Section 263 revision upheld where lack of enquiry into share capital and share premium made the assessment erroneous and prejudicial.

Revisionary jurisdiction under section 263 was upheld where the Assessing Officer accepted share capital and share premium without meaningful enquiry or verification of the credits' nature and source. The record showed substantial receipts from multiple investor concerns, yet the assessee did not produce supporting material despite opportunity. The revisional authority held that later utilisation of funds could not replace the required enquiry into credits recorded in the books, and treated the assessment order as both erroneous and prejudicial to the interests of the Revenue. Fresh assessment was therefore warranted.

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Issues: Whether assumption of revisionary jurisdiction under section 263 of the Income-tax Act, 1961 was valid where the Assessing Officer had not enquired into the receipt of share capital and share premium and had accepted the assessee's explanation without verification.

Analysis: The assessment record showed receipt of substantial share capital and share premium from multiple investor concerns, while the assessee did not furnish supporting material despite opportunity. The revisional authority found that the Assessing Officer had not carried out meaningful enquiry into the nature and source of the credits and that subsequent utilisation of the funds could not substitute the enquiry required for credits appearing in the books. On that basis, the assessment order was treated as both erroneous and prejudicial to the interests of the Revenue, warranting revision under section 263 and a fresh assessment.

Conclusion: The assumption of revisionary jurisdiction under section 263 was upheld, and the assessee's challenge failed.

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