Incriminating material requirement limits section 263 revision where an unabated section 153C assessment lacks search-based support.

In an unabated assessment under section 153C of the Income-tax Act, additions could be made only on the basis of incriminating material found or seized during the search. The Principal Commissioner's revision under section 263 failed because the order did not identify any specific incriminating material to justify the proposed addition, so the assessment could not be treated as erroneous and prejudicial to the interests of the Revenue. The revisional direction was therefore unsustainable and was set aside, with the assessee succeeding in appeal.

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Issues: Whether the Principal Commissioner was justified in revising the assessment under section 263 of the Income-tax Act, 1961 on the footing that the assessment under section 153C was erroneous and prejudicial to the interests of the Revenue despite the absence of incriminating material.

Analysis: The assessment year involved an unabated assessment under section 153C of the Income-tax Act, 1961. In such a case, additions can be made only on the basis of incriminating material found or seized during the search. The impugned revision order did not identify any specific incriminating material to support the proposed addition of Rs. 25 lakhs. In the absence of such material, the assessment could not be characterised as erroneous so as to invoke revision jurisdiction under section 263 of the Income-tax Act, 1961.

Conclusion: The revision order was held to be unsustainable and the ground challenging it was accepted in favour of the assessee.

Final Conclusion: The assessee succeeded in appeal and the revisional direction was set aside.

Ratio Decidendi: In an unabated search assessment under section 153C of the Income-tax Act, 1961, a revision under section 263 cannot be sustained unless the Revenue identifies incriminating material forming the basis of the proposed addition.

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