Revisional jurisdiction under section 263 cannot replace a plausible assessment view when section 54B agricultural use is supported by record.

Section 263 revisional power cannot be invoked merely because the Principal Commissioner prefers a different view; it requires the assessment order to be both erroneous and prejudicial to the Revenue. Where the Assessing Officer made inquiries, examined the assessee's explanation, and adopted one plausible view on the material, revision is not justified. On the section 54B claim, agricultural use of the transferred land during the two years before transfer was supported by revenue records, correction of mistaken entries, physical verification, and cultivation evidence, so the deduction condition was satisfied and the contrary revisionary finding could not stand.

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Issues: (i) Whether the Principal Commissioner validly exercised revisional jurisdiction under section 263 of the Income-tax Act, 1961 by holding that the reassessment order was erroneous and prejudicial to the interests of the Revenue for alleged lack of inquiry into the claim under section 54B; (ii) Whether the assessee's land was used for agricultural purposes during the two years immediately preceding its transfer so as to justify deduction under section 54B of the Income-tax Act, 1961.

Issue (i): Whether the Principal Commissioner validly exercised revisional jurisdiction under section 263 of the Income-tax Act, 1961 by holding that the reassessment order was erroneous and prejudicial to the interests of the Revenue for alleged lack of inquiry into the claim under section 54B.

Analysis: Section 263 can be invoked only when the order of the Assessing Officer is both erroneous and prejudicial to the interests of the Revenue. An order does not become revisable merely because the Principal Commissioner prefers a different inference or believes a different manner of appreciation of the same material was possible. Where the Assessing Officer has made inquiries, considered the assessee's explanations, and adopted one of the plausible views available on the record, the revisional authority cannot substitute its own view. On the record, the reassessment proceedings included queries, replies, supporting documents, and verification material on the section 54B claim.

Conclusion: The revision under section 263 was not sustainable; the Principal Commissioner exceeded the permissible scope of revisional power.

Issue (ii): Whether the assessee's land was used for agricultural purposes during the two years immediately preceding its transfer so as to justify deduction under section 54B of the Income-tax Act, 1961.

Analysis: The claim for deduction under section 54B depended on whether the transferred land was being used for agricultural purposes in the relevant two-year period. The record contained revenue entries, computerized land records, an order of the Naib Tehsildar correcting mistaken manual entries, physical verification material, and supporting explanation showing cultivation of paddy during the relevant years. The adverse reliance on satellite imagery and the Patwari's manual report was displaced by the later revenue correction and verification findings. The Assessing Officer had examined the material and accepted the assessee's explanation as a possible view.

Conclusion: The assessee satisfied the condition for deduction under section 54B, and the contrary finding recorded in revision could not stand.

Final Conclusion: The reassessment order was restored and the revisionary order was set aside, resulting in allowance of all the connected appeals.

Ratio Decidendi: Revisional jurisdiction cannot be used to replace a plausible view taken by the Assessing Officer after inquiry with another view preferred by the Principal Commissioner, and a section 54B deduction cannot be denied where the relevant agricultural use of the land is established on the record by credible revenue and verification material.

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