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Issues: Whether revision under section 263 of the Income-tax Act, 1961 was valid when the assessment had examined the receipt of interest on enhanced compensation and the Assessing Officer had taken a view that such receipt was exempt.
Analysis: The assessment records showed that specific queries were raised during scrutiny regarding the compensation and interest received on compulsory acquisition, and the assessee had explained that interest under section 28 of the Land Acquisition Act, 1894 formed part of enhanced compensation and was exempt. The Assessing Officer accepted that explanation while completing the assessment under section 143(3) of the Income-tax Act, 1961. The revisionary order was founded on the allegation of lack of enquiry and on the view that amended provisions such as section 56(2)(viii), section 57(iv) and section 145B(1) of the Income-tax Act, 1961 required taxation as income from other sources. The Tribunal held that there was enquiry, that the issue was at least debatable, and that the Assessing Officer's view was supported by the law then applied. It also held that reliance on the later High Court decision was misplaced on the facts, and that the conditions for invoking section 263 were not satisfied.
Conclusion: The revision under section 263 was not sustainable and the order setting aside the assessment was quashed, in favour of the assessee.
Ratio Decidendi: Section 263 cannot be invoked where the assessment order follows one of two possible views on a debatable issue and the record shows that the Assessing Officer made enquiries and applied a plausible legal view.
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