Section 263 revision barred where section 14A disallowance was examined and accepted after enquiry, with no error shown.

Revisionary jurisdiction under section 263 could not be invoked where the Assessing Officer had examined the assessee's section 14A disallowance, issued queries, considered the accounts, and accepted the computation after enquiry. The Tribunal noted that section 14A(2) requires disallowance to be made with reference to the accounts and does not automatically require application of Rule 8D in every case. Because the Assessing Officer had taken a possible view on the material before him, the assessment order was not erroneous merely because the Principal Commissioner preferred a different Rule 8D computation. The revision order was therefore quashed.

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Issues: Whether revisionary jurisdiction under section 263 of the Income-tax Act, 1961 could be invoked where the Assessing Officer had examined the assessee's disallowance under section 14A and accepted it after enquiry.

Analysis: The assessee had furnished detailed workings for disallowance under section 14A, including interest attributable to investments and administrative s, and had also explained the treatment of borrowed funds and investments during the assessment proceedings. The record showed that the Assessing Officer had issued queries, considered the accounts, and accepted the assessee's computation after applying his mind. The Tribunal held that section 14A(2) permits disallowance having regard to the accounts and does not mandate automatic application of Rule 8D in every case. It further held that the assessment order could not be branded erroneous merely because the Principal Commissioner preferred a different computation under Rule 8D, especially when the view taken by the Assessing Officer was a possible view and the revenue had not demonstrated prejudice.

Conclusion: The invocation of section 263 was not justified and the revision order was liable to be quashed.

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