Advance ruling binding effect prevents section 263 revision when the Assessing Officer follows the assessee's own ruling.

An advance ruling rendered in an assessee's own case binds the Revenue, the Commissioner and subordinate tax authorities only for the transaction for which it was sought, and it can be displaced only through the statutory mechanism or on a change in law or facts. A later ruling in another matter cannot override that binding effect. Where the Assessing Officer has followed the applicable advance ruling, the order cannot be treated as erroneous or prejudicial to the Revenue merely because the Commissioner prefers a different view. Revisional action under section 263 on that basis is therefore without jurisdiction and cannot be sustained.

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Issues: (i) Whether an advance ruling rendered by the Authority for Advance Rulings in the assessee's own case continued to bind the Revenue for the relevant assessment years and could be displaced by a later ruling in another case; and (ii) whether the Commissioner could invoke revisional jurisdiction under section 263 of the Income-tax Act, 1961 on the basis of that later ruling.

Issue (i): Whether an advance ruling rendered by the Authority for Advance Rulings in the assessee's own case continued to bind the Revenue for the relevant assessment years and could be displaced by a later ruling in another case.

Analysis: The binding effect of an advance ruling is confined by statute to the applicant, the Commissioner and the subordinate income-tax authorities, and only in relation to the transaction for which the ruling was sought. The ruling can be displaced only in the manner provided by law, including where there is a change in law or facts, or where the ruling is declared void in accordance with the statutory mechanism. A later ruling in another matter cannot override the binding effect of the ruling already rendered in the assessee's own case.

Conclusion: The earlier ruling in the assessee's own case continued to bind the Revenue and was not displaced by the later ruling in another case.

Issue (ii): Whether the Commissioner could invoke revisional jurisdiction under section 263 of the Income-tax Act, 1961 on the basis of that later ruling.

Analysis: The Assessing Officer had followed a binding advance ruling. An order giving effect to a binding ruling cannot be treated as erroneous or prejudicial to the interests of the Revenue merely because the Commissioner prefers a different view based on another ruling. The revisional power cannot be used to disregard a statutory command that binds the subordinate authorities, and the impugned notice therefore rested on an improper assumption of jurisdiction.

Conclusion: The invocation of section 263 was improper and the notice was liable to be quashed.

Final Conclusion: The statutory binding force of the assessee's own advance ruling prevailed, the revisional notice lacked jurisdictional foundation, and the assessee succeeded in having the impugned action set aside.

Ratio Decidendi: An advance ruling binds the specified parties only in relation to the transaction for which it is sought, and a revisional authority cannot invoke section 263 merely because it prefers a later ruling in another case when the Assessing Officer has followed the binding ruling applicable to the assessee.

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