Lack of enquiry into a material claim justifies revision when the assessment becomes erroneous and prejudicial to Revenue.

Revision under section 263 is justified where the assessment order is both erroneous and prejudicial to the interests of Revenue. An order passed without enquiry into a material claim cannot be treated as acceptance of a plausible view, because the absence of investigation itself renders the assessment vulnerable to revision. Here, the assessee accepted that the allowability of the disputed provisions had not been examined during assessment. That non-enquiry made the assessment erroneous and prejudicial, so the revision order was upheld and the matter was sent back for fresh examination of the disputed provisions.

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Issues: Whether the Principal Commissioner was justified in revising the assessment under section 263 on the ground that the Assessing Officer had not examined the allowability of the impugned provisions.

Analysis: Revision under section 263 is attracted only when the assessment order is both erroneous and prejudicial to the interests of Revenue. Where the Assessing Officer passes an order without making enquiry on a material claim, the order suffers from lack of investigation and cannot be treated as a conscious acceptance of a plausible view. In the present case, the assessee fairly conceded that the allowability of the two provisions had not been examined in the assessment proceedings. Such non-enquiry by the Assessing Officer rendered the assessment order erroneous and prejudicial to the interests of Revenue.

Conclusion: The revision was validly exercised and the assessee's challenge to the order under section 263 failed.

Final Conclusion: The assessment was correctly set aside for fresh examination of the disputed provisions, and the appeal was rejected.

Ratio Decidendi: An assessment order passed without enquiry into a material claim is erroneous and prejudicial to the interests of Revenue and is liable to revision under section 263 of the Income-tax Act, 1961.

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