Revision under Section 263 requires an unsustainable assessment view; a plausible view on cessation of liability cannot be revised.

Revision under Section 263 is available only where the assessment order is both erroneous and prejudicial to the Revenue. If the Assessing Officer adopts one of two plausible views, the order cannot be revised merely because the Commissioner prefers another view. On the facts, the liability arising from supply of forest produce had not been conclusively or irrevocably extinguished during the relevant previous year, given the continuing litigation and later settlement. Section 41(1) could therefore not be invoked on the footing that the trading liability had finally ceased, and the Commissioner's revisional jurisdiction was unjustified.

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Issues: Whether the Commissioner could invoke revisional jurisdiction under Section 263 of the Income-tax Act, 1961 to bring the sum of Rs.1,75,32,600 to tax under Section 41(1) of the Income-tax Act, 1961 on the footing that the assessee's trading liability had completely ceased during the previous year relevant to assessment year 1982-83.

Analysis: Revisional jurisdiction under Section 263 is available only where the assessment order is both erroneous and prejudicial to the interests of the Revenue. Where the Assessing Officer adopts one of two permissible views, the order cannot be treated as erroneous merely because the Commissioner prefers another view. On the facts, the liability arising from supply of forest produce was not conclusively extinguished by the Kerala High Court judgment striking down the notifications relating to eucalyptus. The litigation history showed continuing uncertainty, including fresh notifications, further writ proceedings, special leave proceedings, interim directions of the Supreme Court, and an eventual settlement. In that background, the view that there was no final or irrevocable cessation of liability during the relevant previous year was a possible view in law.

Conclusion: The Commissioner was not justified in exercising jurisdiction under Section 263, and Section 41(1) could not be invoked on the footing that the liability had finally ceased during the relevant previous year.

Ratio Decidendi: An assessment order cannot be revised under Section 263 merely because the Commissioner prefers a different plausible view on the timing of cessation of liability; revision lies only when the view taken by the Assessing Officer is unsustainable in law and the order is both erroneous and prejudicial to the Revenue.

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