Section 263 revision requires error and prejudice to Revenue; mere disagreement with enquiry depth is insufficient.

Revision under section 263 of the Income-tax Act is not justified merely because the Principal Commissioner disagrees with the depth of enquiry made by the Assessing Officer. Where the assessee produced contract notes, broker confirmations, demat statements and bank records, and the Assessing Officer examined those materials before making an addition under section 68, the assessment reflects a plausible view based on enquiry already conducted. Section 263 requires both error and prejudice to the Revenue; a different view on the same material is insufficient. On the stated facts, the Principal Commissioner had not shown adequate reasons or the minimum enquiry needed, so invocation of revisionary jurisdiction was not sustainable.

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Issues: Whether the Principal Commissioner was justified in invoking revisionary jurisdiction under section 263 of the Income-tax Act, 1961 to set aside the reassessment order on the ground that the Assessing Officer had not properly examined the assessee's penny stock transactions and claim of exempt long-term capital gains.

Analysis: The assessee had furnished contract notes, broker confirmations, demat statements, bank records, and related evidence in the reassessment proceedings, and the Assessing Officer had examined those materials before making an addition under section 68. On the material available, the order of assessment was based on an enquiry already conducted and reflected a plausible view. The assumption of revisional jurisdiction under section 263 requires the coexistence of both error and prejudice to the interests of revenue, and mere dissatisfaction with the depth of enquiry or a different view on the same material is insufficient. The Principal Commissioner also did not record adequate reasons or undertake the minimal enquiry necessary to establish that the assessment order was erroneous and prejudicial.

Conclusion: The invocation of section 263 was not sustainable, and the revision order was liable to be quashed.

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