2021 (3) TMI 649 - AT - Income Tax

Revision u/s 263 - case of the assessee was picked up for scrutiny under the category of limited scrutiny - HELD THAT - As per CBDT Instruction No. 7/2014, CBDT Instruction No. 20/2015 and CBDT Instruction No. 5/2016 and CBDT Letter dated 30.11.2017 - It s not open for the learned Assessing Officer to travellers beyond the reason for selection of the matter for limited scrutiny and on that aspect the assessment order in this case is in accordance with the instructions governing the field. See THE DECCAN PAPER MILLS CO. LTD. 2017 (10) TMI 1495 - ITAT PUNE and M/S R. AND H. PROPERTY DEVELOPER, PVT. LTD 2019 (7) TMI 1534 - ITAT MUMBAI When the assessing officer is bound to follow the CBDT instructions and while following such instructions and after verification of the material furnished by the assessee on the aspect covered by the limited scrutiny, is not open for the Ld. PCIT to say that not adverting to the other aspects of the competition would render the assessment order erroneous and prejudicial to the interest of the Revenue. With this view of the matter we find that the impugned order cannot be sustained and, therefore, the same is liable to be quashed. We accordingly quash the same.

Summary

Issues:
1. Validity of the order under section 263 of the Income Tax Act, 1961.
2. Assessment of capital gains by the Principal Commissioner of Income Tax.
3. Jurisdiction and scope of limited scrutiny assessments under CBDT instructions.

Issue 1: Validity of the order under section 263 of the Income Tax Act, 1961:
The appeal was filed by the assessee against the order dated 20/12/2019 under section 263 of the Income Tax Act, challenging the assessment of total income. The Principal Commissioner of Income Tax issued a notice under section 263 stating that the assessment order was erroneous and prejudicial to the revenue's interests. The dispute arose from the computation of capital gains by the assessee and the subsequent revisionary order by the Principal Commissioner. The assessee argued that the limited scrutiny assessment was confined to the "increase in capital," and the Principal Commissioner overstepped by delving into the computation of capital gains. The Tribunal analyzed the facts, legal provisions, and precedents to determine the validity of the Principal Commissioner's order under section 263.

Issue 2: Assessment of capital gains by the Principal Commissioner of Income Tax:
The Principal Commissioner of Income Tax computed the capital gains at a higher amount than declared by the assessee, leading to a discrepancy. The order set aside the matter to the Assessing Officer for a fresh assessment. The assessee contended that the Principal Commissioner erred in substituting the computation made by the assessee. The Tribunal examined the arguments presented by both parties, the legal provisions governing capital gains computation, and relevant case laws to assess the correctness of the Principal Commissioner's decision and the subsequent order for reassessment.

Issue 3: Jurisdiction and scope of limited scrutiny assessments under CBDT instructions:
The Tribunal delved into the CBDT instructions related to limited scrutiny assessments to determine the boundaries within which the Assessing Officer must conduct assessments. The instructions highlighted the specific issues for scrutiny under limited scrutiny cases and restricted the scope of inquiry to those issues. The assessee argued that the Principal Commissioner exceeded jurisdiction by venturing into aspects beyond the limited scrutiny mandate. The Tribunal referred to relevant case laws, including Deccan Paper Mills Co. Ltd. vs. CIT and M/s R.H. Property vs. PCIT, to establish the importance of adhering to the limited scrutiny scope and the consequences of deviating from it. The Tribunal's analysis focused on upholding the sanctity of limited scrutiny assessments and the Assessing Officer's adherence to CBDT instructions.

In conclusion, the Tribunal allowed the appeal of the assessee, quashing the impugned order dated 20/12/2019 under section 263 of the Income Tax Act, 1961. The detailed analysis covered the validity of the order, assessment of capital gains, and the jurisdictional aspects of limited scrutiny assessments in accordance with CBDT instructions and relevant legal precedents.

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