Section 263 revision requires error and revenue prejudice, while construction activity may qualify for investment allowance but not industrial company status.

A construction company was treated as entitled to investment allowance under section 32A(2)(b)(iii) because building construction was regarded as falling within the statutory expression covering the construction of an article or thing. However, the same activity did not make the assessee an industrial company for concessional tax purposes, as construction of buildings was held not to satisfy the statutory test of manufacture or processing of goods. On revisional jurisdiction, section 263 could not be invoked where the assessment produced no revenue prejudice, and it was also barred where the assessment had merged with the appellate order or where relief had been granted in accordance with section 144B directions.

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Issues: (i) Whether a construction company was entitled to investment allowance under section 32A(2)(b)(iii). (ii) Whether the assessee-company carrying on construction activity was an industrial company entitled to concessional tax rate. (iii) Whether, for assessment year 1979-80, revision under section 263 could be sustained when the assessed income remained nil and there was no tax effect. (iv) Whether, for assessment year 1978-79, revision under section 263 was barred by merger of the assessment order with the appellate order and by the fact that investment allowance had been granted pursuant to directions under section 144B.

Issue (i): Whether a construction company was entitled to investment allowance under section 32A(2)(b)(iii).

Analysis: The provision was applied in the light of Tribunal decisions holding that construction activity falls within the expression relating to construction of an article or thing for the purpose of investment allowance. The business of constructing buildings was treated as covered by the statutory language, and the contrary view was not accepted.

Conclusion: The assessee was entitled to investment allowance and the revision on this point was not sustainable.

Issue (ii): Whether the assessee-company carrying on construction activity was an industrial company entitled to concessional tax rate.

Analysis: The definition of industrial company was read as confined to the statutory expressions governing that status, and construction of buildings was held not to satisfy the relevant test. Binding High Court authority was followed, and the company was held not to fall within the category of manufacture or processing of goods for this purpose.

Conclusion: The assessee-company was not an industrial company and the Commissioner was justified on this aspect.

Issue (iii): Whether, for assessment year 1979-80, revision under section 263 could be sustained when the assessed income remained nil and there was no tax effect.

Analysis: Although the original assessment was held erroneous on the two points examined, the withdrawal of investment allowance would not alter the assessed total income because the corresponding Chapter VIA adjustment would keep the net income at nil. In the absence of any revenue prejudice, the statutory condition for revision was not satisfied.

Conclusion: Revision under section 263 was not permissible for assessment year 1979-80.

Issue (iv): Whether, for assessment year 1978-79, revision under section 263 was barred by merger of the assessment order with the appellate order and by the fact that investment allowance had been granted pursuant to directions under section 144B.

Analysis: The assessment order was treated as having merged with the appellate order, and the revisional power could not be exercised thereafter. Independently, relief granted in accordance with directions under section 144B was also held outside the revisional reach on the facts presented.

Conclusion: Revision under section 263 was not permissible for assessment year 1978-79.

Final Conclusion: The revisional order was set aside for assessment years 1978-79 and 1979-80, while the challenge succeeded only in part for assessment year 1980-81 because the assessee failed on the industrial company issue.

Ratio Decidendi: Revision under section 263 cannot be sustained unless the assessment order is both erroneous and prejudicial to the interests of the revenue, and revisional jurisdiction is also excluded where the assessment has merged with an appellate order or where the relief was granted pursuant to binding section 144B directions.

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