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2019 (7) TMI 1534 - AT - Income TaxRevision u/s 263 - A.O has prima facie failed to carry-out proper investigation and failed to give a specif ic finding as regards appellant's claim of expenditure for the purpose of business and hence, assessment order passed by A.O is erroneous and prejudicial to the interest of Revenue - HELD THAT - We are of a strong conviction that now when the case of the assessee was selected for limited scrutiny for the reason viz. large investment in property (AIR) as compared to total income , therefore, no infirmity could be attributed to the assessment framed by the A.O on the ground that he had failed to deal with other issues which did not fell within the realm of the limited reason for which the case of the assessee was selected for scrutiny assessment. Pr. CIT in the garb of his revisional jurisdiction u/s 263 cannot be permitted to traverse beyond the jurisdiction that was vested with the A.O while framing the assessment. To sum up, revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was vested with the A.O while framing the assessment. As a matter of fact, what cannot be done directly cannot be done indirectly. A.O had aptly confined himself to the issue for which the case of the assessee was selected for limited scrutiny, therefore, no infirmity can be attributed to his order, for the reason, that he had failed to dwell upon certain other issues which were clearly beyond the realm of the reason for which the case of the assessee was selected for limited scrutiny as per the AIR information. We thus not being able to concur with the view taken by the Pr. CIT that the order passed by the A.O u/s 143(3), dated 10.10.2016 is erroneous, therefore, set aside his order and restore the order passed by the A.O. As we have quashed the order passed by the Pr. CIT u/s 263 on the ground of invalid assumption of jurisdiction by him, therefore, we refrain from adverting to and therein adjudicating the contentions advanced by the ld. A.R on the merits of the case, which thus are left open. - Decided in favour of assessee.
Issues Involved:
1. Legality of the Principal Commissioner of Income Tax's (Pr. CIT) order under Section 263 of the Income Tax Act, 1961. 2. Jurisdictional scope of the Assessing Officer (A.O) in a limited scrutiny case. 3. Validity of the Pr. CIT's direction to re-adjudicate the allowability of business expenses. Issue-wise Detailed Analysis: 1. Legality of the Principal Commissioner of Income Tax's (Pr. CIT) order under Section 263 of the Income Tax Act, 1961: The present appeal challenges the order passed by the Pr. CIT under Section 263, which set aside the assessment order issued by the A.O under Section 143(3). The Pr. CIT held that the A.O failed to carry out proper investigation and provide a specific finding regarding the appellant's claim of business expenditure, rendering the assessment order erroneous and prejudicial to the interest of the Revenue. The Pr. CIT directed the A.O to re-adjudicate the issue of business expenses after giving the assessee an opportunity to be heard. 2. Jurisdictional scope of the Assessing Officer (A.O) in a limited scrutiny case: The case was selected for "Limited scrutiny under CASS" specifically for "large investment in property (AIR) as compared to total income." The A.O, while framing the assessment, accepted the returned loss without making any additions or disallowances beyond the scope of the limited scrutiny. The appellant argued that the A.O was prohibited from addressing issues beyond the specific reason for which the case was selected for scrutiny. The Tribunal noted that, according to CBDT guidelines, scrutiny of cases selected on the basis of AIR returns should be limited to the aspects of the information received through AIR unless broader scrutiny is approved by the administrative commissioner. In this case, no such approval was obtained, and the A.O appropriately confined his assessment to the limited scrutiny scope. 3. Validity of the Pr. CIT's direction to re-adjudicate the allowability of business expenses: The Pr. CIT's observation that the A.O failed to examine the allowability of business expenses was found to be beyond the scope of the limited scrutiny for which the case was selected. The Tribunal held that the Pr. CIT, in exercising his revisional jurisdiction under Section 263, could not broaden the scope of the A.O's jurisdiction. The expenses in question, primarily related to property maintenance, MMC expenses, and property tax, were deemed to fall outside the limited scrutiny's scope. The Tribunal concluded that the Pr. CIT's order was invalid as it attempted to extend the A.O's jurisdiction beyond the limited scrutiny's confines. Conclusion: The Tribunal quashed the Pr. CIT's order under Section 263, restoring the original assessment order passed by the A.O under Section 143(3). The appeal was allowed based on the invalid assumption of jurisdiction by the Pr. CIT, and the Tribunal refrained from addressing the merits of the case. The decision reinforces the principle that revisional jurisdiction cannot be used to expand the scope of an assessment beyond its original limited scrutiny parameters.
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