Delhi ITAT sets aside Section 263 revision order where assessing officer examined share premium

The Delhi bench of the Income Tax Appellate Tribunal adjudicated a dispute involving tax revision proceedings initiated under Section 263 of the Income Tax Act. The tribunal ruled in favor of the taxpayer, setting aside the revision order after establishing that the assessing officer had previously examined the issue of share premium during the original scrutiny assessment. The bench noted that a revision order cannot be sustained merely because the commissioner holds a different view on an issue already verified by the assessing officer. Under Indian tax jurisprudence, Section 263 empowers the principal commissioner or commissioner to revise an assessment order if it is considered erroneous and prejudicial to the interests of the revenue.

However, judicial precedents consistently establish that twin conditions must be satisfied: the order must be erroneous, and it must cause prejudice to revenue. If an assessing officer makes a conscious inquiry and adopts one of two permissible legal views, the assessment cannot be labeled erroneous simply because a higher authority prefers an alternative investigation path. Tax professionals handling audit disputes should review assessment records to verify whether contested issues underwent proper examination during original scrutiny proceedings.

When drafting appeals against Section 263 notices, practitioners must highlight prior inquiries conducted by assessing officers to establish that orders are neither erroneous nor prejudicial. Ensuring meticulous documentation of assessment proceedings safeguards corporate taxpayers from repeated scrutiny on settled matters.