Section 263 revision fails where the Assessing Officer adopts a plausible TDS view on a debatable payment classification issue.

Section 263 revision was unsustainable where the Assessing Officer had adopted a plausible view on the TDS treatment of external development charges paid to HUDA. The Tribunal noted that the payment classification under section 194I versus section 194C was debatable, the issue was already pending in appeal, and the later High Court ruling relied on by the revisional authority had been stayed. On the record then available, the Assessing Officer's view was a possible view and the Revenue also failed to establish prejudice, since the rate applied was higher than the section 194C rate. The revisional order was quashed.

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Issues: Whether the revisionary order under section 263 of the Income-tax Act, 1961, could be sustained in relation to tax deduction at source on external development charges paid to HUDA, where the Assessing Officer had proceeded under section 194I and the revisional authority held that section 194C applied.

Analysis: The dispute turned on the character of the payment to HUDA and the applicable TDS provision. The Assessing Officer had passed the order under section 201/201(1A) after examining the material and treating the payment as falling under section 194I. The revisional authority relied on a later High Court ruling to hold that section 194C applied, and thereby invoked section 263. The Tribunal noted that the issue was already pending in appeal before the first appellate authority, that the legal position was still debatable in view of the stay of the later High Court ruling, and that the Assessing Officer's view was a possible view on the record as it then stood. It also noted that the rate applied by the Assessing Officer was higher than the rate under section 194C, so prejudice to the Revenue was not established.

Conclusion: The invocation of section 263 was unsustainable and the revisional order was quashed.

Final Conclusion: The assessees succeeded in all connected appeals, and the revisionary interference with the Assessing Officer's order was set aside.

Ratio Decidendi: Section 263 cannot be invoked where the Assessing Officer has taken a plausible view on a debatable issue on the basis of the record available at the time, and the Revenue fails to show both error and prejudice.

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