Section 263 revision fails where the Assessing Officer examined derivative loss adjustment against presumptive income and accepted the explanation.

Revisionary jurisdiction under section 263 could not be invoked where the Assessing Officer had examined the adjustment of derivative loss against presumptive income under section 44AD, raised queries, and accepted the assessee's explanation on the basis of replies and supporting material. On those facts, the assessment was not shown to be erroneous and prejudicial to the interests of the Revenue merely because the Principal Commissioner held a different view on permissibility of the adjustment. The revision was therefore held unsustainable and quashed.

---

---

Issues: Whether the Principal Commissioner was justified in exercising revisionary jurisdiction under section 263 to revise the assessment on the ground that derivative loss could not be adjusted against income computed under section 44AD.

Analysis: The assessment records showed that the Assessing Officer had raised queries on the adjustment of derivative loss against presumptive income and had accepted the assessee's explanation after considering the replies and supporting material. On that basis, the assessment could not be treated as erroneous and prejudicial to the interests of the Revenue merely because the Principal Commissioner held a different view on the permissibility of the adjustment. No justification was found for invoking revisionary powers in these circumstances.

Conclusion: The revision under section 263 was not sustainable and was quashed.

---