Revision under section 263 upheld where reassessment lacked proper enquiry into accommodation entries and source of funds

Revision under section 263 was upheld where a reassessment under section 147 had accepted an assessee's explanation for alleged accommodation entries without adequate verification. The record showed that the Assessing Officer did not examine the source of the source, and the lender's bank trail reflected immediate corresponding credits and debits, indicating that deeper scrutiny was required. In these circumstances, the reassessment order was treated as erroneous and prejudicial to the interests of the Revenue. The text also states that there is no blanket bar on revision merely because the same subject matter formed the basis of reopening, if the Assessing Officer failed to carry out the enquiries warranted by the material on record.

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Issues: Whether the revisionary order under section 263 was justified on the ground that the reassessment under section 147 suffered from lack of proper enquiry into the alleged accommodation entry and the source of the source of funds.

Analysis: The reassessment had been reopened on information that the assessee had allegedly obtained accommodation entries through M/s. Rati Diamond Pvt. Ltd. The record showed that the Assessing Officer did not examine the source of the source and accepted the assessee's explanation without adequate verification. The bank entries of the lender indicated immediate corresponding credits and debits, supporting the view that the transaction required deeper scrutiny. In these circumstances, the absence of proper enquiry rendered the reassessment order erroneous and prejudicial to the interests of the Revenue. There is no blanket bar against revision under section 263 merely because the same subject matter formed the basis of reopening, where the Assessing Officer failed to make the enquiries warranted by the material on record.

Conclusion: The revision under section 263 was valid and the assessee's challenge failed.

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