Section 263 revision fails when assessment inquiry was made and no material shows error or revenue prejudice.

Section 263 revision is not sustainable where the assessment record shows that the Assessing Officer raised specific queries on the balance written off claim and the assessee furnished replies with supporting details. A revisional authority cannot invoke Explanation 2 to section 263 merely on a general allegation that further verification should have been made. Revision requires material showing both error in the assessment order and prejudice to the interests of revenue; a bare assertion of insufficient inquiry is not enough without evidence that additional verification would have changed the result.

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Issues: Whether the revisionary order under section 263 could be sustained on the ground that the assessment lacked proper inquiry and verification in respect of the claim of balance written off.

Analysis: The assessment record showed that the Assessing Officer had raised specific queries regarding the impugned claim and the assessee had furnished replies along with supporting details. Where the assessment order reflects inquiry on the relevant issue, invocation of Explanation 2 to section 263 is not justified merely on a general assertion that further verification ought to have been made. For revision under section 263, the revisional authority must demonstrate that the assessment order was not only erroneous but also prejudicial to the interests of revenue. A mere allegation that verification was insufficient is not enough unless some material is brought on record showing that the claimed verification would have led to a contrary result.

Conclusion: The revision under section 263 was not sustainable on the issue of balance written off, and the assessee succeeded on this ground.

Ratio Decidendi: Where the Assessing Officer has made relevant inquiries and the assessee has responded, revision under section 263 cannot be upheld merely on the basis of a general allegation of inadequate verification without material showing that the assessment order is erroneous and prejudicial to the interests of revenue.

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