Section 263 revision fails where interest expenditure was examined in assessment and no case of lack of enquiry was made out.

Revision under section 263 was held unsustainable because the assessment record showed detailed enquiry by the Assessing Officer into the source and use of borrowed funds, the land transaction, business objects, refund arrangements and the interest claim under section 36(1)(iii). The issue of interest expenditure and capitalisation had been examined during assessment, part of the claim was considered under section 14A, and notices under section 133(6) were issued and complied with. On these facts, the assessment order could not be treated as a case of no enquiry or merely inadequate enquiry, so the revisional order was quashed.

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Issues: Whether the Principal Commissioner was justified in invoking revisional jurisdiction under section 263 on the footing that the assessment order under section 143(3) was erroneous and prejudicial to the interests of the Revenue for alleged lack of enquiry into the allowability of interest expenditure under section 36(1)(iii).

Analysis: The assessment record showed that the Assessing Officer had examined the source and utilisation of borrowed funds, the land transaction, the assessee's business objects, the agreement and refund arrangements, and the related interest claim in detail. The issue of interest expenditure and capitalisation was considered during the assessment, part of the claim was dealt with under section 14A, and summons under section 133(6) were issued and complied with. On these facts, the order could not be characterised as a case of no enquiry or inadequate enquiry so as to justify revision under section 263.

Conclusion: The invocation of section 263 was not sustainable and was quashed; the assessee succeeded on the principal ground, and the remaining grounds became infructuous.

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