Section 263 revision upheld where donation deductions were not properly verified and inquiry was absent

Failure to examine a claimed deduction can render an assessment order erroneous and prejudicial to the Revenue where the Assessing Officer remains passive despite circumstances requiring verification. Here, the assessment records showed no inquiry into donation claims under sections 80GGC and 80G(5), even though search material, statements under section 132(4), and surrounding facts indicated possible accommodation entries and bogus donations. The Tribunal accepted that such omission justified revisional jurisdiction under section 263 and upheld the direction for fresh assessment.

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Issues: Whether the Principal Commissioner was justified in invoking revisional jurisdiction under section 263 of the Income-tax Act, 1961 on the ground that the assessment order was passed without proper enquiry into the assessee's claim of deduction for donation under sections 80GGC and 80G(5), and whether the resulting order was erroneous and prejudicial to the interests of the Revenue.

Analysis: The assessment records showed that the Assessing Officer had examined only a different deduction issue and had not conducted enquiry into the donation of Rs. 30,00,000 claimed under section 80GGC or the donation of Rs. 2,25,000 claimed under section 80G(5). The Tribunal accepted the Commissioner's finding that the impugned donations required verification, particularly in view of the search material, statements recorded under section 132(4), and the surrounding circumstances indicating accommodation entries and bogus donations. It held that failure to investigate a claim which ought to have been examined renders the assessment order erroneous, and where such omission causes possible tax loss, the order is also prejudicial to the interests of the Revenue. The Tribunal relied on the principle that the Assessing Officer has a duty to inquire and cannot remain passive when the circumstances call for verification.

Conclusion: The revision under section 263 was validly invoked and the Commissioner's direction for fresh assessment was upheld.

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