Section 263 revision cannot stand where the Assessing Officer adopts one plausible view after enquiry on a debatable exemption claim.

A revision under section 263 is not sustainable where the Assessing Officer has made enquiries on a debatable exemption claim and adopted one plausible view. The text states that interest received on enhanced compensation was examined with reference to exemption under section 10(37), replies and judicial authorities were considered, and the absence of a detailed discussion in the assessment order did not by itself show lack of enquiry. Once the revisional order was quashed, the consequential assessment made to implement it also fell, because it was entirely dependent on the foundation order.

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Issues: (i) Whether the revisionary order under section 263 of the Income-tax Act, 1961, could be sustained where the Assessing Officer had examined the claim of exemption on interest received on enhanced compensation and adopted one plausible view. (ii) Whether the consequential assessment framed pursuant to the revisionary order could survive after quashing of the revisionary order.

Issue (i): Whether the revisionary order under section 263 of the Income-tax Act, 1961, could be sustained where the Assessing Officer had examined the claim of exemption on interest received on enhanced compensation and adopted one plausible view.

Analysis: The assessment records showed repeated enquiries by the Assessing Officer on the exemption claim under section 10(37) in respect of interest received on compensation under the Land Acquisition Act. The assessee furnished replies relying on judicial decisions, and the Assessing Officer completed the assessment after considering those replies. The issue whether such interest was taxable or formed part of exempt compensation was treated as debatable, with more than one plausible view. In such a situation, an order cannot be revised merely because the Principal Commissioner prefers another view, and the absence of a detailed discussion in the assessment order does not by itself establish lack of enquiry.

Conclusion: The revisionary order under section 263 of the Income-tax Act, 1961, was not sustainable and was quashed, in favour of the assessee.

Issue (ii): Whether the consequential assessment framed pursuant to the revisionary order could survive after quashing of the revisionary order.

Analysis: Once the foundational revisional order was set aside, the assessment made to give effect to that order could not independently stand. The consequential proceedings were entirely dependent on the revisionary order and fell with it.

Conclusion: The consequential assessment was set aside, in favour of the assessee.

Final Conclusion: The Tribunal held that the Assessing Officer had made enquiries and taken a permissible view on the disputed exemption claim, so the revision under section 263 was unwarranted; the connected assessment made in consequence also failed.

Ratio Decidendi: Where the Assessing Officer has conducted enquiry and adopted one of two plausible views on a debatable tax issue, the assessment order cannot be revised under section 263 merely because the revisional authority prefers a different view.

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