2019 (12) TMI 1539 - AT - Income Tax

Revision u/s 263 - case of the assessee was selected for limited scrutiny under CASS - CIT invoked the revisionary jurisdiction u/s.263 to look into the other issues relating to the assessee which were not within the purview of the limited scrutiny - HELD THAT - In this case, the Assessing Officer has already verified those issues for which limited scrutiny was conducted. Commissioner of Income Tax wants the Assessing officer to look into various other issues of the assessee which were not covered within the purview of the limited scrutiny. This is not permitted within the framework of the Income Tax Act. Further on perusal of the CBDT Circular and the facts of the case, it is clear that the order of the Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue. The Hon‟ble Supreme Court of India in the case of Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT has specifically held that in order to assume the revisionary jurisdiction u/s.263, the order of the Assessing Officer must be erroneous so far as it is prejudicial to the interest of the Revenue. In the facts of the present case, these criteria are not met so far as the assessment order is concerned and therefore, we quash the order passed by the Ld. Pr. Commissioner of Income Tax u/s.263 - Decided in favour of assessee.

Summary

Issues:
Assumption of revisionary jurisdiction by the Ld. Pr. Commissioner of Income Tax u/s.263 of the Income Tax Act, 1961 for the assessment year 2014-15.

Analysis:
The appeal before the Appellate Tribunal ITAT Pune challenged the order of the Ld. Pr. Commissioner of Income Tax-1, Aurangabad invoking revisionary jurisdiction u/s.263 of the Act. The crux of the grievance was the assumption of such jurisdiction. The limited scrutiny under CASS had initially focused on specific issues - higher turnover in Service Tax Return compared to ITR and a mismatch in amounts paid to related persons u/s.40A(2)(b). The assessment order accepted the income filed by the assessee after verification. However, the Ld. Pr. Commissioner sought to delve into other issues not covered by the limited scrutiny, contrary to the CBDT Circular's guidelines for handling such cases. The Tribunal noted that the Assessing Officer had already verified the issues under limited scrutiny, rendering the revisionary jurisdiction invalid.

The Tribunal referred to the CBDT Circular and the Malabar Industrial Co. Ltd. case to emphasize that for revisionary jurisdiction under section 263, the Assessing Officer's order must be both erroneous and prejudicial to the Revenue's interest. In this case, the Tribunal found that the assessment order did not meet these criteria. As a result, the Tribunal quashed the order passed by the Ld. Pr. Commissioner of Income Tax u/s.263 of the Act, thereby allowing the appeal of the assessee. The judgment was pronounced on December 5th, 2019.