Section 263 revision upheld for failure to examine penalty exposure and make proper enquiry in reassessment.

Revisionary jurisdiction under section 263 was upheld where the AO completed reassessment under sections 147 and 144B without initiating penalty proceedings or making proper enquiry into the assessee's delayed return filing. The Tribunal held that the AO was required to examine the applicability of penalty provisions and carry out necessary verification before completing the assessment. Because that enquiry was omitted, the assessment was treated as erroneous and prejudicial to the interests of the Revenue, validating revision.

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Issues: Whether the revisionary order under section 263 of the Income-tax Act, 1961 was valid where the Assessing Officer had not initiated penalty proceedings or made proper enquiry before completing the reassessment.

Analysis: The assessment was completed under section 147 and section 144B without initiating penalty proceedings, despite the assessee's failure to file the return within the prescribed time. The Tribunal held that the Assessing Officer was required to examine the applicability of penalty provisions and undertake necessary verification. Since this enquiry was not made, the assessment order was treated as erroneous and prejudicial to the interests of the Revenue, justifying exercise of revisionary jurisdiction under section 263.

Conclusion: The revision order was upheld and the assessee's challenge failed.

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