Inadequate enquiry in assessment can justify revision where sale deed cancellation is used to avoid capital gains tax.

Limitation for filing the appeal fell within the Supreme Court's Covid-19 exclusion period, so the delay was condoned and the appeal admitted. On revision, the assessment was treated as erroneous and prejudicial because the registered sale deed recorded consideration and possession, the cancellation deed was used to avoid capital gains liability, and the assessing authority accepted the explanation without adequate independent verification of revenue records, bank transactions, or the legal validity of the cancellation deed. The revision under section 263 was therefore sustained, applying Explanation 2(a) to section 263(1) on inadequate enquiry.

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Issues: (i) Whether the delay in filing the appeal deserved condonation in view of the exclusion of limitation ordered during the Covid-19 period. (ii) Whether revision under section 263 of the Income-tax Act, 1961 was valid where the assessment was made without proper enquiry into the taxability of capital gains arising from the registered sale deed and its cancellation.

Issue (i): Whether the delay in filing the appeal deserved condonation in view of the exclusion of limitation ordered during the Covid-19 period.

Analysis: The limitation for filing the appeal fell within the period covered by the Supreme Court's exclusion of limitation directions, and the appeal was filed within the extended time computed from those directions.

Conclusion: The delay was condoned and the appeal was admitted.

Issue (ii): Whether revision under section 263 of the Income-tax Act, 1961 was valid where the assessment was made without proper enquiry into the taxability of capital gains arising from the registered sale deed and its cancellation.

Analysis: The registered sale deed recorded receipt of consideration and handing over of possession, while the cancellation deed itself and the purchaser's statement indicated that the cancellation was executed to overcome capital gains liability. The assessment order accepted the assessee's explanation without adequate independent verification of the revenue records, bank transactions, and the legal validity of the cancellation deed. In such circumstances, the order was treated as having been passed without making enquiries or verification which ought to have been made, attracting Explanation 2(a) to section 263(1).

Conclusion: The exercise of revisionary jurisdiction under section 263 was upheld and the assessment was not interfered with.

Final Conclusion: The revisional order was sustained on the ground of inadequate enquiry in the assessment, and the assessee's appeal failed.

Ratio Decidendi: An assessment order passed without making enquiries or verification which should have been made is deemed erroneous and prejudicial to the interests of revenue, warranting revision under section 263.

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