Section 263 revision fails where the Assessing Officer made enquiry and adopted one plausible view on compensation-related interest.

Section 263 revision was held unsustainable because the Assessing Officer had examined the receipt of enhanced compensation and interest under the Land Acquisition Act, considered the assessee's reply, and adopted one plausible view. The revisional jurisdiction can be exercised only when the assessment order is both erroneous and prejudicial to the Revenue; where enquiry has been made and a debatable tax treatment issue is decided on one of the possible views, revision is not justified. The assessment was therefore not vitiated by lack of enquiry or non-application of mind, and the assessee succeeded.

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Issues: Whether the revisional order under section 263 of the Income-tax Act, 1961 was valid when the Assessing Officer had examined the receipt of enhanced compensation and interest under the Land Acquisition Act, 1894 and had taken a plausible view on exemption.

Analysis: The assessment record showed that the Assessing Officer had called for details, considered the assessee's reply and examined the tax treatment of enhanced compensation and interest received under the Land Acquisition Act, 1894. The revisional power under section 263 can be invoked only where the assessment order is both erroneous and prejudicial to the interests of the Revenue. Where the Assessing Officer has conducted enquiry and adopted one of the possible views, the order cannot be revised merely because the Principal Commissioner prefers another view. The issue regarding taxability of interest linked to enhanced compensation was treated as a debatable issue, and the assessment could not be said to suffer from lack of enquiry or lack of application of mind.

Conclusion: The revisional order was not sustainable and the assessee succeeded.

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