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2023 (1) TMI 666 - AT - Income TaxRevision u/s 263 - As per CIT AO has not examined the purchase of land and its difference in cost - return filed by the assessee was selected for scrutiny under CASS limited scrutiny category in respect of cash deposited during demonetisation period - HELD THAT - It is an admitted fact that the case of the assessee was selected for scrutiny under CASS LIMITED SCRUTINY category to examine the deposits made during demonetisation. The assessee purchased the agricultural land on 14.07.2016 which is much prior to the cash deposits during demonetisation. Therefore the land purchased by the assessee has nothing to do with the cash deposits made during demonetisation and both are different. Therefore AO has only examined cash deposited during demonetisation correctly. As per para 3 of the CBDT circular referred hereinabove the AO cannot proceed further to examine except what is provided in para 3 of the circular. Therefore the order passed by the Assessing Officer cannot be said that it is erroneous and prejudicial to the interest of the Revenue. Thus we quash the revision order passed under section 263 of the Act and allow the appeal of the assessee.
Issues Involved:
1. Validity of invoking Section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax (PCIT). 2. Scope of "Limited Scrutiny" under CASS and whether the Assessing Officer (AO) can examine issues beyond the scope of limited scrutiny. 3. Applicability of Section 56(2)(vii) of the Income Tax Act, 1961 regarding the purchase of agricultural land at a rate less than the market rate or the rate determined by the Stamp Duty Authority. Issue-wise Detailed Analysis: 1. Validity of Invoking Section 263 of the Income Tax Act, 1961: The PCIT issued a show cause notice to the assessee under Section 263 of the Income Tax Act, 1961, stating that the AO had not examined the purchase of land and its difference in cost. The PCIT directed the AO to redo the assessment, observing that the provisions of Section 56(2)(vii) of the Act were not considered. The PCIT argued that the AO's order was erroneous and prejudicial to the interest of revenue, requiring intervention to cure the error. 2. Scope of "Limited Scrutiny" under CASS: The assessee argued that the return was selected for limited scrutiny under CASS to examine cash deposits during the demonetisation period. The agricultural land was purchased prior to demonetisation, and therefore, the AO could not examine this issue. The assessee referred to the CBDT circular F.No. 225/402/2018/ITA.II dated 28.11.2018, which restricts the AO from examining issues beyond the scope of limited scrutiny without prior approval from the concerned Pr. CIT/CIT. The Tribunal agreed with the assessee, stating that the AO correctly examined only the cash deposits during demonetisation and could not proceed further to examine the purchase of agricultural land. 3. Applicability of Section 56(2)(vii) of the Income Tax Act, 1961: The PCIT contended that the purchase of agricultural land at a rate less than the market rate or the rate determined by the Stamp Duty Authority should be taxed under Section 56(2)(vii) of the Act. The Tribunal, however, found that the AO had no jurisdiction to examine this issue as it was beyond the scope of limited scrutiny. The Tribunal cited several decisions, including Subbanadar Chandra Sekar v. ITO and other cases, to support its view that the AO cannot travel beyond the issues for which the case was selected under limited scrutiny. Conclusion: The Tribunal concluded that the revision order passed by the PCIT under Section 263 of the Act could not be upheld. The AO had correctly limited the examination to the cash deposits during demonetisation, and the purchase of agricultural land was not within the scope of limited scrutiny. Therefore, the Tribunal quashed the revision order and allowed the appeal of the assessee. Order: The appeal filed by the assessee is allowed, and the revision order passed under Section 263 of the Act is quashed. The order was pronounced on 13th January, 2023, at Chennai.
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