Section 263 revision barred where assessment followed binding precedent in force at the time, despite a later stay order.

An assessment completed under section 143(3) in accordance with the binding jurisdictional High Court decision prevailing on the date of the order could not be treated as erroneous or prejudicial to the revenue under section 263 merely because the Supreme Court later stayed that decision. Revisional jurisdiction must be assessed on the record and legal position existing when the assessment was made; a subsequent stay does not retrospectively alter that position or invalidate the Assessing Officer's reliance on then-binding law. The revision was therefore unsustainable, and the assessee succeeded.

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Issues: Whether the Commissioner could invoke revisional jurisdiction under section 263 on the ground that the Assessing Officer's assessment, made following the jurisdictional High Court's decision and before the Supreme Court's stay order, was erroneous and prejudicial to the interests of revenue.

Analysis: The assessment under section 143(3) was completed on the basis of the law then prevailing and the jurisdictional High Court decision was in force on that date. Revisional jurisdiction under section 263 must be tested on the record as it existed when the assessment order was passed. A subsequent stay of the High Court decision did not retrospectively render the earlier assessment erroneous, nor did it wipe out the earlier legal position. Since the Assessing Officer followed the binding law as it stood on the date of assessment, the order could not be treated as erroneous or prejudicial to the revenue merely because the Supreme Court later suspended the operation of the High Court decision.

Conclusion: The revision under section 263 was not sustainable and the assessee succeeded.

Ratio Decidendi: An assessment made in accordance with the law and binding precedent prevailing on the date of the assessment cannot be revised under section 263 merely because of a subsequent stay order; revisional power requires an order to be erroneous and prejudicial on the record as it stood when made.

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