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Issues: Whether the revisionary order under section 263 of the Income-tax Act, 1961 was valid where the Assessing Officer had not examined the agricultural income, opening cash balance, cash deposits in bank accounts, investments in immovable assets, and seized material.
Analysis: The order under section 263 can be sustained only if the assessment order is both erroneous and prejudicial to the interests of revenue. A failure to conduct inquiry on material issues constitutes an error, because the Assessing Officer acts not only as an adjudicator but also as an investigator. On the facts, no meaningful inquiry was made on several core issues, including the claimed agricultural income, the source of opening cash in hand, the source of cash deposits, the source of investments in immovable assets, and the examination of seized material. The case was therefore one of lack of inquiry, not merely inadequate inquiry. Since the Commissioner recorded reasons showing that the assessment order suffered from non-application of mind and was prejudicial to revenue, remand for fresh assessment was within jurisdiction.
Conclusion: The revisionary order was upheld and the challenge to section 263 failed. The issue was decided against the assessee and in favour of the Revenue.
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