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Issues: (i) Whether the order passed under section 263 of the Income-tax Act, 1961 was valid when the grounds stated in the show cause notice differed from the basis adopted in the revision order. (ii) Whether the assessment order could be revised on the footing that the Assessing Officer had not made adequate enquiry regarding deduction of tax at source and disallowance of expenditure.
Issue (i): Whether the order passed under section 263 of the Income-tax Act, 1961 was valid when the grounds stated in the show cause notice differed from the basis adopted in the revision order.
Analysis: The revision notice proceeded on the footing that hire charges and carriage payments attracted section 194C and that disallowance under section 40(a)(ia) was warranted for non-deduction of tax at source. The revision order, however, travelled beyond that basis and directed further re-examination on altered reasoning, including a broader reconsideration of the expenditure claim. A revisionary order must rest on the same foundation as the notice that initiates the proceedings, and a material shift in the basis of revision is not sustainable.
Conclusion: The revision order was invalid because the grounds in the show cause notice and the grounds in the final order were materially different.
Issue (ii): Whether the assessment order could be revised on the footing that the Assessing Officer had not made adequate enquiry regarding deduction of tax at source and disallowance of expenditure.
Analysis: The record showed that the Assessing Officer had examined the expenditure claim and made disallowance after verification. The Commissioner could not substitute a different view or compel a fresh reconsideration merely because another view was possible. Revision under section 263 requires a demonstrated error causing prejudice to the Revenue, not a mere desire for deeper scrutiny where enquiry had already been made.
Conclusion: The assessment order could not be revised on the ground of inadequate enquiry.
Final Conclusion: The revision under section 263 was quashed and the assessee's appeal succeeded.
Ratio Decidendi: A revisionary order under section 263 cannot survive when it departs from the grounds stated in the show cause notice and when the assessment order has already been made after adequate enquiry.
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