Section 263 revision can cover unexamined depreciation claims, while hearing remains essential before fresh findings on new issues.

Section 263 revision may be sustained where the Assessing Officer has examined only part of a material depreciation claim and left the wider claim unverified, because an unexamined issue can render the assessment erroneous and prejudicial to the Revenue. The retrospective Explanation to section 263(1) extends revisional power to matters not considered and decided in appeal. On procedural fairness, a specific show-cause notice on every proposed ground is not indispensable if the assessee is otherwise given a hearing; however, absence of a pre-decisional opportunity on particular issues can limit the revisional order to that extent before any fresh determination.

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Issues: (i) Whether the revisional order under section 263 of the Income-tax Act, 1961 was valid in relation to the depreciation claim on fixed assets where the Assessing Officer had not examined the entire claim; (ii) Whether the revisional order could be sustained on the issues of TDS and benchmarking of related-party transactions despite the absence of a specific show-cause notice on those issues.

Issue (i): Whether the revisional order under section 263 of the Income-tax Act, 1961 was valid in relation to the depreciation claim on fixed assets where the Assessing Officer had not examined the entire claim.

Analysis: The record showed that the Assessing Officer had considered only part of the fixed-asset depreciation claim and had not examined the entire larger claim. In such a situation, the assessment order could be treated as erroneous and prejudicial to the interests of the Revenue. The retrospective Explanation (c) to section 263(1) extended revisional power to matters not considered and decided in appeal, and the earlier appellate order did not bar revision on the full claim.

Conclusion: The revisional jurisdiction under section 263 was rightly exercised on this issue, against the assessee.

Issue (ii): Whether the revisional order could be sustained on the issues of TDS and benchmarking of related-party transactions despite the absence of a specific show-cause notice on those issues.

Analysis: Section 263 requires that the order be erroneous and prejudicial to the interests of the Revenue and that the assessee be afforded an opportunity of hearing. A specific show-cause notice on every issue is not mandatory if the assessee is otherwise heard. However, failure to grant a pre-decisional opportunity on those issues made the revisional order unsustainable to that limited extent, even though the Commissioner was not denuded of jurisdiction to examine them.

Conclusion: The absence of a specific show-cause notice did not nullify the revisional jurisdiction, but the assessee had to be heard before a fresh order was made on those issues; the challenge succeeded only to the limited extent of want of opportunity.

Final Conclusion: The appeal failed. The revisional order was upheld in substance, with only a limited direction that the assessee be heard on the two issues not specifically put to notice before any fresh determination.

Ratio Decidendi: An order may be revised under section 263 where the Assessing Officer has failed to examine a material issue, and the absence of a specific show-cause notice on every proposed ground does not vitiate revision so long as the assessee is afforded an opportunity of hearing.

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