Revisionary jurisdiction fails where the Assessing Officer made relevant inquiries and adopted a plausible assessment view.

Revision under section 263 requires the assessment order to be both erroneous and prejudicial to the interests of Revenue. The notes state that the Assessing Officer made specific inquiries and obtained supporting material on security deposits, finance-lease obligations, trade payables, borrowings and interest expenditure, and adopted a plausible view after considering the responses. Explanation 2 does not permit revision merely because the Principal Commissioner considers those inquiries inadequate or prefers another conclusion. As no specific assessment error or failure to make essential inquiries was established, the revisionary action was described as invalid and the revision order as quashed.

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Issues: Whether revisionary jurisdiction under section 263 could be invoked on the basis that the assessment lacked inquiry or verification concerning security deposits, finance-lease obligations, trade payables, borrowings and interest expenditure.

Analysis: The assessment record showed that the Assessing Officer had issued specific queries and obtained replies and supporting details on the matters identified in the revision order. The Assessing Officer had considered the claims, including interest expenditure and high creditors/liabilities, and recorded that no adverse inference arose. The Principal Commissioner neither identified a specific error in the assessment nor established that essential inquiries had not been made. Explanation 2 to section 263 does not permit revision merely because the Principal Commissioner considers the inquiry inadequate or prefers a different conclusion where the Assessing Officer has made inquiries and adopted a plausible view. The statutory conditions of an erroneous order and prejudice to Revenue must coexist.

Conclusion: The assessment order was neither erroneous nor prejudicial to the interests of Revenue; invocation of section 263 was invalid and the revision order was quashed.

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