Section 263 revision fails where the Assessing Officer makes enquiry and adopts a plausible view on section 28 interest as enhanced compensation.

Revision under section 263 was considered invalid where the Assessing Officer had queried the assessee on interest under section 28 of the Land Acquisition Act, accepted the explanation after enquiry, and adopted a plausible view that such interest formed part of enhanced compensation and was exempt. A brief assessment order did not by itself show lack of enquiry, and the revisional authority could not invoke section 263 merely because it preferred another view or relied on an audit objection. The text also notes that dismissal of an earlier special leave petition did not override the Supreme Court's view treating section 28 interest as compensation. On these facts, the assessment was not revisable.

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Issues: Whether revision under section 263 of the Income-tax Act, 1961 was valid where the Assessing Officer had accepted the assessee's claim that interest received under section 28 of the Land Acquisition Act, 1894 formed part of enhanced compensation and was exempt, and whether the assessment order could be treated as erroneous and prejudicial to the interests of Revenue on the ground of alleged lack of enquiry and reliance on an audit objection.

Analysis: The assessee had responded to the assessment queries on the receipt of interest under section 28 of the Land Acquisition Act, 1894, and the Assessing Officer accepted the explanation after enquiry. On the material placed before it, the revisionary authority could not characterize the case as one of no enquiry or lack of enquiry merely because the assessment order was brief. The issue was also found to be supported by one of the possible views on the tax treatment of such receipts, and the matter had been decided by the Assessing Officer by following the view that interest under section 28 is part of enhanced compensation. The revision was also found to have been prompted substantially by an audit objection, which by itself did not justify assumption of revisional jurisdiction. The dismissal of the special leave petition against an earlier High Court decision was held not to amount to affirmation of law so as to override the Supreme Court's earlier view treating section 28 interest as part of compensation.

Conclusion: Section 263 jurisdiction was not validly assumed, and the revisional order was unsustainable in favour of the assessee.

Final Conclusion: The assessment could not be revised on the facts found, as the Assessing Officer had taken a plausible view after enquiry and the case did not meet the statutory threshold for revision.

Ratio Decidendi: Where the Assessing Officer has made enquiry and adopted one of two plausible views on a debatable tax issue, the order cannot be revised under section 263 merely because the revisionary authority prefers another view or relies on an audit objection.

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