Section 263 revision failed where the Assessing Officer made enquiry and adopted a plausible view on exempt compensation interest.

Section 263 revision was unsustainable because the Assessing Officer had made enquiry into the receipt and ed the assessee's explanation that interest under section 28 of the Land Acquisition Act formed part of enhanced compensation and was exempt under section 10(37). The Tribunal treated the issue as a debatable one, noting the distinction between interest under section 28 and section 34 and holding that the amended treatment of interest on compensation did not displace the character of the section 28 amount on the facts. A revision could not rest merely on an audit objection or a non-speaking dismissal of SLP. The revisionary order was quashed and the assessment left undisturbed.

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Issues: Whether the revisionary order under section 263 of the Income-tax Act, 1961 was sustainable where the Assessing Officer had accepted the assessee's claim that interest under section 28 of the Land Acquisition Act, 1894 formed part of enhanced compensation and was exempt under section 10(37) of the Income-tax Act, 1961.

Analysis: The matter turned on whether the assessment suffered from lack of enquiry or an erroneous application of law. The record showed that the Assessing Officer had specifically queried the nature of the receipt and had accepted the assessee's explanation that the amount received under section 28 of the Land Acquisition Act, 1894 was part of enhanced compensation. The Tribunal treated the issue as governed by the line of authority holding that interest under section 28 is distinguishable from interest under section 34, and that the amended provisions concerning interest on compensation did not displace the character of section 28 amounts as part of compensation in the facts before it. It also held that a revision could not rest merely on an audit objection or on a non-speaking dismissal of SLP, and that the issue was at least debatable with two possible views.

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

Final Conclusion: The impugned revisionary order was quashed and the assessment, as accepted by the Assessing Officer on the disputed receipt, was left undisturbed.

Ratio Decidendi: Section 263 cannot be invoked where the Assessing Officer has conducted enquiry and adopted one of two plausible legal views on a debatable tax issue, and a mere audit objection or non-speaking SLP dismissal does not render the assessment erroneous or prejudicial to the interests of the Revenue.

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