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Issues: Whether the Commissioner was justified in invoking revisionary jurisdiction under section 263 of the Income-tax Act, 1961 on the ground that the assessment order was erroneous and prejudicial to the interests of the Revenue, despite enquiries having been made and one possible view having been adopted by the Assessing Officer.
Analysis: The conditions for revision under section 263 are cumulative. The order must be both erroneous and prejudicial to the interests of the Revenue. An order is not erroneous merely because the Commissioner prefers a different view. Where the Assessing Officer has examined the claim, sought details, and adopted one of the possible views on allowability of expenditure, the assessment cannot be treated as erroneous unless the view taken is unsustainable in law. The record showed enquiry by the Assessing Officer into the nature of receipts, expenses, and the business claim, and the Commissioner did not establish any unsustainable application of law or lack of inquiry.
Conclusion: The invocation of section 263 was not justified and the revisional order was liable to be quashed.
Ratio Decidendi: Revision under section 263 can be sustained only when the assessment order is both erroneous and prejudicial to the Revenue; where the Assessing Officer has made enquiry and adopted one of the possible views, the Commissioner cannot substitute his own view in revision.
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