Revision under Section 263 fails where the Assessing Officer made enquiries and adopted a plausible view on share premium.

Section 263 revision was tested against the requirement of error and prejudice where the Assessing Officer had already examined share premium, subscriber details, valuation report, ROC filings and related creditworthiness material. The record indicated that the receipts were explained as conversion of earlier unsecured loans into share application money and premium, with limited fresh inflow in the relevant year. Because the revisional authority did not show that the existing enquiries were legally insufficient or that the assessment view was unsustainable, the distinction between no enquiry and inadequate enquiry remained decisive. On that basis, revision could not rest on a mere difference of opinion, and the revisionary order was set aside.

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Issues: Whether revision under section 263 of the Income-tax Act, 1961 was justified on the ground that the assessment order was passed without proper enquiry into the share premium and the alleged applicability of section 56(2)(viib) and section 68.

Analysis: The Assessing Officer had issued notices, called for details of the share subscribers, valuation report, ROC filings, and creditworthiness-related particulars, and the assessee had furnished replies and documents, including the valuation report under Rule 11UA(2)(c) of the Income-tax Rules, 1962. The record showed that the assessee's case was that the impugned receipts were largely conversion of earlier unsecured loans from directors and relatives into share application money and premium, with only a small amount received during the relevant year. The revisional authority did not record a specific finding as to why the enquiries already made were legally insufficient or why the view taken by the Assessing Officer was unsustainable. The distinction between lack of enquiry and inadequate enquiry was material, and revision could not rest merely on a different view where the Assessing Officer had made enquiries and adopted a plausible view.

Conclusion: The invocation of section 263 was not justified, and the revisionary order was set aside in favour of the assessee.

Ratio Decidendi: Revision under section 263 cannot be sustained where the Assessing Officer has made enquiries and adopted a plausible view, unless the revisional authority demonstrates both error and prejudice by showing that the enquiry was absent or legally inadequate in a material sense.

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