Section 263 revision fails where no finding is recorded on both error and revenue prejudice, and silence to notice is not enough.

Revision under section 263 requires the revisional authority to record a clear, reasoned finding that the assessment order is both erroneous and prejudicial to the interests of the Revenue. Mere reproduction of the show-cause notice, or the assessee's non-response to it, does not satisfy this jurisdictional test or replace a merits-based determination. As the impugned order failed to contain the necessary twin findings, the revisionary order was held unsustainable and was set aside, leaving the assessment undisturbed in favour of the assessee.

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Issues: Whether the revisionary order under section 263 of the Income-tax Act, 1961 was sustainable when it did not record a clear finding that the assessment order was erroneous and prejudicial to the interests of the Revenue, and whether non-response to the show-cause notice by the assessee by itself could justify revision.

Analysis: The revisional authority had substantially reproduced the show-cause notice but had not returned a categorical finding on the twin jurisdictional requirements of error and prejudice. The exercise of jurisdiction under section 263 requires both conditions to coexist before the assessment can be revised. Mere absence of a reply to the show-cause notice does not dispense with the statutory duty to record findings on merits. Since the impugned order lacked such findings, the revision could not be sustained.

Conclusion: The revision under section 263 was held unsustainable and was set aside in favour of the assessee.

Final Conclusion: The appellate tribunal annulled the revisionary directions and allowed the assessee's appeal.

Ratio Decidendi: Section 263 jurisdiction can be exercised only where the revisional authority records a reasoned finding that the assessment order is both erroneous and prejudicial to the interests of the Revenue; non-compliance with the show-cause notice alone is insufficient.

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