Revision under section 263 cannot stand where the Assessing Officer made inquiry and adopted a binding, plausible tax view.

Where the Assessing Officer has made enquiry, examined the acquisition records, TDS details and tax treatment, and then adopted one of two permissible views supported by binding jurisdictional precedent, the assessment order is not erroneous merely because the Principal Commissioner prefers another view. The article notes that interest under section 28 of the Land Acquisition Act, 1894 was treated as part of enhanced compensation and, following precedent, not taxed under section 56(2)(viii) read with section 145B of the Income-tax Act, 1961. On that basis, the revisionary order under section 263 was unsustainable and had to be quashed.

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Issues: (i) Whether the Principal Commissioner was justified in invoking revisionary jurisdiction under section 263 on the ground that the Assessing Officer had failed to make proper inquiry into the taxability of interest received on enhanced compensation for compulsory acquisition of agricultural land.

Analysis: The assessment records showed that the Assessing Officer had issued a detailed notice seeking particulars about the receipt, the acquisition documents, the TDS reconciliation and the tax treatment of the amount. The assessee furnished replies and supporting material during the reassessment proceedings. The Assessing Officer then adopted the view that interest awarded under section 28 of the Land Acquisition Act, 1894 formed part of the enhanced compensation and, following the binding jurisdictional precedent, did not attract tax under section 56(2)(viii) read with section 145B of the Income-tax Act, 1961. The order under section 263 proceeded on a different view of the law and on the assumption that the amount ought to have been assessed as income from other sources. However, where the Assessing Officer has taken one of two permissible views after inquiry and that view is supported by binding judicial authority, the order cannot be treated as erroneous merely because the revisional authority prefers another view.

Conclusion: The invocation of section 263 was not sustainable and the revisional order was liable to be quashed.

Final Conclusion: The assessment order was held to be a legally sustainable one passed after inquiry and in accordance with binding precedent, and the revisionary interference was set aside.

Ratio Decidendi: An order passed after due inquiry and in accordance with a binding, plausible legal view cannot be revised under section 263 merely because the Commissioner holds a different opinion on the same issue.

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