Revision under section 263 upheld where an assessment was passed without enquiry into the deduction claim.

Section 263 revision was upheld where the Assessing Officer allowed a deduction claim without examining the relevant material. The assessment record showed no proper enquiry into the assessee's claim that an amount of business loss had been allowed, while the material indicated it had been adjusted against statutory reserves and the opening credit balance in the profit and loss account. In these circumstances, the failure to verify the claim made the assessment order erroneous and prejudicial to the interests of the Revenue, justifying revision and a fresh assessment.

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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 had allowed the assessee's claim without enquiry and thereby passed an order that was erroneous and prejudicial to the interests of the Revenue.

Analysis: The order recorded that the assessment had been completed without enquiry on the relevant claim. The assessee did not successfully rebut that finding. The claim of deduction of Rs. 2.84 crores was allowed as business loss, but the material placed before the Tribunal showed that the amount had been adjusted partly out of statutory reserves and partly out of the opening credit balance in the profit and loss account. In these circumstances, the Assessing Officer's failure to examine the claim rendered the assessment order vulnerable under section 263, since an order passed without enquiry can be treated as erroneous and prejudicial to the interests of the Revenue.

Conclusion: The revisionary order was valid and there was no ground to interfere with the Commissioner's direction for fresh assessment.

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