Revision under Section 263 requires lack of inquiry; mere disagreement with AO's appreciation cannot sustain revisionary action.

Whether revisionary powers under Section 263 were rightly invoked: the tribunal applied the principle that revision is permissible only where the assessment order is both erroneous and prejudicial to revenue and where there is a lack of inquiry. Because the Assessing Officer had reopened the assessment, examined cash deposits, obtained schedules and audited balance-sheet entries, and accepted explanations, the essential condition of lack of inquiry was not met. Re-appreciation of audited classifications by the revisional authority amounted to a change of opinion, not correction of an erroneous assessment; accordingly the revision order was quashed and the appeal allowed for the assessee.

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Issues: Whether the Commissioner (PCIT) correctly invoked powers under Section 263 of the Income-tax Act, 1961 to revise the assessment on the ground that the Assessing Officer failed to determine the source of cash deposits and that the assessment order was erroneous and prejudicial to the interests of revenue.

Analysis: Applicable law requires that revision under Section 263 be exercised only if the assessment order is both erroneous (contrary to law) and prejudicial to the interests of the revenue. A distinction exists between lack of inquiry and inadequate inquiry; only lack of inquiry can justify exercise of revisionary jurisdiction. Where the Assessing Officer has raised queries, received and examined explanations and supporting audited books and schedules, and accepted the return after enquiry, the essential condition of lack of inquiry is not satisfied. In the present case, the Assessing Officer reopened the assessment, specifically examined cash deposits during the demonetisation period, obtained schedules and audited balance sheet entries showing advances recoverable/imprest to staff, and accepted the explanation. The PCIT re-appreciated balance sheet classifications and reached a different view, treating an amount recorded in audited books under advances as unexplained cash credit. Such re-appreciation amounts to change of opinion rather than correction of an assessment that is erroneous and prejudicial to revenue. Judicial authority confirms that inadequate inquiry does not permit Section 263 revision and that revision cannot be based on mere difference of opinion or on an incorrect appreciation of record entries.

Conclusion: The invocation of Section 263 was not justified; the impugned revision order dated 31.01.2024 is quashed and the appeal is allowed in favour of the assessee.

Ratio Decidendi: Revision under Section 263 of the Income-tax Act, 1961 is permissible only where there is lack of inquiry and the assessment order is shown to be erroneous and prejudicial to revenue; where the Assessing Officer has made enquiries, considered explanations and accepted audited books and schedules, a revisional order based on mere disagreement or different appreciation of those records is invalid.

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