2024 (10) TMI 100 - HC - Income Tax

Rectification u/s 254 - Tribunal set aside the order passed u/s 263 on the ground of limited scrutiny case and holding that the AO could not have gone beyond the reasons for which case was selected for scrutiny - as contended that the Tribunal has committed mistake apparent on record by considering the fact of limited scrutiny as there was a case of survey and the returned income was to be examined thoroughly. HELD THAT - Tribunal has passed the order considering the case of limited scrutiny under the regular assessment and accordingly, allowed the Appeal filed by the assessee. The petitioner could not have on the same ground filed the rectification application as the Tribunal has already considered the same. We are therefore of the opinion that there is no mistake apparent on record from the order passed by the Tribunal in the Appeal so as to entertain the Misc. Application under Section 254 (2) . Tribunal has not committed any error which is apparent on record while passing the order in Appeal. If the petitioner has any grievance, the recourse in accordance with law can be taken but the provisions of Section 254 (2) of the Act would not be of any avail to the petitioner.

Issues:
Challenge to order of Income Tax Appellate Tribunal under Articles 226 and 227 of the Constitution of India.
Validity of Assessment Order for Assessment Year 2017-18 under the Income Tax Act, 1961.
Jurisdiction of Principal Commissioner of Income Tax under Section 263 of the Act.
Consideration of limited scrutiny in assessment proceedings.
Rejection of Misc. Application under Section 254(2) of the Act by the Tribunal.
Petitioner's contention on rectification of Tribunal's order.

Analysis:
The petitioner challenged the order of the Income Tax Appellate Tribunal, Surat Bench, rejecting the Misc. Application arising from the Assessment Year 2017-18 under the Income Tax Act, 1961. The respondent filed the return of income for the said year, initiating limited scrutiny for cash deposits made. The Assessing Officer accepted the explanation and passed the Assessment Order. However, the Principal Commissioner of Income Tax later passed an order under Section 263, alleging failure to conduct inquiry. The Tribunal allowed the appeal, setting aside the PCIT's order, emphasizing the limited scrutiny nature of the case. The petitioner contended that the Assessing Officer should have examined subsequent declarations made by the assessee. The Tribunal rejected the Misc. Application, stating the PCIT's jurisdiction under Section 263 exceeded the reason for limited scrutiny, and there was no apparent mistake in the order.

The Tribunal's decision was based on the premise that the case was selected for limited scrutiny, and the Assessing Officer had thoroughly examined the issue within the scope of limited scrutiny. The Tribunal found no justification for invoking Section 263 beyond the reasons for limited scrutiny. The petitioner argued that the Tribunal erred in considering the limited scrutiny aspect and should have rectified the order based on subsequent declarations by the assessee. However, the Tribunal held that there was no mistake apparent on record justifying the rectification sought by the petitioner under Section 254(2) of the Act.

The petitioner's submission regarding the Tribunal's order was that the PCIT fulfilled the twin conditions of an erroneous and prejudicial assessment order under Section 263, leading to revenue loss. The Tribunal, however, maintained its stance on the limited scrutiny nature of the case and the absence of any apparent mistake in its order. The Tribunal's decision was upheld, dismissing the petition for lack of merit and affirming the validity of its previous order. The legal provisions under Section 254(2) were also cited to emphasize the limitations on rectification under the Act.

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