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Issues: Whether the Commissioner was justified in invoking section 263 of the Income-tax Act, 1961, to revise the assessment orders on the ground that the Assessing Officer had not made proper enquiries and had wrongly granted exemption to the assessee-society under section 10(22) of the Income-tax Act, 1961.
Analysis: The assessment records showed that the Assessing Officer had examined the survey material, raised queries, considered the replies and reached a reasoned conclusion that the assessee existed for educational purposes and that the surplus generated from its activities had been used for its institutional objects. The Commissioner did not record any concrete finding that the assessee had ceased to pursue its main educational object, that it existed for profit, or that any diversion of funds to members had been established. The allegation of inadequate enquiry was not supported by any specific error or demonstrable prejudice to the Revenue. In revision under section 263, both conditions of error and prejudice must coexist, and an order cannot be revised merely because a different view is possible or because the Commissioner acts on suspicion.
Conclusion: The revision under section 263 was not sustainable and the assessee remained entitled to exemption under section 10(22); the finding is in favour of the assessee.
Ratio Decidendi: Section 263 cannot be invoked unless the assessment order is both erroneous and prejudicial to the interests of the Revenue, and a reasonable view taken after enquiry on the assessee's educational exemption cannot be revised merely because the Commissioner prefers a different view.
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