Revision under section 263 and retrospective land-distance test rejected where enquiry was made and the later amendment could not apply to the year in question.

Revision under section 263 is not justified where the Assessing Officer made a specific enquiry, considered the assessee's explanation on interest received on enhanced compensation, and adopted one plausible view on a debatable issue; an audit objection or mere change of opinion cannot sustain revision. The later-amended distance criterion under section 2(14)(iii)(b) cannot be applied retrospectively to assessment year 2013-14, so land shown by revenue records and certification to be beyond the prescribed distance was not treated as a capital asset on that basis. The revisionary order was quashed and the capital gains addition failed, granting relief to the assessee.

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Issues: (i) Whether the Principal Commissioner could invoke revisionary jurisdiction under section 263 of the Income-tax Act, 1961 in respect of the assessment treatment of interest received on enhanced compensation under section 28 of the Land Acquisition Act, 1894. (ii) Whether, for assessment year 2013-14, the assessee's land could be treated as a capital asset on the basis of the amended distance criterion under section 2(14)(iii)(b) of the Income-tax Act, 1961.

Issue (i): Whether the Principal Commissioner could invoke revisionary jurisdiction under section 263 of the Income-tax Act, 1961 in respect of the assessment treatment of interest received on enhanced compensation under section 28 of the Land Acquisition Act, 1894.

Analysis: The assessment record showed that the Assessing Officer had raised a specific query on the receipt of interest on enhanced compensation, and the assessee had explained that the amount formed part of enhanced compensation and was claimed exempt under section 10(37) of the Income-tax Act, 1961. The assessment was thus not a case of no enquiry or lack of enquiry. The issue whether interest under section 28 of the Land Acquisition Act, 1894 is taxable as income from other sources or forms part of compensation was also treated as debatable on the footing of the decisions relied upon before the authorities. Revision under section 263 cannot be sustained merely because a different view is possible, and an audit objection by itself does not justify revision.

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

Issue (ii): Whether, for assessment year 2013-14, the assessee's land could be treated as a capital asset on the basis of the amended distance criterion under section 2(14)(iii)(b) of the Income-tax Act, 1961.

Analysis: The assessee produced revenue records and official certification showing that the land was situated beyond the prescribed distance, while the Revenue relied on aerial measurement under the later amended provision. The amendment to section 2(14)(iii)(b) introduced by the Finance Act, 2013 was held not to operate retrospectively for assessment year 2013-14. On that footing, the Revenue's attempt to sustain the capital gains addition on the basis of the amended distance test was rejected.

Conclusion: The land was not to be treated as a capital asset on the Revenue's retrospective-distance basis, and the capital gains addition failed.

Final Conclusion: The common order resulted in complete relief to the assessee, with the revisionary order quashed and the capital gains addition deleted, and the connected appeals were allowed.

Ratio Decidendi: Revision under section 263 cannot rest on a mere change of opinion, an audit objection, or a debatable tax issue when the Assessing Officer has made enquiry and adopted one of the plausible legal views; a later-amended statutory distance criterion cannot be applied retrospectively to an earlier assessment year.

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