Section 263 revision upheld for non-enquiry into cash deposits, family loan source, and unsupported deduction claims.

Revision under section 263 was sustained where the assessment order accepted cash deposits and a claimed loan from the assessee's wife without adequate verification. The record showed that part of the deposits remained unexplained and the wife's capacity to advance funds was not examined, bringing the case within Explanation 2 to section 263 for failure to make enquiries a prudent officer should have made. Revision was also upheld because the Assessing Officer allowed a Chapter VI-A deduction without calling for documentary evidence, leaving a material claim unsupported. The order was therefore treated as erroneous and prejudicial to the interests of the Revenue.

---

---

Issues: (i) Whether the revisionary jurisdiction under section 263 of the Income-tax Act, 1961 was validly invoked for want of enquiry into the cash deposits of Rs. 10.10 lakhs and the source of Rs. 5 lakhs stated to have been received from the assessee's wife; (ii) Whether the Assessing Officer had made enquiry before allowing the deduction claimed under Chapter VI-A.

Issue (i): Whether the revisionary jurisdiction under section 263 of the Income-tax Act, 1961 was validly invoked for want of enquiry into the cash deposits of Rs. 10.10 lakhs and the source of Rs. 5 lakhs stated to have been received from the assessee's wife.

Analysis: The assessment record showed that the Assessing Officer had asked about the cash deposits, but the assessee's reply did not reconcile the entire sum deposited. The explanation for Rs. 4.10 lakhs and Rs. 5 lakhs was accepted without supporting material, while a shortfall of Rs. 1 lakh remained unexplained. The source and capacity of the wife to advance Rs. 5 lakhs were also not verified. In view of Explanation 2 to section 263, an order passed without making enquiries or verification that a reasonable and prudent officer should have made is erroneous and prejudicial to the interests of the Revenue.

Conclusion: The invocation of section 263 on this issue was upheld in favour of the Revenue.

Issue (ii): Whether the Assessing Officer had made enquiry before allowing the deduction claimed under Chapter VI-A.

Analysis: No enquiry was made by the Assessing Officer regarding documentary evidence for the deduction claim. The revisionary authority found that the claim was partly unsupported and not fully sustainable, and the assessment order therefore suffered from non-enquiry on a material aspect.

Conclusion: The revision under section 263 was justified on this issue as well, in favour of the Revenue.

Final Conclusion: The assessment order was rightly treated as erroneous and prejudicial to the interests of the Revenue, and the assessee's appeal failed.

Ratio Decidendi: An assessment order is amenable to revision under section 263 where material issues are accepted without necessary enquiry or verification, and such non-enquiry renders the order erroneous and prejudicial to the interests of the Revenue.

---