Revisionary jurisdiction overturned where the Assessing Officer made specific enquiries and accepted verified exempt LTCG evidence.

Assessee's claim of exempt long-term capital gains under section 10(38) was upheld because the Assessing Officer conducted specific enquiries, issued notices, verified documentary evidence (contract notes, DMAT, broker ledgers, purchase proofs) and accepted the claim; therefore exercise of revisionary jurisdiction was unjustified where the superior authority relied on a retracted search statement without independent corroboration. Operative effect: the section 263 revisional order was quashed and the assessment under section 153C stands, affirming that mere suspicion or superior disagreement does not render an enquiry-based assessment erroneous and prejudicial to revenue.

---

---

Issues: Whether the assumption of jurisdiction under section 263 of the Income-tax Act, 1961 to revise the assessment framed under section 153C of the Income-tax Act, 1961 in respect of the claim of exempt long-term capital gains under section 10(38) was justified.

Analysis: The Tribunal examined whether the Assessing Officer had made due enquiries into the claim of exempt LTCG and whether the Principal Commissioner of Income Tax (revisionary authority) could validly conclude that the assessment order was erroneous and prejudicial to the interests of revenue. The record shows that (a) reassessment proceedings had been initiated under section 147/148; (b) satisfaction notes under section 153C were placed on record and the re-assessment proceedings abated as per section 153C read with section 153A; (c) during the assessment under section 153C the Assessing Officer issued notices under section 142(1) and a show-cause notice requiring the assessee to justify the exempt LTCG claim and the assessee filed detailed replies and documentary evidence (including contract notes, DMAT statements, broker ledgers and purchase evidence); (d) the revisioning authority relied on a statement recorded during search proceedings and treated the matter as suspicious, but the statement relied upon had been retracted and no independent corroborative material was placed on record; and (e) where the Assessing Officer has examined the issue, issued specific queries and accepted the claim after verification, mere suspicion or disagreement by a superior authority does not satisfy the statutory test under section 263 that the order is erroneous and prejudicial. The Tribunal further observed that the revisionary authority failed to obtain or place on record the departmental retraction relied upon and ignored material from the assessment record evidencing due enquiry by the Assessing Officer.

Conclusion: The assumption of jurisdiction under section 263 was not justified; the Assessing Officer had duly enquired into the exempt LTCG claim and the revisionary order is quashed. The appeal is allowed in favour of the assessee.

Ratio Decidendi: Revision under section 263 of the Income-tax Act, 1961 cannot be exercised where the Assessing Officer has made specific enquiries, considered evidence, and reached a bona fide conclusion supported by the assessment record; suspicion or reliance on a retracted statement without independent corroboration does not make the assessment order erroneous and prejudicial to revenue.

---