Section 263 revision upheld for failure to verify Section 54F exemption claim and unregistered property purchase documents.

Revisional jurisdiction under Section 263 was considered where reassessment had allowed a Section 54F exemption claim without proper verification. The Tribunal noted that the asserted residential property purchase rested on an unregistered agreement, and that part performance under Section 53A of the Transfer of Property Act required compliance with the registration requirement in Section 17(1-A) of the Registration Act. Because the Assessing Officer failed to make the necessary inquiry, the order fell within Explanation 2(a) to Section 263 as erroneous and prejudicial to the interests of the Revenue, and revision was upheld.

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Issues: Whether the Principal Commissioner was justified in revising the reassessment order under Section 263 of the Income-tax Act, 1961 on the ground that the Assessing Officer had failed to verify the assessee's claim for exemption under Section 54F of the Income-tax Act, 1961, and whether the reassessment order was therefore erroneous and prejudicial to the interests of the Revenue.

Analysis: The assessee's claim for exemption under Section 54F was not verified during reassessment. The revisional authority found that the explanation regarding purchase of a residential property had changed, and the alleged purchase rested on an unregistered agreement. The Tribunal noted that, for purposes of part performance under Section 53A of the Transfer of Property Act, 1882, the document had to satisfy the registration requirement under Section 17(1-A) of the Registration Act, 1908. In the absence of a registered document, the claim that the property had been purchased in the manner asserted could not be accepted. The failure to conduct the required inquiry brought the case within Explanation 2(a) to Section 263, which treats an order passed without necessary verification as erroneous insofar as it is prejudicial to the interests of the Revenue.

Conclusion: The revision under Section 263 was valid and the reassessment order was rightly set aside for fresh adjudication.

Ratio Decidendi: An assessment order passed without making inquiries or verification that ought to have been made is deemed erroneous and prejudicial to the interests of the Revenue, and such non-verification can sustain revision under Section 263.

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