by applying the Tribunal's ruling and quashing the consequential assessment order passed under section 143(3) read with section 263. The legal framework includes the limits on revisionary powers under section 263, the requirement that an order be erroneous and prejudicial to revenue to sustain revision, and the effect of a Tribunal quashal on consequential proceedings.

Conclusion: The Commissioner of Income-tax (Appeals) correctly quashed the assessment order passed under section 143(3) read with section 263 by following the Tribunal's quashal of the section 263 order; the Revenue's appeal is dismissed and the outcome favors the assessee.

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