Section 263 revision fails where DPCO liability is treated as an ascertained liability and the assessment view is plausible.

ITAT Ahmedabad held that revision under section 263 was not justified where the Assessing Officer had allowed deduction of DPCO liability while computing book profits under section 115JB on a plausible view. The liability had already been accepted as an ascertained liability in the assessee's own case, and the DPCO dispute was still pending before the High Court. The Principal Commissioner's assumption that the liability had been settled by the Supreme Court, and that the amount was only a bank guarantee obligation, was factually incorrect. As the assessment view was neither erroneous nor prejudicial on that basis, the revisionary order was set aside.

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Issues: Whether the Principal Commissioner was justified in invoking revisional jurisdiction under section 263 of the Income-tax Act, 1961 on the footing that the Assessing Officer had erroneously allowed deduction of DPCO liability while computing book profits under section 115JB.

Analysis: The liability had already been accepted as an ascertained liability in the assessee's own case for the relevant assessment year while computing income under the normal provisions, and the record showed that the DPCO dispute remained pending before the High Court. The assumption that the liability had been settled by the Supreme Court and that the amount represented only a bank guarantee obligation was found to be factually incorrect. In these circumstances, the Assessing Officer's view that the claim could be accepted was a plausible view and could not be branded as erroneous merely because the Principal Commissioner preferred a different approach.

Conclusion: The invocation of section 263 was unsustainable and the revisionary order was set aside.

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