Revisionary jurisdiction under section 263 upheld where assessment failed to examine investment allowance and processing was not manufacture.

Revision under section 263 was considered valid where the original assessment had not examined the claim for investment allowance. The assessee's activity of processing metal or tin sheets was treated as not amounting to manufacture or production, because the end-product remained substantially the same as the raw material and the audit report itself described the concern as a processing company. Authorities relied on by the assessee were distinguished on their facts, while the Revenue's authorities supported the principle that failure to make necessary inquiries can render an assessment order erroneous and prejudicial to the Revenue. The Commissioner's revisionary order was therefore upheld.

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Issues: Whether the Commissioner was justified in exercising revisionary jurisdiction under section 263 of the Income-tax Act, 1961 to set aside the assessment on the ground that investment allowance had been wrongly allowed, and whether the assessee's activity amounted to manufacture or production so as to justify the allowance.

Analysis: The original assessment had not examined the assessee's claim for investment allowance. The material on record showed that the assessee was engaged in processing metal or tin sheets and that the end-product remained substantially the same as the raw material. The audit report also described the concern as a processing company. The authorities relied upon by the assessee were held distinguishable on facts, while the principles in the decisions cited for the Revenue supported the view that failure to make necessary inquiries renders the order erroneous and prejudicial to the Revenue.

Conclusion: The Commissioner's order under section 263 was held to be valid, and the assessee was not entitled to succeed.

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