Section 263 revision fails where limited-scrutiny issues were examined and section 50C could not be added beyond the mandate.

Section 263 revision requires both error and prejudice to Revenue; where the Assessing Officer examined the limited-scrutiny issue of sale consideration and accepted the return after finding duplicate reporting in AIR/ITS, the assessment was not erroneous for want of enquiry. In a limited-scrutiny assessment, the Assessing Officer need not travel beyond the specific reason for selection, so a capital-gains adjustment under section 50C outside that mandate could not justify revision. The revisional order was set aside and the original assessment restored.

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Issues: (i) Whether the revisional order under section 263 of the Income-tax Act, 1961 was sustainable when the Assessing Officer had examined the limited-scrutiny issue relating to sale consideration and the alleged mismatch arose from duplicate reporting in AIR/ITS. (ii) Whether an addition under section 50C of the Income-tax Act, 1961 could be made in a limited-scrutiny assessment when that issue was not among the reasons for selection of the case.

Issue (i): Whether the revisional order under section 263 of the Income-tax Act, 1961 was sustainable when the Assessing Officer had examined the limited-scrutiny issue relating to sale consideration and the alleged mismatch arose from duplicate reporting in AIR/ITS.

Analysis: Revision under section 263 can be exercised only if the assessment is both erroneous and prejudicial to the interests of the Revenue. The record showed that the Assessing Officer had examined the very issue for which scrutiny was selected and had accepted the returned income after finding that the apparent mismatch was due to erroneous multiple reporting of the same transaction. In such circumstances, the assessment could not be treated as lacking enquiry or as suffering from an error warranting revision.

Conclusion: The invocation of section 263 on this ground was not justified and was against the assessee.

Issue (ii): Whether an addition under section 50C of the Income-tax Act, 1961 could be made in a limited-scrutiny assessment when that issue was not among the reasons for selection of the case.

Analysis: The scrutiny was confined to the specific issue of mismatch in sale consideration reflected in the return vis-a -vis departmental information. The proposed capital-gains adjustment under section 50C was not part of the limited-scrutiny mandate under the CBDT instruction governing the assessment. The Assessing Officer was therefore justified in not travelling beyond the permitted scope of enquiry, and non-application of section 50C could not render the assessment erroneous and prejudicial to the Revenue.

Conclusion: No revision under section 263 could be sustained on the basis of a section 50C issue outside the limited-scrutiny scope, and this was against the Revenue.

Final Conclusion: The revisional order was set aside, and the original assessment was restored, resulting in success for the assessee.

Ratio Decidendi: Section 263 cannot be invoked unless both error and prejudice to the Revenue coexist, and in a limited-scrutiny assessment the Assessing Officer is not required to examine issues beyond the specific reason for selection.

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