Revisionary jurisdiction cannot be used where the Assessing Officer made inquiry and applied mind to a disputed loan transaction.

Section 263 revision was held unwarranted where the reassessment record showed active inquiry by the Assessing Officer, including a section 142(1) query, examination of the assessee's explanation, and consideration of confirmations and bank statements. The assessee's reply addressed the loan transaction with M/s Jar Metal Industries Private Limited, stating that the alleged amount was incorrect and that the actual loan was partly repaid with an outstanding balance. As no contrary material was brought on record, the assessment was based on inquiry and conscious application of mind, and the Principal Commissioner could not revise it merely because a different view was preferred. The revisional order was set aside and the assessee succeeded.

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Issues: Whether the Principal Commissioner was justified in invoking revisionary jurisdiction under section 263 on the ground that the Assessing Officer had failed to make proper inquiry and verification in the reassessment relating to the assessee's loan transaction with M/s Jar Metal Industries Private Limited.

Analysis: The reassessment record showed that the Assessing Officer had specifically queried the impugned transaction, called for explanation under section 142(1), and considered the assessee's reply along with supporting material such as confirmation and bank statements. The assessee had explained that the alleged transaction of Rs. 80,50,000 was incorrect and that the actual loan was Rs. 17,50,000, part-repaid, with the balance outstanding. The material on record also showed that the assessee had sought adverse material and cross-examination, but no contrary material was brought on record. On these facts, the reassessment was based on inquiry and conscious application of mind, and the revisional authority could not treat the assessment as erroneous merely because it preferred a different view.

Conclusion: The invocation of section 263 was not justified. The revisional order was set aside and the appeal was allowed in favour of the assessee.

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