Section 263 revision fails where the Assessing Officer had already examined the relevant material and conducted enquiry.

Revision under section 263 was considered unsustainable where the assessee had already placed the revised return, invoices, agreements and supporting details before the Assessing Officer, who issued notices and completed the assessment after examining the material on record. The omission to reflect the revised return in the assessment computation did not, by itself, show lack of enquiry or non-application of mind. On those facts, the twin conditions for revision, namely error and prejudice to the revenue, were not satisfied, so the revision was quashed in favour of the assessee.

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Issues: Whether revision under section 263 of the Income-tax Act, 1961 was validly invoked on the ground of lack of enquiry and prejudice to the revenue.

Analysis: The assessee had placed the revised return, invoices, agreements and related details before the Assessing Officer, who issued notices under sections 143(2) and 142(1) and completed the assessment after considering the material on record. The omission to take the revised return into account in the assessment computation did not by itself establish lack of enquiry, since the relevant facts and supporting evidence were already before the Assessing Officer and had been examined. In these circumstances, the order could not be said to suffer from the absence of enquiry or non-application of mind so as to satisfy both requirements for revision under section 263, namely error and prejudice to the revenue.

Conclusion: Revision under section 263 was not sustainable and was rightly quashed; the issue is decided in favour of the assessee.

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