Section 263 revision barred where Assessing Officer adopts a plausible view on debatable taxability of land acquisition interest.

Revisionary jurisdiction under section 263 cannot be exercised where the Assessing Officer, after reopening the assessment and making enquiry, accepts a plausible view on a debatable tax issue. The Tribunal noted that the officer examined the assessee's material and judicial authorities before accepting the claim that interest received under section 28 of the Land Acquisition Act on enhanced compensation was not taxable under section 10(37). As error and prejudice to the Revenue must both exist for section 263 to apply, the Commissioner could not revise the order merely because another view was possible. The revision was quashed and the assessee's position was upheld.

---

---

Issues: Whether the Principal Commissioner could invoke revisionary jurisdiction under section 263 on the ground that the Assessing Officer had accepted, after enquiry, the assessee's claim that interest received under section 28 of the Land Acquisition Act on enhanced compensation was not taxable under section 10(37) of the Income-tax Act.

Analysis: The Assessing Officer had reopened the assessment, examined the material and the assessee's judicial authorities, and then accepted the returned income. The disputed receipt related to interest on compensation/enhanced compensation under the Land Acquisition Act. The governing principle for revision under section 263 is that both error and prejudice to the Revenue must coexist. Where the Assessing Officer adopts one of two permissible views after enquiry, the order cannot be treated as erroneous merely because the Commissioner prefers another view. The issue of taxability of such interest was treated as debatable, and the Assessing Officer's view was regarded as a plausible one.

Conclusion: The revision under section 263 was not sustainable and was quashed. The issue was decided in favour of the assessee.

Ratio Decidendi: Section 263 cannot be invoked where the Assessing Officer, after enquiry, adopts a plausible view on a debatable issue, since an order is not erroneous and prejudicial to the interests of the Revenue merely because another view is possible.

---