Section 263 revision sustained for failure to make meaningful inquiry into revised returns, agricultural income, and cash deposits.

Revisional jurisdiction under section 263 was upheld where the Assessing Officer accepted revised returns and agricultural income claims without meaningful verification. The absence of proper inquiry into alleged crop receipts, the link between crop sales and LIC investments, the source and movement of cash deposits, and the authenticity of supporting documents rendered the assessments erroneous and prejudicial to the Revenue. Failure to give effect to binding directions under section 144A, together with the surrounding inconsistencies and unusual income pattern, showed non-application of mind. The matter was treated as one of practically no enquiry rather than a mere case of inadequate inquiry, and the assessments were set aside for fresh assessment.

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Issues: Whether the Commissioner was justified in invoking revisional jurisdiction under section 263 on the ground that the Assessing Officer had accepted the revised returns and the agricultural income claims without conducting the inquiry warranted by the facts, and whether the assessment orders were therefore erroneous and prejudicial to the interests of the Revenue.

Analysis: The assessee's revised returns were filed after scrutiny had commenced and were accepted without adequate verification of the alleged agricultural receipts, the nexus between crop sales and LIC investments, the source and movement of cash deposits, and the authenticity of the supporting documents and bills. The Assessing Officer also failed to give due effect to binding directions issued under section 144A and did not make the deeper enquiry demanded by the surrounding circumstances, including the unusual magnitude of income, the claimed cash transactions, and the inconsistencies in the material produced. A mere collection of replies and papers was held not to amount to a proper enquiry where the facts themselves called for further investigation. The contention that the matter involved a merely debatable issue or only inadequate enquiry was rejected, because the case was treated as one of practically no meaningful enquiry and non-application of mind.

Conclusion: The revision under section 263 was valid and the assessment orders were rightly set aside for fresh assessment.

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