Section 263 revision barred where life insurance income was computed under Section 44 after due examination of account aggregation.

Section 44 of the Income-tax Act, read with the First Schedule, governs computation of life insurance business income, and the distinction between policyholders' and shareholders' accounts does not, by itself, require separate tax treatment where the assessee is engaged only in life insurance. The Assessing Officer had examined the assessee's aggregation method, and prior Tribunal decisions supported that approach. On these facts, the Commissioner could not invoke section 263 merely because a different view was preferred. The assessment was not shown to be erroneous or prejudicial to the interests of the Revenue, so revisionary jurisdiction was unavailable.

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Issues: Whether the Commissioner was justified in revising the assessment under section 263 of the Income-tax Act, 1961 on the ground that the Assessing Officer erred in accepting the assessee's aggregation of policyholders' and shareholders' accounts in the computation of life insurance income.

Analysis: The assessee was engaged only in the business of life insurance and had explained before the Assessing Officer that the computation of income had to be made under section 44 of the Income-tax Act, 1961 read with the First Schedule. The record showed that the Assessing Officer had examined the method of aggregation adopted by the assessee. The issue had also been considered in prior Tribunal decisions dealing with life insurance business, where it was held that once section 44 applies, the distinction between policyholders' and shareholders' accounts does not justify separate tax treatment for the purpose of computing business income. On these facts, the assessment could not be characterised as unsustainable merely because the Commissioner preferred a different view.

Conclusion: The conditions for exercise of revisionary jurisdiction under section 263 were not satisfied, as the assessment order was neither erroneous nor prejudicial to the interests of the Revenue.

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