Revision under section 263 upheld where unverified business-expense deductions made the assessment erroneous and revenue-prejudicial.

Revision under section 263 was upheld where the assessing officer allowed a substantial business-expense deduction without calling for details or verifying whether the expenditure had actually been incurred for business purposes. The lack of inquiry rendered the assessment order erroneous and prejudicial to the interests of the revenue, so the Commissioner was justified in setting aside the assessment. The assessee's challenge failed.

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Issues: Whether the Commissioner was justified in setting aside the assessment under section 263 of the Income-tax Act, 1961 on the ground that the Income-tax Officer had allowed a large deduction towards expenses without verifying whether such expenses were actually incurred for the purposes of the assessee's business.

Analysis: The assessee had received substantial gross receipts and claimed heavy expenditure against them, but the Income-tax Officer allowed the deduction without calling for details or verifying the claim. The deduction of business expenses is permissible only when the expenditure is shown to have been actually incurred and laid out for business purposes. On the facts, the absence of verification made the assessment order erroneous and prejudicial to the interests of the revenue, justifying revision under section 263.

Conclusion: The setting aside of the assessment under section 263 was upheld and the assessee's challenge failed.

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