2023 (1) TMI 1340 - AT - Income Tax

Assessment of income as per the original return or revised return - case was picked up for limited scrutiny - AO has taken up the returned income as per the original return of income only on the ground that the case was selected for scrutiny of the original return of income - HELD THAT - Action of the Assessing Officer taking returned income as per the original return of income only is not justified at all. The original return of income of the assessee was substituted by the revised return of income which was filed within the prescribed time period. The case was selected for scrutiny on two issues, which the assessee successfully explained before the AO, therefore, as supposed to assess the income as per the revised return of income. If the AO wanted to scrutinise any other issue also including the withdrawal of interest income, which the assessee claimed to be erroneously offered, the AO could have got converted the limited scrutiny assessment into full assessment by getting permission from the competent authority. Even otherwise, AO has merely taken the returned income as per original return of income without making any disallowance in respect of above issue in the revised return of income. Therefore, the action of the lower authorities in taking the returned income as per original return of income is not justified as the assessee had already filed a valid revised return within the statutory period and has also explained the issues satisfactorily to the AO for which the return was selected for limited scrutiny. In view of this, the impugned order of the CIT(A) is set aside and the AO is directed to accept the income of the assessee as per the revised return of income. Appeal of the assessee stands allowed.

Summary

Issues:
1. Whether the Assessing Officer was justified in considering the original return of income for assessment instead of the revised return.
2. Whether the Commissioner of Income Tax (Appeals) erred in upholding the action of the Assessing Officer regarding the returned income.
3. Whether the Assessing Officer's decision to select the returned income as per the original return for scrutiny assessment was justified.

Analysis:
1. The appellant challenged the CIT(A)'s order, claiming that the original return was assessed instead of the revised return, which was filed within the statutory period. The ITAT held that the Assessing Officer's action was unjustified. The case was selected for scrutiny based on specific issues, which the appellant explained satisfactorily. The Assessing Officer should have assessed the income as per the revised return. The ITAT emphasized that the Assessing Officer could have converted the limited scrutiny assessment into a full assessment if necessary. The lower authorities' decision to consider the original return was deemed unjustified, and the ITAT directed the Assessing Officer to accept the income as per the revised return.

2. The CIT(A) had deleted a disallowance made by the Assessing Officer but upheld the decision to treat the returned income as per the original return. The ITAT found this action to be incorrect as the revised return was valid and filed within the prescribed time frame. The ITAT emphasized that the Assessing Officer should have considered the revised return for assessment, especially since the appellant had explained the issues satisfactorily during scrutiny. Therefore, the ITAT set aside the CIT(A)'s order and directed the Assessing Officer to accept the income as per the revised return.

3. The Assessing Officer justified selecting the returned income as per the original return for scrutiny assessment. However, the ITAT disagreed, stating that the Assessing Officer should have considered the revised return filed by the appellant. The ITAT highlighted that the Assessing Officer's decision to stick to the original return was unwarranted, especially considering that the appellant had provided satisfactory explanations during scrutiny. The ITAT concluded that the Assessing Officer should have accepted the income as per the revised return, given the circumstances of the case.

This detailed analysis of the judgment highlights the key issues raised, the arguments presented by the parties, and the ITAT's decision on each issue, providing a comprehensive overview of the case.