Section 263 revision upheld where no enquiry was made into bank credits and disputed contractual receipt entries.

Where the assessment record showed no enquiry into unexplained bank credits, alleged short disclosure of contractual receipts, or the debit of the time-extension amount, the assessment was treated as erroneous and prejudicial to the interests of the Revenue. Mere rejection of books and estimation of profit did not substitute for verification of these separate issues, because the Assessing Officer had not shown application of mind to their nature or tax treatment. The revisional power under section 263 was therefore held to have been validly invoked, and the assessment order was upheld.

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Issues: Whether the revisional order under section 263 of the Income-tax Act, 1961 was valid where the Assessing Officer had not made enquiry into the bank credits, alleged short disclosure of contractual receipts, and debit of the time-extension amount in the profit and loss account.

Analysis: The assessment record did not show any enquiry by the Assessing Officer on the specific matters raised in revision. Mere rejection of books and estimation of profits under section 143(3) did not dispense with enquiry into separate credits in the bank account or entries which required verification as to their nature. In the absence of material showing application of mind by the Assessing Officer on these issues, the order was treated as both erroneous and prejudicial to the interests of the Revenue.

Conclusion: The revisional jurisdiction under section 263 was correctly invoked and the assessment order setting aside was upheld.

Ratio Decidendi: Where the assessment order reflects no enquiry on material issues such as unexplained bank credits or disputed debits, the order is erroneous and prejudicial to the interests of the Revenue and is liable to revision under section 263.

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