Section 263 revision fails where the Assessing Officer made enquiry and adopted a plausible view on loss set-off.

Section 263 revision cannot be sustained where the Assessing Officer has examined the return, schedules and replies, and specifically enquired into set-off of brought-forward losses and unabsorbed depreciation. The governing test requires the assessment order to be both erroneous and prejudicial to the interests of the Revenue; a mere difference of opinion or alleged inadequacy of enquiry is insufficient if the Assessing Officer has applied his mind to the issue. On the facts, the record showed enquiry rather than a complete absence of it, so the revisionary order was unsustainable.

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Issues: Whether the Principal Commissioner was justified in invoking revisionary jurisdiction under section 263 of the Income-tax Act, 1961 on the ground that the Assessing Officer had not made proper enquiry while allowing set-off of brought-forward losses and unabsorbed depreciation.

Analysis: The assessment record showed that the Assessing Officer had examined the relevant return, schedules and replies during the reassessment proceedings, and the issue of set-off had been specifically enquired into. On the facts, the revision order proceeded on a view that the enquiry was insufficient, but the record did not show a complete absence of enquiry. The governing principle is that section 263 can be invoked only when the assessment order is both erroneous and prejudicial to the interests of the Revenue. A mere difference of opinion, or even inadequacy of enquiry, does not satisfy that test where the Assessing Officer has applied his mind to the issue.

Conclusion: The invocation of section 263 was not justified, and the revision order was unsustainable.

Ratio Decidendi: Section 263 cannot be sustained where the Assessing Officer has made enquiry and taken a plausible view on the issue, because revision requires a demonstrable lack of enquiry and satisfaction of both twin conditions of error and prejudice.

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