Revisionary power requires demonstrable lack of inquiry or legal error; suspicion or alternative inquiries alone cannot sustain revisionary action.

Revisionary power was held exercisable only where the original assessment is shown to be erroneous or prejudicial by reason of a true lack of inquiry or incorrect application of law; mere suspicion or suggestions for alternative inquiries (including ''source of source'') do not suffice. The Assessing Officer had issued procedural notices and received substantive documentation (licence, audited statements, remittance certificates, FC GPR filings, merchant banker valuation and bank records), and acceptance of a qualified merchant banker valuation was not open to routine interference. Consequently the revisional order was quashed and relief granted to the taxpayer.

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Issues: Whether the order passed by the revisionary authority under Section 263 of the Income-tax Act, 1961 holding the reassessment order dated 30.03.2022 to be erroneous and prejudicial to the interest of revenue on grounds of alleged lack of inquiry into share capital received from a foreign investor was sustainable.

Analysis: The Tribunal examined whether the Assessing Officer failed to make requisite inquiries or whether the assessment involved merely an arguable or different view. The record shows that notices under Section 142(1) were issued and the assessee furnished detailed replies, including trading licence and registration of the investor, audited financial statements of the investor, foreign inward remittance certificates, FC-GPR filings, SEBI-registered merchant banker valuation (DCF) and related bank statements. Jurisprudence distinguishes between a total lack of inquiry (which may render an order erroneous) and an inadequate or different inquiry (which does not). Acceptance of a valuation by a qualified merchant banker under applicable rules is ordinarily not susceptible to interference under revisional powers. The revisionary authority's observations were largely founded on suspicion and on suggestions of additional or alternative lines of inquiry (source of source), without pointing to any factual deficiency in the material placed before the Assessing Officer or any incorrect application of law by the Assessing Officer that would make the order per se erroneous and prejudicial to revenue.

Conclusion: The impugned order of the revisionary authority under Section 263 is quashed and the appeal is allowed in favour of the assessee.

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