Section 263 revision requires an erroneous and prejudicial assessment; accepted project completion accounting blocked taxation of disputed on-money.

Revision under section 263 is sustainable only where the assessment order is both erroneous and prejudicial to the Revenue; it cannot be used for a fresh or roving enquiry when the Assessing Officer has already examined the relevant material and adopted a permissible view. The Bombay HC noted that the assessee followed the project completion method, the accounting treatment had been accepted, and the occupancy certificate for the project had not been received in the relevant year. On that factual basis, the disputed on-money was not taxable in the year under appeal, and the revisional authority had no material to justify interference. The section 263 revision was therefore held unjustified.

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Issues: Whether the revisional order under section 263 of the Income-tax Act, 1961 could be sustained where the Assessing Officer had examined the relevant material and the assessee followed the project completion method, so that the disputed on-money was not taxable in the relevant assessment year.

Analysis: Revision under section 263 can be invoked only when the assessment order is both erroneous and prejudicial to the interests of the Revenue. An order is not erroneous merely because the Commissioner holds a different view, and the power cannot be used for a fresh or roving enquiry when the Assessing Officer has made enquiries, verified the record, and taken a permissible view. Here, the assessee's accounting method was accepted, the project completion method governed recognition of income, and the material showed that the occupancy certificate for the relevant project had not been received in the year under appeal. On that basis, the amount of Rs. 7,96,39,066/- was not taxable in the year in question, and the revisional authority had no material to hold otherwise.

Conclusion: The revision under section 263 was not justified and the assessee succeeded on the merits of the controversy.

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