Revisionary power upheld where inadequate enquiry on property receipt and capital gains made the assessment unsustainable.

An assessment was held revisable under section 263 because the Assessing Officer accepted the taxpayer's explanation on receipt and property transfer issues without making adequate enquiry into the earlier payment, supporting confirmation, settlement deed, sale documents, and surrounding transaction circumstances. On the record, the unexplained acceptance of a material claim rendered the assessment erroneous and prejudicial to the interests of the Revenue. The Principal Commissioner's revision was therefore sustained, and the matter was sent back for fresh examination of the taxability and capital gains implications of the transaction.

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Issues: Whether the Principal Commissioner was justified in invoking revisionary jurisdiction under section 263 on the ground that the Assessing Officer had not made proper enquiries regarding the taxability of the receipt and the capital gains implications of the property transaction.

Analysis: The reassessment had been reopened to examine the receipt of Rs. 8 lakhs, but the record did not show that the Assessing Officer verified the alleged earlier payment to Shri Sastry, obtained any confirmation from him, examined the settlement deed, or considered the sale documents and surrounding circumstances bearing on the actual nature of the transaction. The explanation accepted by the Assessing Officer was not supported by evidence, while the material before the Principal Commissioner showed that the issue of consideration and transfer rights required deeper verification. On these facts, the assessment was found to have been completed without proper enquiry, making it both erroneous and prejudicial to the interests of the Revenue.

Conclusion: The invocation of section 263 was upheld. The Principal Commissioner was justified in setting aside the assessment and directing fresh examination of the issue by the Assessing Officer.

Final Conclusion: The revisionary order was sustained, and the matter was sent back for fresh adjudication on the taxability and computation issues.

Ratio Decidendi: An assessment order is revisable under section 263 where the Assessing Officer accepts a claim on a material tax issue without making the enquiries necessary to verify the transaction and its tax consequences.

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