Section 263 revision cannot rest only on choosing the wrong penalty provision when no prejudicial assessment error is shown.

Revision under section 263 could not be sustained merely because the Assessing Officer initiated penalty proceedings under section 270A instead of section 271(1)(c). The Tribunal noted that section 263 requires a demonstrable error in the assessment order causing prejudice to Revenue, and the record showed that penalty proceedings had already been initiated; the dispute was only about the applicable penalty provision. That choice, by itself, did not render the assessment order erroneous and prejudicial. The revision order was therefore unsustainable, with reference also made to the hearing safeguard in section 275.

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Issues: Whether revision under section 263 of the Income-tax Act, 1961 could be sustained solely on the ground that the Assessing Officer had initiated penalty proceedings under section 270A instead of section 271(1)(c), and whether the assessment order could be treated as erroneous and prejudicial to the interests of Revenue on that basis.

Analysis: The revisionary jurisdiction under section 263 requires a demonstrable error in the assessment order that causes prejudice to Revenue. The record showed that penalty proceedings had already been initiated, and the controversy was only about the provision under which such proceedings were to be invoked. The Tribunal held that this choice of penalty provision could not, by itself, render the assessment order erroneous in so far as it was prejudicial to the interests of Revenue. Reference was also made to the statutory safeguard under section 275 regarding opportunity of being heard in penalty matters.

Conclusion: The invocation of section 263 was not justified, and the revision order was unsustainable. The issue was decided in favour of the assessee.

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