Section 263 revision fails when assessment follows binding jurisdictional precedent, despite later Supreme Court clarification.

Revision under section 263 was held unsustainable where the Assessing Officer had completed the assessments in line with the then-binding jurisdictional High Court ruling in AIMIL Ltd. on employees' PF/ESI contributions. The later Supreme Court ruling in Checkmate Services did not justify treating the earlier assessment as erroneous or prejudicial for revision purposes. The absence of a specific query in the section 142(1) notice did not, by itself, show non-application of mind. Explanation 2 to section 263 was also inapplicable because the assessment order had followed the prevailing jurisdictional precedent.

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Issues: Whether the revisionary orders under section 263 of the Income-tax Act, 1961 could be sustained where the Assessing Officer had completed the assessments in accordance with the then-prevailing jurisdictional High Court view and the issue of disallowance of employees' PF/ESI contributions was later considered by the Supreme Court.

Analysis: The assessments were completed before the decision in Checkmate Services (P) Ltd. and, on the relevant dates, the jurisdictional High Court decision in AIMIL Ltd. governed the field. The Assessing Officer was bound to follow that binding precedent, and the absence of a specific query in the notice under section 142(1) did not by itself establish non-application of mind. Revision under section 263 cannot be sustained on a debatable issue, and Explanation 2 to section 263 does not apply where the assessment order followed the decision of the jurisdictional High Court then holding the field.

Conclusion: The invocation of section 263 was invalid and the revisionary orders were unsustainable.

Ratio Decidendi: An assessment order cannot be treated as erroneous and prejudicial to the interests of the Revenue under section 263 when the Assessing Officer has followed the binding jurisdictional High Court view applicable at the time of assessment, even if the law is later clarified differently by the Supreme Court.

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