Section 263 revision on land acquisition interest failed where the Assessing Officer had taken a plausible view after enquiry.

Section 263 revision was held unwarranted where the Assessing Officer had examined the assessee's explanation on interest under section 28 of the Land Acquisition Act, 1894 and adopted one of two possible views on a debatable issue. The Tribunal held that the record did not show lack of enquiry, and the assessment could not be treated as erroneous and prejudicial merely because the Principal Commissioner preferred a later contrary view based on an audit objection. It further held that interest under section 28 remained part of enhanced compensation on the Supreme Court authority relied upon by the Assessing Officer, and that dismissal of an SLP in limine does not affirm the High Court's reasoning or create binding precedent.

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Issues: Whether the Principal Commissioner was justified in invoking revisional jurisdiction under section 263 of the Income-tax Act, 1961 on the ground that interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation was wrongly assessed and exempted.

Analysis: The assessee had specifically replied to the assessment queries regarding receipt of interest on enhanced compensation, and the assessment order was passed after consideration of the explanation. The record did not support a finding of lack of enquiry or no enquiry. The revision was founded mainly on an audit objection and on the view that the interest should be taxed as income from other sources in light of later High Court authority. However, the tribunal held that the character of interest under section 28 of the Land Acquisition Act, 1894, as part of enhanced compensation, remained supported by the Supreme Court ruling relied upon by the Assessing Officer. It also held that dismissal of an SLP in limine does not amount to affirmation of the High Court's reasoning or creation of binding precedent. Since the Assessing Officer had adopted one of two possible views on a debatable issue, the assessment order could not be treated as erroneous and prejudicial to the interests of the Revenue.

Conclusion: The invocation of section 263 was unjustified and the revisional order was not sustainable; the assessee succeeded.

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