Section 263 revision barred where assessment followed enquiry and a possible view on gift of shares at nil consideration.

Section 263 revision is not sustainable where the assessment order follows enquiry and adopts a possible view on the same material. The assessee had disclosed the gift transfer of shares at nil consideration, explained the commercial rationale, and furnished supporting documents during assessment; the Assessing Officer raised queries, received replies, and considered the tax position, including the plea that a gift was not taxable and that capital gains computation would fail without consideration. On these facts, the revisional authority merely substituted a different view without showing lack of enquiry or any legally sustainable error prejudicial to revenue, so revision was held impermissible and the assessment order stood.

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Issues: Whether revisionary jurisdiction under section 263 of the Income-tax Act, 1961 was validly invoked on the ground that the assessment order was erroneous and prejudicial to the interests of the revenue in relation to the transfer of shares by way of gift at nil consideration.

Analysis: The assessee had disclosed the transfer of shares at nil consideration, explained the commercial rationale and produced the supporting materials before the Assessing Officer during the assessment proceedings. The record showed that the Assessing Officer had raised queries on the transaction, received replies, and considered the legal position, including the plea that a transfer by way of gift was not taxable and that, in any event, the computation mechanism for capital gains would fail where no consideration was received. On these facts, the revision order was based on a different view of the same material and did not establish absence of enquiry or any legally sustainable error in the assessment order. The conditions for section 263 jurisdiction had to coexist, and a mere substitution of view on an examined issue could not justify revision.

Conclusion: The invocation of section 263 was not justified and the revisional order was liable to be set aside in favour of the assessee.

Final Conclusion: The assessment could not be revised under section 263 on the facts found, as the Assessing Officer had conducted enquiry and adopted a permissible view on the tax treatment of the gift of shares.

Ratio Decidendi: Section 263 cannot be invoked where the assessment order is based on enquiry and a possible view, and revision is impermissible merely because the revisional authority prefers a different conclusion on the same material.

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