Section 263 revision fails where share transaction defects are procedural and the assessment was already examined on record.

Revision under section 263 could not be sustained where the assessment had already examined the share-loss claim on the material before it, and the Commissioner relied mainly on alleged defects in Companies Act formalities. The Tribunal treated the capital-increase and return-of-allotment requirements as procedural, noting that later filing of forms and payment of additional fees regularised the defect and did not render the share transactions non-existent or invalid. It applied the settled test that revision lies only if the assessment order is both erroneous and prejudicial to the revenue, and that a mere possibility of deeper enquiry is insufficient. The revisional order was therefore unsustainable.

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Issues: Whether revision under section 263 could be sustained on the ground that the assessment order allowing set-off of short-term capital loss was erroneous and prejudicial to the interests of the revenue for want of enquiry and alleged non-compliance with the Companies Act formalities.

Analysis: The assessment had accepted the assessee's claim of loss on transfer of shares after examining the material placed in the original proceedings. The revision was founded mainly on the view that the company had not properly complied with the requirements relating to increase of share capital and return of allotment. The Tribunal held that the relevant provisions in the Companies Act operated in a procedural manner and that subsequent filing of forms and payment of additional fees regularized the defect. On that footing, the share transactions could not be treated as non-existent or invalid merely because of delayed compliance. The Tribunal further applied the settled principle that revision under section 263 is permissible only where the assessment order is both erroneous and prejudicial to the interests of the revenue, and that the Commissioner cannot invoke revisional power merely because a different or more elaborate enquiry was possible.

Conclusion: The conditions for assuming jurisdiction under section 263 were not satisfied, and the revisional order could not stand.

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