Section 263 revision cannot be used to replace a permissible assessment view in limited scrutiny cases

Revision under section 263 was held unavailable where, in a limited scrutiny assessment, the Assessing Officer issued a questionnaire, examined the assessee's reply under section 142(1), and completed the assessment without addition. The Tribunal's factual finding that the disputed issue was not part of the limited scrutiny was accepted, and the settled requirement that an assessment must be both erroneous and prejudicial to the interests of the Revenue was applied. On those facts, a Principal Commissioner could not invoke revision merely because he disagreed with the Assessing Officer's permissible view on the same material, so the revision attempt failed.

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Issues: Whether the Principal Commissioner could invoke revision under section 263 of the Income-tax Act, 1961 in respect of an assessment framed under limited scrutiny, where the Assessing Officer had issued a questionnaire, considered the assessee's reply and completed the assessment without addition.

Analysis: The Court noted that the Tribunal had recorded a factual finding that the Assessing Officer had examined the materials furnished in response to the notice under section 142(1) of the Income-tax Act, 1961 and had completed the assessment after considering the reply. It further accepted the Tribunal's view that the issue sought to be revised was not the subject matter of the limited scrutiny. Applying the settled principle that revision under section 263 can be exercised only when the assessment order is both erroneous and prejudicial to the interests of the Revenue, the Court held that if the Assessing Officer had taken one of the permissible courses on the facts before him, and the Principal Commissioner merely disagreed with that conclusion, revision could not be invoked on the same material.

Conclusion: The invocation of section 263 was not justified on the facts found by the Tribunal, and the assessee succeeded on the revision issue.

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