Judgment :- R. Jayasimha Babu, J. The question referred is, " As to whether the Tribunal was right in law in holding that there is no justification to interfere with the order of the C.I.T. ?" The assessment year is 1986-87. 2. The assessee company is engaged in the manufacture of trucks. For the assessment year 1986-87 it filed a revised return admitting a loss of Rs. 3,03,19,667/-. The assessing officer framed the assessment determining the business loss at Rs.86,86,547/-. The Commissioner of Income-tax while going through the assessment record found that a sum of Rs. 4.87 crores received by the assessee from the insurance company had been allowed by the Income-tax Officer without proper scrutiny and verification, as a capital receipt not subject to tax even though that sum had been accounted for by the assessee in its Profit & Loss Account as an item of revenue. The Commissioner, therefore, initiated action under Section 263 of the Income-tax Act. 3. The assessee in its reply submitted to the Commissioner stated that there was a severe cyclone in Madras on 11th and 12th of November1984 and that as a consequence the assessee's factory was totally inundated, the building, stocks and machinery suffered damage. The assessee claimed compensation from its insurer. The compensation it received in respect of the stock, work in progress and repairs to machinery were treated by the assessee as revenue receipts in its Profit and Loss Account and as also for the purpose of income tax. However, the sum received by it for the damage caused to the machinery, which continued to be used even after the damage suffered, was though treated as income in the Profit & Loss account and also used for the purpose of distributing dividend, was however, not treated as an item of revenue for the purpose of income tax as in the view of the assessee that receipt was in the capital field. It was also the case of the assessee that it had treated that sum as falling within the capital field by relying upon the opinion furnished to it by a firm of chartered accountants. 4. It was also the case of the assessee that it had treated that sum as falling within the capital field by relying upon the opinion furnished to it by a firm of chartered accountants. 4. This sum of Rs.4.87 crores which the assessee had received from its insurer for the partial damage suffered by the machinery which was continued to be used was, it was felt by the Commissioner, a matter which would have to be thoroughly probed by the Income-tax officer before deciding as to whether it formed part of the income of the assessee. In his order the Commissioner also noted that the assessee had not filed before him the copy of the insurance policy. According to the details furnished by the assessee to the Commissioner 357 machines had suffered damage. 5. The assessee company aggrieved by that order of the Commissioner appealed to the Tribunal which declined to interfere with the order. 6. Learned counsel for the assessee submitted before us that the amount received by the assessee for the damage caused to its machineries, which machineries were still usable and were in fact being used, was a capital receipt and that, that capital receipt fall outside the scope of Section 41 (2) of the Income-tax Act. Reliance was placed by the counsel on the decision of the Apex Court in the case of Vaniya Silk Mills vs. C.I.T. [191 (1991) I.T.R. 647]. That decision was considered by a larger Bench of the Apex Court in the case of C.I.T. vs. Mrs. Grace Collis [248 (2001) I.T.R. 323]. At page 330 of the report, the Court after referring to the decision in the Vaniya Silk Mills case observed that, " .... the definition in Section 2(47) of the Act contemplates the extinguishment of rights in a capital asset distinct and independent of such extinguishment consequent upon the transfer thereof." The law stated in that decision is indeed, the law that had been followed by the Commissioner for holding that the assessee's claim with regard to the amount received from its insurer for the damage to its machinery was an amount which was prima facie liable to be taxed. 7. 7. Learned counsel also relied on the decision of the Apex Court in the case of Malabar Industrial Company Ltd. vs. C.I.T. [243 (2000) I.T.R. 83] wherein the Court emphasised that for the exercise of jurisdiction under Section 263 of the Act, it was necessary that the order of assessment be not merely erroneous but also be prejudicial to the interest of the revenue. Counsel submitted that the order made by the assessing officer having been made after the opinion received by the assessee from its consultant had been placed before him cannot be regarded as having been made by him in a casual manner or without proper examination of facts, and cannot be regarded as an erroneous order and that it also cannot be regarded as one causing prejudice to the revenue, as in the submission of the counsel that order was in conformity with the law laid down in the case of Vaniya Silk Mills. 8. The order of assessment in the record does not at all show any application of mind by the assessing officer to this receipt of Rs. 4.87 crores from the insurer. This amount is not even referred to in the order of assessment. The reference is only to an adjustment statement. That adjustment statement is not annexed to the assessment order. It is a statement filed by the assessee which has been implicitly accepted by the assessing officer. As to whether this receipt should be treated as taxable income in the hands of the assessee or excluded altogether from the computation on the ground that it is a capital receipt which did not have the character of a capital gain, is not anywhere discussed. Admittedly, the assessee had treated this amount as income in its Profit & Loss Account and on its own showing it has used a part of this amount for payment of dividends. It was, therefore, necessary for the assessing officer to have examined in depth this claim of the assessee and his failure to do so is not only erroneous but also prejudicial to the revenue. The Commissioner was therefore right in exercising his power of revision under Section 263 and directing the assessing officer to examine this aspect thoroughly and in accordance with law. 9. The order of the Tribunal declining to interfere with that order of the Commissioner cannot be faulted. The Commissioner was therefore right in exercising his power of revision under Section 263 and directing the assessing officer to examine this aspect thoroughly and in accordance with law. 9. The order of the Tribunal declining to interfere with that order of the Commissioner cannot be faulted. We, therefore, answer the question referred to us in favour of the revenue and against the assessee.