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Issues: Whether the Principal Commissioner could invoke revision under section 263 of the Income-tax Act, 1961 to examine issues of cash deposits and purchase of immovable properties when the reassessment was initiated only to verify the applicability of section 2(22)(e) concerning deemed dividend under a limited-scrutiny reassessment.
Analysis: The reassessment proceedings were initiated for the specific purpose of examining section 2(22)(e), and the Assessing Officer confined the enquiry to that issue and made an addition on that basis after considering the assessee's explanation. The revisionary jurisdiction under section 263 can be exercised only when the assessment order is both erroneous and prejudicial to the interests of the revenue. On the facts, the issues identified by the Principal Commissioner were outside the scope of the original limited scrutiny and could not be used to enlarge the reassessment beyond its recorded purpose. The order was not shown to be erroneous in relation to the issue actually reopened, and revision could not be founded on matters beyond the reassessment record.
Conclusion: The invocation of section 263 was not justified and the revisionary order was liable to be set aside.
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