Section 263 revision fails where the Assessing Officer adopts a permissible view on alleged bogus purchases and profit estimation.

Section 263 revision was held unsustainable because the Assessing Officer had adopted a legally supportable view by taxing only the profit element embedded in disputed purchases after examining invoices, bank records, e-way bills, goods-receipt evidence and undisputed sales. The revisionary authority failed to identify any specific factual or legal error in the assessment and merely sought to substitute a 100% disallowance for the original estimate. As the assessment order was neither erroneous nor prejudicial to the interests of the Revenue on the record, the direction to disallow the entire purchases was set aside.

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Issues: (i) whether the revisionary order under section 263 of the Income-tax Act, 1961 was justified in directing 100% disallowance of alleged bogus purchases instead of sustaining the assessment made by estimating profit element at 12.5%.

Analysis: The assessment had proceeded on scrutiny of purchases from non-compliant parties, and the Assessing Officer had accepted the trading results while treating only the profit element embedded in the disputed purchases as taxable. The record showed that the assessee had furnished invoices, bank statements, e-way bills, goods receipt records and other material, and that the sales were not doubted. The purchases were also not shown to be wholly unsupported merely because some parties had not responded to notices or had not filed returns. The revisionary authority did not demonstrate any specific factual or legal error in the assessment order and sought to substitute its own view that the entire purchases ought to be added. Since the assessment order was based on a view supported by judicial precedent and was not shown to be unsustainable in law, the preconditions for revision were not met.

Conclusion: The revision under section 263 was not sustainable, and the direction to disallow the entire purchases was set aside.

Final Conclusion: The assessment order could not be revised merely because a different view on the quantum of addition from alleged bogus purchases was possible; the Tribunal held that the original assessment was not erroneous and prejudicial to the interests of the Revenue on the facts found.

Ratio Decidendi: Section 263 cannot be invoked where the Assessing Officer has taken one of the permissible and legally supported views, unless the order is shown to be both erroneous and prejudicial to the interests of the Revenue on identifiable facts or law.

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