Section 263 revision limits: assessment cannot be revised where enquiry was made and no demonstrable revenue prejudice was shown.

Revision under section 263 of the Income-tax Act requires the assessment order to be both erroneous and prejudicial to the interests of the revenue. Where the assessment was under limited scrutiny and the Assessing Officer examined the gift declaration, supplementary agreement, and donor's source of funds before accepting the explanation, the order could not be treated as one passed without enquiry. A Principal Commissioner cannot revise an assessment merely because a different view is preferred or further enquiry is considered desirable. On the facts noted, the alleged non-registration of the gift deed also did not establish demonstrable prejudice to the revenue, so invocation of section 263 was unjustified.

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Issues: Whether the Principal Commissioner could invoke revisionary jurisdiction under section 263 of the Income-tax Act, 1961, on the ground that the assessment order was erroneous and prejudicial to the interests of the revenue for alleged inadequate enquiry into the increase in capital arising from a gifted immovable property.

Analysis: The limited scrutiny was on the issue of increase in capital, and the Assessing Officer had called for details, examined the declaration of gift, supplementary agreement, and source of funds of the donor, and then accepted the explanation. The preconditions for revision under section 263 require the assessment order to be both erroneous and prejudicial to the interests of the revenue. An order cannot be revised merely because the Commissioner prefers a different view or considers further enquiry desirable. On the facts, the assessee had furnished the relevant documents and the donor's source of funds, so the assessment could not be treated as a case of lack of enquiry. Further, even on the Commissioner's objection regarding non-registration of the gift deed, the transaction did not result in any demonstrable prejudice to the revenue in the circumstances found by the Tribunal.

Conclusion: The conditions for invoking section 263 were not satisfied and the revisionary order was without jurisdiction.

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