Revisional jurisdiction under section 263 fails where the Assessing Officer made enquiry and adopted one plausible view on debatable compensation interest.

Where the Assessing Officer had specifically enquired into interest received under section 28 of the Land Acquisition Act, 1894 and accepted the assessee's claim that it formed part of enhanced compensation exempt under section 10(37) of the Income-tax Act, the assessment could not be treated as erroneous merely because the order was brief. The point was debatable, and a Principal Commissioner cannot invoke revisional jurisdiction under section 263 simply because another view is possible or because of an audit objection. The discussion also noted that Supreme Court treatment of section 28 interest as part of compensation and a dismissal of an SLP in limine do not by themselves amount to a declaration of law supporting revision.

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Issues: Whether the Principal Commissioner could invoke revisional jurisdiction under section 263 of the Income-tax Act, 1961 to revise the assessment on the ground that interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation was taxable as income from other sources and not exempt as part of compensation.

Analysis: The assessment record showed that the Assessing Officer had specifically queried the receipt and the assessee had explained that the amount represented interest under section 28 of the Land Acquisition Act, 1894 forming part of enhanced compensation and claimed exemption under section 10(37) of the Income-tax Act, 1961. The acceptance of that explanation showed enquiry, and the absence of an elaborate discussion in the assessment order did not by itself make the order erroneous. The revision was also founded mainly on an audit objection and on the view taken in a High Court decision, but the underlying controversy remained debatable because the Supreme Court had treated interest under section 28 as part of enhanced compensation and the dismissal of an SLP in limine did not amount to affirmation of the High Court's reasoning or declaration of law.

Conclusion: The revision under section 263 was not sustainable, and the assessee succeeded.

Ratio Decidendi: Where the Assessing Officer has made enquiry and taken one of two possible views on a debatable issue, the Principal Commissioner cannot revise the assessment merely because a different view is possible or because of an audit objection.

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