Section 263 revision fails where enquiry was made and a new ground could not be added beyond the show-cause notice.

Section 263 revision was held unsustainable where the Assessing Officer had examined the scrutiny triggers, sought replies and considered the material before completing assessment. The Tribunal held that revision cannot be based on mere inadequacy of enquiry or a roving and fishing inquiry when the Assessing Officer has taken a plausible view. It also held that a fresh ground on expense verification could not be introduced in the revision order because it was not part of the show-cause notice. The alleged liability transfer by journal entry under a tripartite arrangement did not establish the requisite error and prejudice to justify revisional jurisdiction, so the revisionary order was quashed and the assessment restored.

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Issues: Whether the revisionary order under section 263 of the Income-tax Act, 1961 was valid when the Assessing Officer had made enquiries on the scrutiny issues and the Principal Commissioner introduced a fresh ground not covered by the show-cause notice.

Analysis: The assessment record showed that the Assessing Officer had examined the scrutiny triggers, called for replies, and completed the assessment after considering the material furnished by the assessee. The Principal Commissioner's revision was founded on alleged violation of sections 269T, 73 and 185, and on non-verification of expenses. The Tribunal held that the expenses issue was not part of the show-cause notice and could not be introduced for the first time in the revision order. It further held that the transaction in question was a transfer of liability by journal entry under a tripartite arrangement and did not establish such lack of enquiry or prejudice as would justify section 263. The Tribunal reiterated that revision cannot be sustained for mere inadequacy of enquiry or for directing a roving and fishing investigation where the Assessing Officer has already taken a plausible view.

Conclusion: The revisionary order under section 263 was unsustainable and was quashed.

Final Conclusion: The assessment order was restored and the assessee succeeded on the ground that the conditions for invoking revisional jurisdiction were not satisfied.

Ratio Decidendi: Section 263 can be invoked only where the assessment order is both erroneous and prejudicial to the interests of the Revenue, and not merely because the revisional authority prefers a fuller enquiry or seeks to introduce a new issue beyond the notice.

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