Section 263 revision cannot stand when the Assessing Officer adopts one of two legally permissible views on scrutiny.

The HC held that revision under section 263 could not be sustained where the Assessing Officer had examined the capital gains and property-income treatment on scrutiny and adopted one of the legally permissible views. The Tribunal was in finding that the Commissioner's revisionary assumption rested on an incorrect reading of the record and that the assessment order was not shown to be both erroneous and prejudicial to the interests of the Revenue. A mere possibility of a different view was insufficient to justify revision, and no perversity or legal error was found in the Tribunal's conclusion.

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Issues: Whether the Tribunal was justified in setting aside the Commissioner's order under section 263 of the Income-tax Act, 1961 on the ground that the assessment order was not erroneous insofar as it was prejudicial to the interests of the Revenue.

Analysis: The assessment was completed under section 143(3) after scrutiny of the assessee's claim relating to capital gains and the treatment of the property sold. The Tribunal found that the Assessing Officer had examined the relevant records, including the portion of the building on which depreciation had been claimed and the treatment of the balance as income from house property, and had adopted one of the permissible views in law. It further held that the Commissioner's assumption of revisionary power was based on an incorrect understanding of the record and was unsupported by the material before him. The High Court accepted that view and found no perversity or legal error in the Tribunal's conclusion.

Conclusion: The Tribunal was right in holding that the Commissioner could not invoke section 263 merely because a different view was possible, since the assessment order was not shown to be both erroneous and prejudicial to the interests of the Revenue.

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