Section 263 revision fails where the Assessing Officer made enquiry and took a possible view on the material.

Revision under section 263 of the Income-tax Act is not justified unless the assessment order is both erroneous and prejudicial to the Revenue. Where the Assessing Officer issued notices, called for details, examined subcontracting expenditure, obtained a section 133(6) response, and completed reassessment after considering the material, mere inadequacy of enquiry does not permit revision. The Commissioner cannot substitute a different view on the same record, and the refund-related issue, being consequential to the reassessment, did not provide an independent basis for section 263 action. On these facts, the revisional order was not sustainable.

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Issues: Whether the revisionary order under section 263 of the Income-tax Act, 1961 was valid when the Assessing Officer had examined the subcontracting expense claim and the refund-related issue in the reassessment proceedings.

Analysis: The reassessment record showed that the Assessing Officer issued notices, called for details, examined the subcontracting expenditure, obtained a response under section 133(6), and completed assessment under section 143(3) read with section 147 after considering the material placed before him. The revisional authority proceeded on the premise that the enquiry was inadequate and also questioned the refund aspect. The governing test under section 263 requires both an erroneous order and prejudice to the Revenue. Mere inadequacy of enquiry is not enough; revision is justified only where there is a lack of enquiry or a definite error causing prejudice. On the facts, the same material had already been considered in reassessment, and the Commissioner could not substitute a different view on the same record. The refund issue was also consequential to the reassessment and did not furnish an independent basis for revision.

Conclusion: The revisional order was not sustainable and the assessee succeeded.

Ratio Decidendi: Section 263 cannot be invoked where the Assessing Officer has made enquiry and taken a possible view on the material before him, because inadequate enquiry alone does not satisfy the twin requirements of error and prejudice.

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