Revision power under Section 263 invalid where no exemption was granted; taxpayer relief granted and computation rectifiable under Section 154.

The article examines whether a revision under Section 263 was valid where the assessing officer had in substance denied exemption under Section 11 but the tax computation sheet still recorded the assessee's Section 11 computation. It applies the legal standard that revision requires an assessment order to be both erroneous and prejudicial to revenue, and finds that anomaly in the computation is remediable under the rectification provision rather than by revision. Conclusion: the revision is unsustainable and is set aside, with the computation error open to correction under rectification procedure.

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Issues: Whether the revision order under Section 263 of the Income-tax Act, 1961 was valid in view of the Assessment Officer not granting exemption under Section 11 of the Income-tax Act, 1961.

Analysis: The assessment record shows the AO held that the assessee was not eligible for exemption under Section 11 and excluded receipts/expenditure covered by the mutuality principle, while the tax computation sheet nevertheless incorporated the assessee's claimed Section 11 computation, creating confusion. The revision under Section 263 was premised on an alleged grant of exemption under Section 11; however the body of the assessment order evidences no such grant. The tax computation anomaly is amenable to rectification under Section 154 of the Income-tax Act, 1961. The revision power under Section 263 requires the assessment order to be erroneous and prejudicial to the interests of revenue, which is not established where no exemption was in fact allowed in the assessment order.

Conclusion: The revision order under Section 263 is not sustainable and is set aside; the assessee's appeal is allowed.

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