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2023 (8) TMI 429 - AT - Income TaxRevision u/s 263 by CIT - original assessment came to be passed u/s. 143(3) in the limited scrutiny - HELD THAT - The issues raised by the Pr. CIT in his revisionary order u/s. 263 admittedly have no relationship to the issues on which limited scrutiny had been initiated. As in the case of Shark Mines and Minerals Pvt Ltd. 2023 (3) TMI 324 - ORISSA HIGH COURT has categorically upheld the findings that unconnected issues to the assessment order which is the subject matter of limited scrutiny could not be used to treat the limited scrutiny assessment order as erroneous and prejudicial to the interest of the revenue. Thus as the issues raised by the Pr. CIT in the revision order is unconnected to the issues in the limited scrutiny assessment the revisionary order passed by the Pr. CIT is found to be unsustainable and consequently, same stands quashed. Appeal of assessee allowed.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Validity of the order passed under Section 263 of the Income Tax Act. 3. Scope of limited scrutiny assessment and powers of the Principal Commissioner of Income Tax (Pr. CIT) under Section 263. Summary of Judgment: 1. Condonation of Delay in Filing the Appeal: The appeal was time-barred by 296 days. The assessee filed a condonation petition citing the COVID-19 pandemic as the reason for the delay. The Hon'ble Supreme Court had directed to exclude the period from 15th March 2020 till 28th February 2022 for such delays. The revenue had no objection to the request. Consequently, the delay was condoned, and the appeal was admitted for adjudication. 2. Validity of the Order Passed Under Section 263: The original assessment was completed under Section 143(3) of the Act on 27.12.2018 as a 'limited scrutiny assessment' focusing on whether contract receipts/fees were correctly offered to tax. The Pr. CIT invoked powers under Section 263, treating the limited scrutiny assessment order as erroneous and prejudicial to the interest of the revenue due to a mismatch in Form 26AS and alleged excess labor charges. The Assessing Officer (AO) found no mismatch in Form 26AS but made an addition for excess labor charges. 3. Scope of Limited Scrutiny Assessment and Powers of Pr. CIT under Section 263: The assessee argued that the issues raised by the Pr. CIT were beyond the scope of the limited scrutiny assessment, citing the Tribunal's decision in Shark Mines and Minerals Pvt Ltd, upheld by the Hon'ble Jurisdictional High Court of Orissa. The Pr. CIT argued that even in limited scrutiny, the AO is duty-bound to make a prima facie enquiry into any potential income escapement exceeding Rs. 10 lakhs. The Tribunal considered various case laws, including Baby Memorial Hospital Ltd. and Maa Tarini Industries Ltd., which emphasized that the AO must conduct a thorough enquiry even in limited scrutiny cases. However, the Tribunal noted that the issues raised by the Pr. CIT in the revision order were unrelated to the original limited scrutiny issues. The Hon'ble Jurisdictional High Court of Orissa had held that the Pr. CIT cannot travel beyond the scope of issues forming part of the limited scrutiny without prior permission from a superior officer, as per CBDT instructions. Conclusion: The Tribunal found the revisionary order passed by the Pr. CIT unsustainable as the issues raised were unconnected to the limited scrutiny assessment. Consequently, the order under Section 263 was quashed, and the appeal filed by the assessee was allowed. Order dictated and pronounced in the open court on 24/03/2023.
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