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Issues: (i) Whether revision under section 263 was valid where the assessment orders were passed in block assessment proceedings after following binding directions under section 144A and on the basis of material such as information from the District Industries Centre. (ii) Whether investments in household assets could be treated as undisclosed income so as to sustain revision under section 263.
Issue (i): Whether revision under section 263 was valid where the assessment orders were passed in block assessment proceedings after following binding directions under section 144A and on the basis of material such as information from the District Industries Centre.
Analysis: The power under section 263 can be exercised only when the assessment order is both erroneous and prejudicial to the interests of the Revenue. An order passed by the Assessing Officer in accordance with binding directions issued by the superior authority under section 144A cannot ordinarily be treated as erroneous. The existence of material such as different figures furnished to the District Industries Centre, by itself, did not establish that the assessment orders were unsustainable in law or that the Assessing Officer had failed to apply the law to the material on record in a manner permitting revision.
Conclusion: The revision on this ground was not justified and was against the assessee.
Issue (ii): Whether investments in household assets could be treated as undisclosed income so as to sustain revision under section 263.
Analysis: The household investments had been explained by the assessee with supporting cash-flow statements and the sources had been reflected in earlier years. In block assessment proceedings, additions can be made only in respect of undisclosed income, and items already disclosed or accepted in earlier years do not automatically become block-period undisclosed income. Where the addition itself was not legally permissible, the omission to make such addition could not render the assessment order erroneous for section 263 purposes.
Conclusion: The revision on this ground was not justified and was against the assessee.
Final Conclusion: The Commissioner lacked valid jurisdiction to revise the assessment orders, and the orders under section 263 were liable to be cancelled.
Ratio Decidendi: Revision under section 263 is permissible only when the assessment order is demonstrably erroneous in law and prejudicial to the Revenue, and an order passed on binding superior directions or one that omits an addition not legally permissible cannot be revised on a mere difference of opinion.
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