2023 (11) TMI 1319 - AT - Income Tax

Revision u/s 263 based on limited scrutiny assessment - whether the Ld. Pr. CIT can deliberate on any other issue other than the issue dealt by the Ld. AO in limited scrutiny assessment? - whether the Ld. Pr. CIT can revise the assessment framed by the AO u/s. 143(3) when the assessment itself was a limited scrutiny assessment HELD THAT - We note that case of the assessee was selected for limited scrutiny assessment under the e-Assessment Scheme, 2019 on the sole issue of business expenses as evident from the assessment order passed u/s. 143(3) of the Act. From the perusal of the said assessment order, we note that there is no whisper in the said order for expanding the scope of limited scrutiny after obtaining the permission from the competent authority. Further, Ld. CIT, DR has not brought anything on record contrary to the arguments and submission made by assessee. The expansion of scope of scrutiny from limited scrutiny to complete scrutiny is that during the course of assessment proceedings, which comes to the notice of the AO that the potential escapement of income exceeding Rs.5 lakhs for normal CIT charge and exceeding Rs.10 lakhs for monetary limits for metro CIT charge. The case can be taken up for complete scrutiny with the approval of the PCIT / CCIT concerned, which means that the AO is empowered to enlarge the scope of limited scrutiny case to the complete scrutiny assessment in view of the above condition only and that also through quasi-judicial powers. Thus as per uncontroverted facts relating to limited scrutiny assessment on the sole issue of business expenses, we are of the view that once the AO cannot examine any other issue except the issue as selected for limited scrutiny assessment, the Ld. Pr CIT can examine only that issue which was before the Ld. AO during the course of scrutiny assessment and not any other issue which has not been subject matter of the assessment in a limited scrutiny assessment. Hence, we quash the revisionary order and allow the appeal of the assessee.

Summary

Issues:
Jurisdiction of Ld. Pr. CIT for invoking revisionary proceedings u/s. 263 of the Act based on limited scrutiny assessment and subsequent issues not raised in the assessment.

Detailed Analysis:

Issue 1: Jurisdiction of Ld. Pr. CIT for invoking revisionary proceedings
The appeal challenged the revision order by Ld. Pr. CIT against the assessment order by ITO, National e-Assessment Centre, Delhi. The main issue was whether Ld. Pr. CIT could revise the limited scrutiny assessment under section 143(3) by Ld. AO and deliberate on issues beyond the scope of limited scrutiny. The Ld. Pr. CIT observed discrepancies in the assessee's reported income and directed further verification by the Ld. AO.

Issue 2: Limited scrutiny assessment and scope of revisionary proceedings
The assessee's case was selected for limited scrutiny assessment under the e-Assessment Scheme, focusing on business expenses. The Ld. AO examined this issue and made disallowances. However, the Ld. Pr. CIT raised concerns about unreported receipts in Form 26AS, alleging a suppression of taxable income. The Ld. Pr. CIT issued a show cause notice under section 263, prompting the assessee's appeal before the Tribunal.

Issue 3: Legal arguments and precedents
The appellant argued that the Ld. Pr. CIT exceeded jurisdiction by revising the assessment on an issue not part of the limited scrutiny. Citing CBDT Instructions and judicial precedents, the appellant contended that the Ld. Pr. CIT could only address issues within the limited scrutiny scope. The appellant referenced relevant case laws to support the argument that the Ld. Pr. CIT's actions were beyond the permissible scope of revisionary powers.

Issue 4: Tribunal's decision
After hearing both sides, the Tribunal analyzed the CBDT Instructions and judicial precedents. It concluded that the Ld. Pr. CIT could only examine issues within the limited scrutiny scope and not expand beyond them without proper authorization. Therefore, the Tribunal quashed the revisionary order and allowed the appeal of the assessee.

In conclusion, the Tribunal held that the Ld. Pr. CIT had overstepped the permissible boundaries of revisionary powers by revising the assessment on issues not covered under the limited scrutiny assessment. The decision was based on the interpretation of CBDT Instructions and relevant legal precedents, leading to the allowance of the assessee's appeal.