Revision under section 263 fails when the Assessing Officer has made enquiries and taken a plausible view on examined claims.
Revision under section 263 is not sustainable where the Assessing Officer has made enquiries, examined replies and records, and adopted a plausible view. On the dividend tax credit claim under the India-Oman DTAA read with section 90, the Tribunal noted detailed questionnaires, consideration of the assessee's explanations, and consistent acceptance in earlier years, so a different view by the Principal Commissioner could not justify revision. On capitalisation of interest and the proviso to section 36(1)(iii), the Tribunal found that fixed assets, work-in-progress, borrowings and accounts were examined, and further inquiry could not by itself support revision. The assessment revision was therefore quashed.
Issues: (i) Whether the Principal Commissioner was justified in invoking revisionary jurisdiction under section 263 of the Income-tax Act, 1961 on the ground that the Assessing Officer had not properly examined the assessee's claim of tax credit on dividend income under the India-Oman DTAA read with section 90 of the Income-tax Act, 1961; (ii) whether revision under section 263 was sustainable on the ground that the Assessing Officer had not examined capitalisation of interest and the applicability of the proviso to section 36(1)(iii) of the Income-tax Act, 1961.
Issue (i): Whether the Principal Commissioner was justified in invoking revisionary jurisdiction under section 263 of the Income-tax Act, 1961 on the ground that the Assessing Officer had not properly examined the assessee's claim of tax credit on dividend income under the India-Oman DTAA read with section 90 of the Income-tax Act, 1961.
Analysis: The record showed that the Assessing Officer had issued detailed questionnaires and had examined the claim of tax credit in the light of the assessee's replies, the DTAA provisions, and the earlier consistent treatment accepted in preceding years. The Tribunal also relied on the binding outcome in the assessee's own earlier year, where identical revisionary action had been quashed, and the jurisdictional High Court had affirmed that detailed enquiries were made and that the Assessing Officer had adopted a plausible view. On those facts, the order could not be characterised as erroneous merely because the Principal Commissioner preferred a different view.
Conclusion: The revision on this issue was not sustainable and was against the Revenue.
Issue (ii): Whether revision under section 263 was sustainable on the ground that the Assessing Officer had not examined capitalisation of interest and the applicability of the proviso to section 36(1)(iii) of the Income-tax Act, 1961.
Analysis: The Tribunal noted that the Assessing Officer had examined the fixed assets, capital work in progress, borrowings, annual accounts, and the assessee's accounting policy before completing the assessment. The jurisdictional High Court in the assessee's earlier year had already held that detailed enquiries were made and that, in the presence of sufficient interest-free funds and a consistent accounting treatment, the revisionary order could not stand. Following that binding decision, the Tribunal held that the assessment order could not be revised merely because the Principal Commissioner considered a further inquiry desirable.
Conclusion: The revision on this issue was not sustainable and was against the Revenue.
Final Conclusion: The Tribunal held that the conditions for exercise of jurisdiction under section 263 were not satisfied on either of the substantive issues, and the assessment revision was quashed.
Ratio Decidendi: Revision under section 263 cannot be sustained where the Assessing Officer has made enquiries, applied mind, and adopted a plausible view, especially when the issue has been consistently accepted in earlier years and the proposed revision is based only on a different possible view of the evidence.