Revisionary jurisdiction under section 263 affirmed where inadequate verification of expenditures rendered the assessment erroneous and prejudicial.

Exercise of revisionary jurisdiction under section 263 was affirmed where the assessment was completed after scrutiny selection without adequate verification of large expenditure entries and director particulars; the supervisory authority found the assessing officer erred by accepting affidavits and explanations without third party enquiries or detailed examination to satisfy genuineness, and thereby held the order both erroneous and prejudicial to revenue. The assessment was set aside and remitted for fresh enquiry with a direction to afford the assessee opportunity of hearing before finalization.

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Issues: Whether the Principal Commissioner of Income Tax validly exercised jurisdiction under section 263 of the Income-tax Act, 1961 by holding the assessment dated 23.2.2024 to be erroneous and prejudicial to the interest of revenue for not verifying/examining expenditure of Rs. 27,20,11,899/- and related director inquiries.

Analysis: The Principal Commissioner identified that the assessment was completed after scrutiny selection but without adequate enquiries or verification regarding large expenditure entries and the status/verification of directors, and noted absence of calling for details or issuing enquiries to third parties to verify payments. The assessing officer had accepted affidavits and certain explanations but had not examined the claimed expenditure and related particulars as required to satisfy genuineness. The Principal Commissioner applied the legal standard for exercising revisionary jurisdiction to determine whether the assessment order was both erroneous and prejudicial to revenue, relying on supervisory power to remit for fresh enquiry and to direct the assessing officer to afford opportunity of hearing before finalizing assessment.

Conclusion: The exercise of jurisdiction under section 263 was upheld and the assessment order was set aside as erroneous and prejudicial to the interest of revenue; the appeal by the assessee is dismissed (decision adverse to the assessee).

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