Section 263 revision fails where the Assessing Officer enquired into cash deposits and accepted the explained source.

Revision under section 263 was not sustainable where the Assessing Officer had reopened the assessment to examine a cash deposit, carried out enquiry, verified the assessee's explanation and supporting material, and recorded a finding that the source of the deposit was in order. The Principal Commissioner could not invoke section 263 merely to reappreciate the same material or substitute a different view on the same facts. Because the assessment order was passed after application of mind and enquiry on the very issue, it was not shown to be erroneous and prejudicial to the interests of the Revenue. The assessee therefore succeeded.

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Issues: Whether the revisionary order under section 263 of the Income-tax Act, 1961 could be sustained when the Assessing Officer had already reopened the assessment to examine the cash deposit, conducted enquiry, verified the explanation and recorded a finding accepting the source of the deposit.

Analysis: The assessment had been reopened to verify the cash deposit in the assessee's bank account. During reassessment, the assessee furnished an explanation and supporting documents, and the Assessing Officer recorded that the information had been examined and verified and that the source of the cash deposit was found in order. On the same material, the Principal Commissioner sought to hold that part of the deposit remained unexplained and that the assessment order was erroneous and prejudicial to the interests of the Revenue. Where the Assessing Officer has actually conducted enquiry and applied mind to the issue, section 263 cannot be invoked merely to reappreciate the same facts or substitute a different view.

Conclusion: The invocation of section 263 was not sustainable and the assessee succeeded.

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