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2023 (1) TMI 121 - AT - Income TaxRevision u/s 263 - CIT power to travel beyond the issues for which the case was selected for scrutiny - whether the Pr.CIT could use his revisonary power to direct to make the addition by holding the assessment order erroneous and prejudicial to the interest of the revenue on the issues which are not connected issues to the issues which have been raised in the limited scrutiny in an assessment proceedings? - HELD THAT - Since the matter has already been decided by this Bench of the Tribunal under identical facts and circumstances in favour of the assessee, therefore, respectfully following the decision in the case of M/s Shark Mines Minerals Pvt. Ltd 2022 (8) TMI 1334 - ITAT CUTTACK we are of the considered opinion that the revisionary order passed by the Pr.CIT is unsustainable and the same is liable to be quashed. Appeal of the assessee is allowed.
Issues Involved:
1. Jurisdiction of the CIT under Section 263 of the IT Act. 2. Legitimacy of the CIT's order treating the assessment as erroneous and prejudicial to the interest of revenue. 3. Validity of the CIT's order without rejecting the documents furnished or recording them as irrelevant. 4. Adequacy of the AO's appreciation of evidence in the 263 proceedings. 5. Compliance with CBDT instructions and directives. 6. Scope of limited scrutiny under CASS and its implications for the assessment. Detailed Analysis: 1. Jurisdiction of the CIT under Section 263 of the IT Act: The assessee argued that the CIT's order dated 29/03/2022 passed under Section 263 of the IT Act was without jurisdiction and liable to be quashed. The Tribunal noted that the CIT invoked Section 263 powers, observing that the assessment order framed under Section 143(3) was erroneous and prejudicial to the interest of revenue. The CIT issued a show cause notice and directed the AO to verify the issues raised, which were not part of the original assessment. 2. Legitimacy of the CIT's Order Treating the Assessment as Erroneous and Prejudicial to the Interest of Revenue: The Tribunal examined whether the CIT could treat the assessment as erroneous and prejudicial to the interest of revenue on issues not identified for examination in the limited scrutiny. The assessee contended that the AO had verified all relevant evidence and that the issues raised by the CIT were outside the scope of limited scrutiny. The Tribunal found that the AO had completed the assessment by accepting the returned income and that the issues identified by the CIT were not part of the original scrutiny. 3. Validity of the CIT's Order Without Rejecting the Documents Furnished or Recording Them as Irrelevant: The assessee argued that the CIT's order was unreasoned and invalid because it did not reject the documents furnished or record them as irrelevant. The Tribunal noted that the CIT had set aside the assessment without appreciating the submission of the assessee or the details furnished. The Tribunal agreed with the assessee that the CIT's order was unreasoned and liable to be quashed. 4. Adequacy of the AO's Appreciation of Evidence in the 263 Proceedings: The assessee contended that the AO had erred by not appreciating the evidence available on record during the 263 proceedings. The Tribunal found that the AO had examined all the relevant books of accounts, bank statements, and other documents during the original assessment. The Tribunal held that the AO had adequately appreciated the evidence, and the CIT's order was therefore not sustainable. 5. Compliance with CBDT Instructions and Directives: The assessee argued that the CIT's order was contrary to CBDT Instruction No-20/2015 and other directives, which restrict the AO from expanding the scope of enquiry beyond the issues flagged for limited scrutiny. The Tribunal noted that the AO had followed the CBDT instructions and that the CIT's order violated these provisions. The Tribunal held that the CIT's order was not sustainable and liable to be quashed. 6. Scope of Limited Scrutiny under CASS and Its Implications for the Assessment: The Tribunal examined whether the CIT could use his revisonary power to direct the AO to make additions on issues not connected to the limited scrutiny. The Tribunal referred to its earlier decision in the case of M/s Shark Mines & Minerals Pvt. Ltd., where it was held that the AO cannot go beyond the issues raised in the limited scrutiny. The Tribunal found that the issues raised by the CIT were not connected to the limited scrutiny and that the AO was barred from looking into any other issues. The Tribunal held that the CIT's order was unsustainable and quashed it. Conclusion: The Tribunal quashed the revisionary order passed by the CIT under Section 263 of the IT Act, holding that the CIT's order was without jurisdiction, unreasoned, and contrary to CBDT instructions. The Tribunal found that the AO had adequately appreciated the evidence and that the issues raised by the CIT were outside the scope of limited scrutiny. The appeal of the assessee was allowed.
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