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Issues: Whether the revisionary order under section 263 of the Income-tax Act, 1961 was validly passed on the ground that the Assessing Officer made no enquiry into the applicability of section 56(2)(vii)(b)(ii) in a limited scrutiny assessment and thereby passed an erroneous and prejudicial order.
Analysis: The assessment was selected for limited scrutiny on the issue of investment in immovable property, so the enquiry was not confined only to one source aspect but extended to all provisions incident on the transaction, including the possible application of section 56(2)(vii)(b)(ii). The Assessing Officer had not examined that statutory issue at all and had accepted the assessment without making the enquiry that the circumstances called for. The absence of enquiry amounted to non-application of mind and brought the case within the scope of section 263 read with Explanation 2(a), under which an order passed without requisite enquiry is treated as erroneous and prejudicial to the interests of the Revenue. The Tribunal also held that, once such jurisdiction was attracted, the revisional authority could remit the matter for fresh examination instead of deciding the issue itself.
Conclusion: The revision under section 263 was upheld and the assessee's challenge failed.
Final Conclusion: The assessments were validly set aside for fresh consideration because the original orders were passed without the enquiry required on a material issue arising from the scrutiny.
Ratio Decidendi: Where the Assessing Officer fails to make enquiry into a material issue falling within the scope of scrutiny, the assessment order is erroneous and prejudicial to the interests of the Revenue and is amenable to revision under section 263, including by remand for de novo examination.
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