Section 263 revision fails where the Assessing Officer adopts one plausible valuation view after considering the material on record.

Section 263 revision could not be sustained where the Assessing Officer, while giving effect to the appellate remand, examined the valuation material, including the registered valuer's report and circle-rate data, and adopted one plausible view on fair market value for computing capital gains and business income under section 45(2). The revisional authority's preference for a DVO reference did not make the assessment erroneous, because the record showed due application of mind and no lack of inquiry. As revision under section 263 requires both error and prejudice to the Revenue, a mere difference of opinion on valuation was insufficient.

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Issues: Whether the revisionary order under section 263 could be sustained where the Assessing Officer, in giving effect to the appellate remand, accepted the registered valuer's determination of fair market value as on 01.04.1981 and computed capital gains and business income accordingly.

Analysis: The matter had earlier been remitted to the Assessing Officer to compute capital gains under section 45(2) and to examine the fair market value of the land in accordance with law. In the set-aside proceedings, the Assessing Officer considered the material filed by the assessee, including the valuation report and the prevailing circle-rate information, and adopted one possible view on valuation. The revisionary authority treated the assessment as erroneous on the premise that a reference to the DVO ought to have been made and that the valuation accepted by the Assessing Officer was unrealistic. The record showed, however, that the Assessing Officer had applied his mind to the valuation issue and had not acted without inquiry. On these facts, the assessment could at best be said to be a different plausible view on valuation. Since revision under section 263 requires both error and prejudice, mere disagreement with the view taken by the Assessing Officer was insufficient.

Conclusion: The revision under section 263 was not justified, as the assessment order was not erroneous though it may have been prejudicial to the Revenue.

Final Conclusion: The assessee's challenge succeeded, and the revisional order was set aside in both appeals.

Ratio Decidendi: Where the Assessing Officer adopts one of two possible views after considering the material on valuation, the order cannot be revised under section 263 merely because the Commissioner prefers a different view; both error and prejudice must co-exist.

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