Lack of inquiry into a foreign exchange loss claim justified revision of the assessment under tax law.

An assessment accepting a foreign exchange fluctuation loss claim without inquiry or verification was treated as erroneous and prejudicial to the interests of revenue because the Assessing Officer had not examined its allowability under section 43AA, despite the revised return and explanation being on record. The ITAT Ahmedabad upheld revision under section 263, finding that failure to scrutinise a material claim justified revisional interference.

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Issues: Whether the Principal Commissioner was justified in revising the assessment under section 263 of the Income-tax Act, 1961 on the ground that the Assessing Officer had not examined the assessee's claim for deduction of foreign exchange fluctuation loss under section 43AA.

Analysis: The revised return and the assessee's explanation were on record, but the assessment proceedings showed no inquiry or specific verification by the Assessing Officer on the allowability of the claim under section 43AA. The order was therefore treated as having been passed without proper examination of a material claim. In such circumstances, the assessment could be regarded as erroneous and prejudicial to the interests of revenue, warranting revision under section 263.

Conclusion: The revision under section 263 was upheld and the assessee's challenge failed.

Ratio Decidendi: Where a material claim is accepted in assessment without any inquiry or verification by the Assessing Officer, the assessment order is erroneous and prejudicial to the interests of revenue and is amenable to revision under section 263 of the Income-tax Act, 1961.

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