Section 263 revision fails where section 115BBE treatment of surrendered income is debatable and one plausible view was taken.
Section 263 revision cannot be sustained where the Assessing Officer adopted one permissible view on the taxability of surrendered income under section 115BBE. The record showed that the income was already offered in the return, tax was paid, and no addition was made under sections 68 or 69. Because the applicability of the amended section 115BBE was treated as debatable, the assessment order could not be characterised as both erroneous and prejudicial to the interests of the Revenue. Revisional power cannot be used to substitute another view on a debatable issue.
Issues: Whether revisionary jurisdiction under section 263 of the Income-tax Act, 1961 could be invoked on the ground that the Assessing Officer did not apply section 115BBE to the surrendered income included in the return.
Analysis: The revision was founded on the view that the surrendered income ought to have been taxed at the higher rate under section 115BBE. The record showed that the surrendered amount was already offered in the return, taxes were paid, and no addition was made under sections 68 or 69. The applicability of the amended provision of section 115BBE to surrendered income in the facts of the case was treated as a debatable question. In such circumstances, the assessment order could not be branded as erroneous and prejudicial to the interests of the Revenue merely because another view was possible. The preconditions for section 263 require both error and prejudice, and revisional power cannot be used to replace one permissible view with another.
Conclusion: The invocation of section 263 was invalid and the revisionary order was liable to be quashed; the assessee succeeded.
Ratio Decidendi: Revisional jurisdiction under section 263 cannot be exercised on a debatable issue where the Assessing Officer has taken one of the possible views and the twin requirements of error and prejudice to the Revenue are not both satisfied.
TaxTMI 
AI Drafter ✕
TaxTMI 
