The assessee issued shares at a premium supported by a merchant banker’s valuation report. In the preceding assessment year, the Assessing Officer had rejected a similar valuation under identical financial circumstances, whereas in the year under consideration, he accepted the valuation without any enquiry. The Principal Commissioner invoked section 263 on the ground that the assessment order was erroneous and prejudicial to the interests of the Revenue. The Tribunal held that the Assessing Officer, while completing a scrutiny assessment under section 143(3), was duty-bound to examine the valuation report and conduct necessary enquiries. Failure to do so rendered the assessment order erroneous and prejudicial to the Revenue, warranting revision under section 263. However, the Principal Commissioner could not direct the Assessing Officer to make a straightaway addition of the share premium and was required to leave the issue open for fresh examination. The Assessing Officer was accordingly directed to carry out a de novo verification of the valuation after considering the evidence produced by the assessee. (AY. 2018-19)