Revisionary jurisdiction under section 263 upheld where failure to examine carry-forward allowances caused prejudice to Revenue.

An assessment marked "not assessable" was treated as acceptance of the return, not rejection of the assessee's claims, so the Assessing Officer should have examined unabsorbed investment allowance, unabsorbed depreciation and unabsorbed development rebate. The failure to scrutinise those items rendered the assessment erroneous and prejudicial to the interests of the Revenue. On that basis, the Commissioner was justified in invoking revisionary jurisdiction under section 263 of the Income-tax Act, 1961, and the reference was answered against the assessee.

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Issues: Whether the Commissioner was justified in invoking revisionary jurisdiction under section 263 of the Income-tax Act, 1961 on the ground that the Assessing Officer's order marked "not assessable" had caused prejudice to the Revenue.

Analysis: The order of "not assessable" was construed as acceptance of the return and not as rejection of the assessee's claims. In that view, the assessment order ought to have been scrutinised for unabsorbed investment allowance, unabsorbed depreciation and unabsorbed development rebate. The Tribunal's view that no prejudice had been caused to the Revenue was held to be in law, because the non-scrutiny of those claims rendered the assessment erroneous and prejudicial to the interests of the Revenue.

Conclusion: The Commissioner was rightly empowered to invoke section 263, and the reference was answered against the assessee and in favour of the Revenue.

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