CBDT circular limits cannot alone justify section 263 revision without an independent finding of unsustainable expenditure.

A CBDT circular limiting insurance commission deduction to Rs. 10,000 did not, by itself, justify revision of an assessment under section 263 where the assessee maintained no detailed accounts. The ITAT Jaipur held that such a circular was only a guideline for the assessing authority and could not override the statute or create an absolute bar on allowance beyond the stated limit. Because the Commissioner had recorded no independent finding that the expenditure claimed was unsustainable on the merits, the assessment was not shown to be erroneous and prejudicial to the Revenue. The revision order was therefore cancelled and the original assessment restored.

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Issues: Whether the Commissioner was justified in revising the assessment under section 263 of the Income-tax Act, 1961 on the basis that a CBDT circular restricted deduction on insurance commission to Rs. 10,000 where the assessee maintained no detailed accounts.

Analysis: The Tribunal held that the circular was only a guideline for the assessing authority and did not create an absolute prohibition against allowing expenditure beyond Rs. 10,000. It further noted that the Commissioner had not recorded any factual finding that the expenditure claimed by the assessee was unwarranted on the merits, but had proceeded solely on the basis of the circular. In the absence of such a finding, the assessment could not be treated as erroneous and prejudicial to the interests of the Revenue merely because the allowance exceeded the circular limit.

Conclusion: The revision order under section 263 was not sustainable and was cancelled; the issue was decided in favour of the assessee.

Final Conclusion: The assessment as originally made was restored and the assessee succeeded in the appeal.

Ratio Decidendi: A CBDT circular cannot by itself override the statute or justify revision unless the Commissioner independently finds that the allowance made in assessment is legally or ually unsustainable and prejudicial to the Revenue.

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