Section 263 revision needs error and prejudice on material evidence; plausible enquiry-based assessment cannot be disturbed.

Revision under section 263 requires material showing that the assessment order is both erroneous and prejudicial to the interests of the Revenue; where the assessee had disclosed details of advances for properties and no further enquiry was warranted on the record, revisional interference was not justified. On the interest-rate issue under section 36(1)(iii), the Assessing Officer had adopted a rate after enquiry and the underlying disallowance had already been deleted in appeal, rendering the dispute academic. The revisional order was therefore unsustainable.

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Issues: (i) Whether the revision order under section 263 of the Income-tax Act, 1961 was sustainable on the ground that the Assessing Officer had not enquired into advances for properties; (ii) Whether the revision order was sustainable on the ground that the rate of interest adopted for disallowance under section 36(1)(iii) was erroneous.

Issue (i): Whether the revision order under section 263 of the Income-tax Act, 1961 was sustainable on the ground that the Assessing Officer had not enquired into advances for properties.

Analysis: The assessee had furnished details of advances for properties during the assessment proceedings. The record did not show any material warranting further enquiry, and the revisional authority acted only on its own opinion without supporting evidence. A revision under section 263 requires the assessment order to be both erroneous and prejudicial to the interests of the Revenue.

Conclusion: The revision on this ground was not sustainable and was against the assessee.

Issue (ii): Whether the revision order was sustainable on the ground that the rate of interest adopted for disallowance under section 36(1)(iii) was erroneous.

Analysis: The assessee had placed material showing the borrowing rates and the Assessing Officer had adopted a rate after enquiry. In any event, the disallowance under section 36(1)(iii) had already been deleted in appeal, making the dispute over the rate adopted academic.

Conclusion: The revision on this ground was also not sustainable and was against the Revenue.

Final Conclusion: The revisional order under section 263 could not be sustained, and the assessee's appeal succeeded.

Ratio Decidendi: Revision under section 263 cannot be upheld unless the assessment order is shown, on material evidence, to be both erroneous and prejudicial to the interests of the Revenue; where the Assessing Officer has taken a plausible view after enquiry, or the issue has become academic, revisional interference is unwarranted.

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