Section 263 revision fails where reassessment applies the governing tax scheme and mere disagreement cannot replace the Assessing Officer's view.

Revisional jurisdiction under section 263 was held unavailable where the reassessment order was passed after reopening, considered the assessee's submissions and judicial authorities, and applied section 44 with the First Schedule for life insurance business. The earlier assessment stood effaced by the reassessment, so the Commissioner could not insist that original disallowances be carried forward. Since section 263 requires the assessment order to be both erroneous and prejudicial to the Revenue on the basis of material on record, mere disagreement with the computation method or alleged inadequacy of enquiry was insufficient. The revisionary order was quashed.

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Issues: Whether revision under section 263 was justified on the ground that the reassessment order did not carry forward additions made in the original assessment and was allegedly passed without proper enquiry or verification.

Analysis: The reassessment was made after reopening on the basis of actuarial valuation and the Assessing Officer computed the income afresh by applying section 44 of the Income-tax Act, 1961 and the First Schedule applicable to life insurance business. The order under reassessment showed consideration of the statutory scheme, the assessee's submissions and judicial authorities. The earlier assessment had been effaced by the reassessment, and the view that the Assessing Officer was bound to retain the original disallowances was not accepted. For exercise of jurisdiction under section 263, the Commissioner had to establish both error and prejudice on the basis of material on record, and mere disagreement with the assessment approach or assertion of inadequate scrutiny was insufficient.

Conclusion: The revisionary order under section 263 was not justified and was liable to be quashed.

Ratio Decidendi: Section 263 can be invoked only when the assessment order is ially erroneous and prejudicial to the interests of the Revenue; where the Assessing Officer has made a fresh assessment after applying the governing statutory provisions and material on record, the Commissioner cannot substitute his view merely because he considers further enquiry or a different computation preferable.

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