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Issues: Whether revision under section 263 of the Income-tax Act, 1961 was validly invoked on the ground that the Assessing Officer had not enquired into the assessee's claim of short-term capital loss on certain scrips.
Analysis: The jurisdiction under section 263 can be exercised only when the assessment order is both erroneous and prejudicial to the interests of the Revenue. An order becomes erroneous where it is passed without enquiry or without application of mind, but not where the Assessing Officer has made enquiries, called for particulars, examined supporting documents, and thereafter taken one of the permissible views. The record showed that specific queries were raised under section 142(1), including detailed questions on investment in shares and short-term capital loss, and the assessee furnished replies with contract notes, bank statements, and other supporting material. On these facts, the Assessing Officer had in fact applied his mind and conducted enquiry before accepting the claim. The revision was also based on an assumption that the scrips were penny stocks, without cogent material to establish that premise.
Conclusion: The invocation of section 263 was invalid because the prerequisite of an erroneous and prejudicial assessment order was not satisfied; the revisional order was liable to be quashed, in favour of the assessee.
Final Conclusion: The assessment order could not be revised merely because the Principal Commissioner held a different view on the adequacy of enquiry, since the Assessing Officer had already examined the claim and taken a conscious decision.
Ratio Decidendi: Revision under section 263 cannot be sustained where the Assessing Officer has made enquiry and adopted a permissible view; absence of enquiry is essential before an order can be treated as erroneous and prejudicial to the Revenue.
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