Revisional jurisdiction cannot rest on mere inadequate inquiry where the assessment record shows proper examination of the deduction claim.

Revision under section 263 was held unsustainable because the assessment record showed proper inquiry into the assessee's deduction claim and related business facts. The assessee had produced the audit report, approvals and supporting material to establish that the claim was under section 10A, and not section 10B, while the Assessing Officer had issued detailed queries, examined replies and considered the profitability and nature of activity before accepting the return. On those facts, the matter was not one of absence of inquiry, and mere inadequacy of inquiry could not justify revision without a finding that the assessment was both erroneous and prejudicial to the Revenue. The revisional order was quashed and the assessment restored.

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Issues: Whether revision under section 263 of the Income-tax Act, 1961 was justified on the ground that the Assessing Officer had not properly examined the assessee's claim for deduction under section 10A and the applicability of sections 80IA(8) and 80IA(10).

Analysis: The assessee had placed on record the relevant audit report, approvals and other supporting material to show that the claim was under section 10A and not section 10B. The assessment record also showed that the Assessing Officer had issued detailed queries, obtained replies and examined the business activity, the form of deduction claim and the profitability of the assessee before accepting the return. In these circumstances, the case was not one of absence of inquiry. At the highest, the Commissioner could only allege inadequate inquiry, which by itself does not attract revisional jurisdiction unless the assessment order is shown to be both erroneous and prejudicial to the interests of the Revenue. The record did not establish such jurisdictional error.

Conclusion: The revision order under section 263 was unsustainable and was quashed; the original assessment under section 143(3) was restored.

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