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Issues: (i) Whether the revisionary order under section 263 could be sustained when the assessment had been framed after detailed enquiry and with prior approval under section 153D; (ii) Whether Explanation 2(a) to section 263 applied so as to deem the assessment order erroneous and prejudicial to the interests of revenue on the ground of alleged lack of enquiry.
Issue (i): Whether the revisionary order under section 263 could be sustained when the assessment had been framed after detailed enquiry and with prior approval under section 153D.
Analysis: The assessment records showed that the Assessing Officer issued detailed questionnaires, called for replies with reference to the seized material, and considered the assessee's explanations before completing the assessments. The additions and disallowances made in assessment also indicated that the Assessing Officer had applied his mind and adopted one of the courses permissible in law. The Tribunal further noted that the assessments were completed only after approval under section 153D, and the Principal Commissioner did not revise or disturb that approval order. In such a situation, the revisionary jurisdiction could not be exercised merely to direct a fresh enquiry on the same material.
Conclusion: The revision under section 263 was not sustainable on this ground and was against the assessee.
Issue (ii): Whether Explanation 2(a) to section 263 applied so as to deem the assessment order erroneous and prejudicial to the interests of revenue on the ground of alleged lack of enquiry.
Analysis: Explanation 2(a) does not confer an unfettered power to revise every assessment on a generalized allegation of insufficient enquiry. The deeming fiction applies only where the order is passed without the enquiries or verifications which a prudent assessing authority ought to have made. Here, the Tribunal found that the Assessing Officer had conducted extensive and issue-specific enquiries, and the Principal Commissioner had not carried out any independent enquiry to establish that the assessment was made without the requisite verification. The Tribunal also held that where a plausible view has been taken after enquiry, the assessment cannot be treated as erroneous merely because a different view is possible.
Conclusion: Explanation 2(a) was not attracted and the assessee succeeded on this issue.
Final Conclusion: The revisionary orders were quashed and the assessments framed under section 153A read with section 143(3) were restored, leaving the assessee with complete relief in the appeals.
Ratio Decidendi: Section 263 cannot be invoked where the Assessing Officer has made adequate enquiries, taken a legally permissible view, and the Principal Commissioner has not conducted an independent enquiry to establish that the assessment order is erroneous and prejudicial to the interests of revenue, especially when the assessment is supported by approval under section 153D.
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