Revisionary jurisdiction under Section 263 cannot displace an Assessing Officer's reasoned acceptance of documentary source-of-funds evidence.

Where an Assessing Officer examined and accepted documentary evidence explaining the source of funds for an immovable property investment, the revisional jurisdiction under Section 263 cannot be validly invoked merely by substituting the revisional authority's view; interference requires the assessment to be erroneous and prejudicial to revenue because the AO failed to apply his mind or took a view no reasonable authority could take. Applying that principle, the AO's consideration of bank statements, ledger entries and explanations established a reasoned assessment, so the Section 263 revision was set aside and the appeal allowed in favour of the assessee.

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Issues: Whether the Commissioner (Exemption) was justified in invoking revisionary jurisdiction under Section 263 of the Income-tax Act, 1961 to set aside the assessment on the ground that the Assessing Officer did not examine the source of investment in immovable property, when the Assessing Officer had in fact examined and accepted the assessee's explanation and supporting evidence regarding the source of funds.

Analysis: The Assessing Officer reopened the assessment under Section 147 and issued a notice under Section 142(1) requiring explanation of the source of funds. The assessee furnished bank statements, ledger evidence and a written explanation showing that the actual investment was Rs. 46,00,000 and identifying sources. The Assessing Officer, after considering those materials, completed the assessment without making any addition. The revisional authority under Section 263 may interfere only if the assessment order is erroneous and prejudicial to the revenue, which requires that the Assessing Officer failed to apply his mind or reached a view that no reasonable authority could have taken. Where the Assessing Officer has examined the source of funds, considered supporting documentary evidence and accepted the explanation, the revisional authority is not permitted to simply substitute its own view by treating the matter as erroneous and prejudicial to revenue. The facts show the AO applied mind to the source of investment and was satisfied; therefore the requirements for valid exercise of Section 263 were not met.

Conclusion: The revisional order under Section 263 is set aside and the appeal is allowed; decision in favour of the assessee.

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