Section 263 revision needs independent satisfaction of error and revenue prejudice; audit objection alone is insufficient.

Revision under section 263 requires the Commissioner's independent satisfaction from the record that the assessment order is both erroneous and prejudicial to the interests of revenue. An audit objection cannot substitute for that statutory finding, and a revision cannot be sustained merely to order a de novo assessment or because a different view is preferred. The distinction between lack of enquiry and inadequate enquiry is material: where the Assessing Officer has made enquiries and adopted a view, revision is not justified on that basis alone. The revisionary order was held unsustainable and set aside.

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Issues: Whether the revision under section 263 of the Income-tax Act, 1961 was valid when the Commissioner acted on audit objection and directed de novo assessment without recording an independent finding that the assessment order was erroneous and prejudicial to the interests of revenue.

Analysis: Jurisdiction under section 263 can be assumed only when the Commissioner independently examines the record and records a clear finding that the assessment order is both erroneous and prejudicial to the interests of revenue. An audit objection by itself cannot substitute the Commissioner's own satisfaction. The distinction between lack of enquiry and inadequate enquiry is material: where the Assessing Officer has made enquiries and taken a view, the order cannot be revised merely because the Commissioner prefers a different view. A revisionary order that merely remits the matter for fresh examination, without first establishing error in the assessment order, does not satisfy the statutory conditions for revision.

Conclusion: The revisionary order under section 263 was not sustainable and was set aside in favour of the assessee.

Ratio Decidendi: Section 263 can be invoked only on the Commissioner's independent satisfaction, based on the record, that the assessment order is both erroneous and prejudicial to revenue, and not merely because of an audit objection or a perceived need for further enquiry.

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