Section 263 revision fails where the Assessing Officer adopts one permissible view on a debatable deduction claim.

Section 263 revision was held unsustainable where the Assessing Officer had examined the assessee's deduction claim under section 80P(2)(d) on interest from investments in co-operative banks and adopted one permissible view. The governing principle is that revision requires both error and prejudice to the Revenue; a mere difference of opinion on a debatable issue is insufficient. Since the assessment order reflected conscious acceptance of the deduction claim and judicial support existed for the exemption, the revisional authority could not substitute a different view. The assessee therefore succeeded and the revision was quashed.

---

---

Issues: Whether revision under section 263 of the Income-tax Act, 1961 was valid where the Assessing Officer had examined the assessee's claim for deduction under section 80P(2)(d) on interest earned from investments in co-operative banks and adopted one of the permissible views.

Analysis: The Assessing Officer had verified the assessee's claim for deduction under section 80P and consciously accepted the interest income as deductible. The revisional authority took a different view and treated the interest as taxable by relying on contrary authority. The controlling principle applied was that section 263 can be invoked only when the assessment order is both erroneous and prejudicial to the interests of the Revenue. Where the Assessing Officer adopts one permissible view and the matter is debatable, a mere difference of opinion does not justify revision. The Tribunal also noted that judicial authorities had supported the availability of deduction under section 80P(2)(d) on interest from co-operative banks.

Conclusion: The revisionary order under section 263 was not sustainable and the assessee succeeded on the issue.

---