Revision under section 263 fails where the Assessing Officer made enquiries and section 14A disallowance lacked any expenditure claim.

Revision under section 263 requires the assessment order to be both erroneous and prejudicial to the Revenue, and it cannot be invoked merely because a different view is preferred or further enquiry is thought desirable. On the section 14A point, the assessee had received share of profit from partnership firms but had claimed no expenditure, so there was no basis for disallowance on the record and the revision on that ground failed. On the demonetisation cash deposit issue, the assessee had explained the deposit from cash withdrawn from the capital account, supported by confirmations and account details, and the Assessing Officer had made a specific enquiry before accepting the explanation. The revisional order was therefore unsustainable and the assessment was restored.

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Issues: (i) Whether revision under section 263 could be sustained on the footing that section 14A was attracted to share of profit from partnership firms, despite no expenditure having been claimed by the assessee; (ii) Whether revision under section 263 could be sustained on the ground that the Assessing Officer had not made adequate enquiry into the cash deposit of Rs. 10 lakh during the demonetisation period.

Issue (i): Whether revision under section 263 could be sustained on the footing that section 14A was attracted to share of profit from partnership firms, despite no expenditure having been claimed by the assessee.

Analysis: The assessment record showed that the assessee had received share of profit from partnership firms and had placed the relevant details before the Assessing Officer. The Principal Commissioner initially proceeded on the footing that the firms had not been properly verified, but in the revisional order shifted the focus to disallowance under section 14A. The material on record showed that the assessee had not claimed any expenditure in the return, so there was no basis for a disallowance under section 14A on the facts of the case. In these circumstances, the assessment order could not be treated as erroneous and prejudicial to the interests of the Revenue on this ground.

Conclusion: The revision on this issue was not justified and the assessee succeeded.

Issue (ii): Whether revision under section 263 could be sustained on the ground that the Assessing Officer had not made adequate enquiry into the cash deposit of Rs. 10 lakh during the demonetisation period.

Analysis: The assessee had explained the cash deposit as having been made out of cash withdrawn from the capital account in the partnership firm shortly earlier, and the supporting confirmation and account details were part of the assessment record. The Assessing Officer had raised the specific query and accepted the explanation after verification. The record therefore did not support the conclusion that there was no enquiry at all. Even in light of the expanded scope of section 263, the facts did not establish that the assessment order suffered from the type of enquiry defect that would justify revision.

Conclusion: The revision on this issue was not justified and the assessee succeeded.

Final Conclusion: The revisional order was unsustainable, the assessment order was restored, and the assessee obtained relief.

Ratio Decidendi: Revision under section 263 is permissible only where the assessment order is both erroneous and prejudicial to the interests of the Revenue, and an order cannot be revised merely because the Principal Commissioner prefers a different view or considers the enquiry insufficient when the Assessing Officer has in fact made enquiries on the relevant issues.

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