Alleged accommodation entries in reassessment; AO examined evidence so revision was disallowed and assessment upheld.

Reassessment was reopened specifically for alleged accommodation entries; the AO issued notices, examined explanations and documentary evidence, and recorded affidavits and disclosures admitting the transactions which were on record and offered before the Settlement Commission. The absence of detailed discussion or a specific addition in the assessment order did not negate application of mind; where records demonstrate enquiry and a conscious decision by the AO, the order cannot be treated as erroneous or prejudicial to revenue. Accordingly, the revision challenge failed and the assessee's appeal was allowed.

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Issues: Whether the Principal Commissioner of Income-tax was justified in invoking revisionary jurisdiction under section 263 of the Income-tax Act, 1961 to set aside the reassessment order passed under section 147/148 r.w.s.144 r.w.s.144B for AY 2015-16 on the ground that the Assessing Officer failed to make additions or verify alleged accommodation entries of Rs.95,09,351/-.

Analysis: The reopening under section 147 was premised on information from a search indicating alleged accommodation entries. Reassessment proceedings record issuance of notices, consideration of explanations, and evidences including affidavits and disclosures where the entry operator admitted transactions and the assessee's name appeared in seized annexures. The Assessing Officer accepted the returned income after examining the material on record. Lack of elaborate discussion in the assessment order does not, by itself, demonstrate absence of enquiry where the records show that enquiries were made and a conscious decision was taken. Invocation of section 263 requires the reassessment order to be shown to be erroneous and prejudicial to the interests of revenue on the basis of lack of enquiry or incorrect application of mind; where the material indicates verification and acceptance of returned income, setting aside the order under section 263 is not justified.

Conclusion: The revision under section 263 was not justified; the reassessment order is not erroneous or prejudicial to the interests of the Revenue and the appeal is allowed in favour of the assessee.

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