2019 (12) TMI 1336 - AT - Income Tax

Validity of power of revision exercised by PCIT u/s 263 - assessment was completed by the AO under limited scrutiny assessment - Large other expenses claimed in the Profit and Loss account and Mismatch between income/receipt credited to profit and loss account considered under other heads of income and income from heads of income other than business of profession - HELD THAT - AO not following procedure prescribed in Sub Clause (d) of Clause of 3 of said CBDT instruction would render the assessment order erroneous and prejudicial to the interests of the Revenue, thereby confirming the jurisdiction on ld. PCIT u/s.263. As regards to the decision of Co-ordinate Bench of the Tribunal in the case of Smt. Padmavathi 2019 (12) TMI 399 - ITAT CHENNAI to which one of us i.e. the Accountant Member is the author of the order. In the said decision the Tribunal had rendered decision overlooking exceptional clause carved out in Sub Clause (d) of Clause 3 of CBDT Instruction No.20/2015, dated 29.12.2015. Decision is per incuriam. It is needless to say that an order which is per incuriam has no precedential value. In the circumstances, we are of the considered opinion that ld. PCIT was justified in exercising the jurisdiction vested with him u/s.263 - Appeal filed by the assessee stands dismissed.

Issues Involved:
1. Validity of the Principal Commissioner of Income Tax's (PCIT) order under Section 263 of the Income Tax Act, 1961.
2. Whether the assessment order was erroneous and prejudicial to the interests of the Revenue.
3. Scope of limited scrutiny and whether the Assessing Officer (AO) could consider issues beyond the specified scope.
4. Application of CBDT Instructions and their exceptions.
5. Jurisdiction of PCIT under Section 263.

Detailed Analysis:

1. Validity of the PCIT's Order under Section 263:
The assessee challenged the order passed by the PCIT under Section 263, arguing that it was erroneous, opposed to law and facts, and should be cancelled. The PCIT had issued the order based on the assessment records for AY 2014-2015, finding that the AO failed to consider specific information regarding the purchase of land and the associated on-money payment.

2. Erroneous and Prejudicial to the Interests of the Revenue:
The PCIT found that the AO did not consider the information from the Assistant Commissioner of Income Tax, Central Circle-1, Madurai, regarding the assessee's purchase of land and the on-money payment involved. This omission led the PCIT to conclude that the assessment order was erroneous and prejudicial to the interests of the Revenue, warranting revision under Section 263.

3. Scope of Limited Scrutiny:
The assessee contended that the assessment was completed under limited scrutiny, focusing on verifying large other expenses claimed in the Profit and Loss account and mismatches in income. The assessee argued that the AO could not go beyond these issues without proper authorization. However, the PCIT opined that the AO should have considered the additional information regarding the on-money payment, which was material to the tax liability.

4. Application of CBDT Instructions and Exceptions:
The assessee relied on CBDT Instruction Nos. 20/2015 and 6/2017, which limit the scope of scrutiny. However, the Tribunal noted that Sub Clause (d) of Clause 3 of CBDT Instruction No. 20/2015 allows the AO to consider other issues with the approval of the PCIT/CIT if there is potential escapement of income exceeding specified thresholds. The Tribunal found that the AO should have sought permission to investigate the on-money payment issue, which was not done, rendering the assessment order erroneous.

5. Jurisdiction of PCIT under Section 263:
The Tribunal upheld the PCIT's jurisdiction under Section 263, citing that non-enquiry into a material issue can render an assessment order erroneous and prejudicial to the Revenue. The Tribunal referenced the Patna High Court's decision in CIT vs. Pushpa Devi, which supports the PCIT's authority to revise an assessment order if the procedure followed by the AO results in lesser revenue.

Conclusion:
The Tribunal dismissed the appeal, confirming that the PCIT was justified in exercising jurisdiction under Section 263. The AO's failure to follow the procedure prescribed in CBDT instructions and to consider material information regarding the on-money payment led to the assessment order being deemed erroneous and prejudicial to the interests of the Revenue. The Tribunal emphasized that orders per incuriam, such as the decision in Smt. Padmavathi's case, have no precedential value.

Order Pronounced:
The appeal filed by the assessee stands dismissed, and the PCIT's order under Section 263 is upheld. The order was pronounced on 11th December 2019, at Chennai.

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