Revisional power under section 263 is limited when enquiry was made and one lawful view was taken on section 14A disallowance.

Section 263 revision cannot be used where the Assessing Officer had already raised queries and the assessee furnished details on investments, own funds, and the applicability of section 14A and Rule 8D; if one permissible view was taken after enquiry, the order is not revisable merely because it lacks elaborate discussion or a deeper enquiry is preferred. On that issue, the revision was unjustified and the assessment was restored for the assessee. The interest component on refund was accepted by the assessee and the revisional finding on that point was sustained, resulting in only partial relief.

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Issues: (i) whether the Principal Commissioner was justified in invoking revisional jurisdiction under section 263 on the ground that the assessment under section 143(3) was passed without proper enquiry into disallowance under section 14A and Rule 8D in relation to exempt dividend income; (ii) whether the interest component on refund received by the assessee was liable to be sustained in revision.

Issue (i): whether the Principal Commissioner was justified in invoking revisional jurisdiction under section 263 on the ground that the assessment under section 143(3) was passed without proper enquiry into disallowance under section 14A and Rule 8D in relation to exempt dividend income.

Analysis: Explanation 2 to section 263 deems an order to be erroneous and prejudicial where it is passed without making enquiries or verification that should have been made. On the record, the Assessing Officer had raised queries during scrutiny, and the assessee had replied by furnishing details of investments, sources of own funds, and explanations on the applicability of section 14A and Rule 8D. Once a permissible view had been taken after enquiry, revision could not be invoked merely because the order did not contain an elaborate discussion or because a different view was possible. The power under section 263 cannot be used to direct a fuller enquiry where relevant enquiries were in fact made.

Conclusion: the revision under section 263 on the issue of section 14A and Rule 8D was not justified and the assessment order was restored in favour of the assessee.

Issue (ii): whether the interest component on the refund received by the assessee was liable to be sustained in revision.

Analysis: The assessee fairly conceded that this component stood accepted. To that extent, the revisional findings were not disturbed.

Conclusion: the finding of the Principal Commissioner was upheld on the refund-interest component, in favour of the Revenue.

Final Conclusion: the revision order was set aside substantially, but the addition relating to interest on refund was sustained, resulting in a partial allowance of the appeal.

Ratio Decidendi: revisional power under section 263 can be exercised only when the assessment order is both erroneous and prejudicial to the interests of the Revenue, and it cannot be invoked merely because the Commissioner prefers a deeper inquiry where the Assessing Officer has already made enquiries and adopted one of the possible lawful views.

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