Revisionary power fails where assessment followed enquiry and the tax view taken was legally plausible.

Revision under section 263 was held unsustainable because the Assessing Officer had made enquiries on the charity and educational expenditure, examined the supporting material, and adopted a plausible view in the assessment. The same result followed on the capital gains issue: the transfer-related receipts were explained as advances, the claimed transfer of rights depended on prior sanction under the Maharashtra Public Trusts Act, and the possession relied upon was not possession in part performance of the relevant contract. As the assessment was made after enquiry and on a permissible view, the twin conditions for revision were not met and the assessee's appeal succeeded.

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Issues: (i) Whether the revision order under section 263 of the Income-tax Act, 1961 could be sustained on the allegation that the Assessing Officer had not made proper enquiries into the charity and educational expenditure claimed as application of income. (ii) Whether the revision order could be sustained on the allegation that capital gains had arisen on transfer of two plots of land in the relevant assessment year.

Issue (i): Whether the revision order under section 263 of the Income-tax Act, 1961 could be sustained on the allegation that the Assessing Officer had not made proper enquiries into the charity and educational expenditure claimed as application of income.

Analysis: The assessment record showed that the case was selected for limited scrutiny and the Assessing Officer had specifically called for details relating to charity expenses, educational expenses, salaries, donations and fixed assets. The assessee furnished replies, supporting statements and breakup details from time to time, including the expenditure towards objects of the trust and the salary components questioned in revision. The material on record indicated that the Assessing Officer had examined the details and taken a plausible view while completing the assessment under section 143(3) of the Income-tax Act, 1961. In such circumstances, the revisionary authority could not validly characterize the assessment as one made without enquiry.

Conclusion: The revision under section 263 on this ground was not sustainable and was decided in favour of the assessee.

Issue (ii): Whether the revision order could be sustained on the allegation that capital gains had arisen on transfer of two plots of land in the relevant assessment year.

Analysis: The record showed that this aspect also fell within the limited scrutiny parameters, namely mismatch in income or capital gain on sale of land or building. The assessee had explained that the amounts received were advances, that the relevant transfer of rights was subject to prior sanction of the Charity Commissioner under section 36(1) of the Maharashtra Public Trusts Act, 1950, and that such sanction was obtained only later. The consent terms were not registered, and the possession relied upon for invoking section 2(47)(v) of the Income-tax Act, 1961 was not possession in part performance of the very contract but possession arising from the earlier lease arrangement. The Assessing Officer had considered these materials and adopted a possible view that no taxable capital gain arose in the year under assessment. The twin conditions for section 263 were therefore not met.

Conclusion: The revision under section 263 on this ground was also not sustainable and was decided in favour of the assessee.

Final Conclusion: The revisionary order was unsustainable in law because the Assessing Officer had made enquiries on the relevant issues and had adopted a permissible view; the assessee's appeal consequently succeeded.

Ratio Decidendi: Section 263 cannot be invoked where the assessment order is passed after enquiry and the Assessing Officer has adopted one of the possible lawful views, and capital gains do not arise under section 2(47)(v) unless the transfer falls within the statutory requirements of part performance.

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