Section 263 revision cannot reopen issues already deleted in appeal or travel beyond the show-cause notice.

Revision under section 263 was not sustainable where the assessment addition based on seized loose papers and estimated marketing income had already been deleted in appeal. The first appellate authority had found the papers unreliable and insufficient, so the same subject matter could not be reopened in revision under Explanation 1(c) to section 263. The revisional authority also went beyond the show-cause notice by directing fresh enquiries on matters not proposed in the notice, which could not support the exercise of revisional jurisdiction. On these facts, the assessment order was not shown to be erroneous and prejudicial to the interests of the revenue for section 263 purposes.

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Issues: Whether the Principal Commissioner was justified in invoking revisional jurisdiction under section 263 of the Income-tax Act, 1961 to set aside the assessment order when the addition had already been deleted in appeal and the revision travelled beyond the issues mentioned in the show-cause notice.

Analysis: The assessment had resulted in an addition based on seized loose papers and estimated marketing income. The first appellate authority had examined the materials, treated the loose papers as unreliable and insufficient, and deleted the addition. Once the very subject matter had been considered and decided in appeal, Explanation 1(c) to section 263 barred revision on those matters. The revisional authority also directed fresh enquiries on matters not covered by the show-cause notice, which could not sustain the revision. In these circumstances, the assessment order could not be said to be erroneous and prejudicial to the interests of the revenue for the purpose of section 263.

Conclusion: The invocation of section 263 was held unsustainable, and the revisional order was quashed in favour of the assessee.

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