Revision under section 263 fails where the assessment record shows proper inquiry into capital gains treatment.

Section 263 revision was not justified where the Assessing Officer had examined the assessee's capital-gains working, sale and purchase deeds, bank statements and related material before accepting long-term capital gain. The record showed scrutiny assessment with application of mind to the relevant facts, and the absence of an elaborate discussion did not mean there was no inquiry or verification. The consistency of treating receipts from the same plots as long-term capital gain in the preceding year also supported the assessment view. On these facts, the condition in Explanation 2 to section 263(1) was not met, so the revisional order could not be sustained and the assessment stood restored.

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Issues: Whether the Principal Commissioner was justified in invoking revisionary jurisdiction under section 263 on the ground that the assessment order was passed without proper inquiry and whether the assessment treating the profit on sale of plots as long-term capital gain was liable to be disturbed.

Analysis: The assessment records showed that the assessee furnished the working of capital gain, purchase and sale deeds, bank statements and other relevant material, which were considered by the Assessing Officer before accepting the declared long-term capital gain. The assessment proceedings were carried out through scrutiny and the order reflected application of mind to the relevant materials, even if the discussion was not elaborate. On these facts, the essential requirement in Explanation 2 to section 263(1) that the order must have been passed without making inquiries or verification was not satisfied. The record also showed that similar receipts from the same plots had been accepted as long-term capital gain in the immediately preceding year, supporting consistency in the treatment of the income.

Conclusion: The revisionary jurisdiction under section 263 was wrongly invoked and the order setting aside the assessment could not be sustained; the issue is decided in favour of the assessee.

Final Conclusion: The assessment order was restored in effect by cancelling the revisional order, and the appeal succeeded.

Ratio Decidendi: Section 263 can be invoked for lack of enquiry only where the assessment order is shown to have been passed without the inquiries or verification that ought to have been made; where relevant material was examined and the view taken is a possible one, revision is not warranted.

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