2021 (10) TMI 743 - AT - Income Tax

Revision u/s 263 by CIT - Assessment was framed by the assessing officer for a limited scrutiny - expansion of scope of limited scrutiny - HELD THAT - As decided in PARADISE RUBBER INDUSTRIES 2021 (10) TMI 444 - ITAT AMRITSAR revisionary jurisdiction shall not be invoked by the Pr. CIT to look into the issues which were not within the purview of limited scrutiny - thus the appeal filed by the assessee is allowed on legal ground.

Summary

Issues:
1. Jurisdiction of Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961.
2. Limited scrutiny assessment and conversion to complete scrutiny.
3. Condonation of delay in filing appeal due to COVID-19.
4. Assessment order passed by the Assessing Officer (AO) and its correctness.
5. Grounds of appeal raised by the assessee.

Jurisdiction of PCIT under section 263:
The appeal challenged the PCIT's order dated 20.02.2020, asserting that it was against the law and facts of the case. The PCIT invoked section 263 to set aside the assessment order dated 07.11.2017, deeming it erroneous and prejudicial to the interest of revenue. The PCIT's decision was based on the potential escapement of income exceeding the prescribed limit, necessitating complete scrutiny. However, the assessee argued that the limited scrutiny case did not require examination beyond the identified issues. Citing precedents, the assessee contended that the PCIT's order was void and should be quashed.

Limited scrutiny assessment and conversion to complete scrutiny:
The case underwent limited scrutiny focusing on specific issues like Contract Receipt/Fees mismatch, Sales Turnover Mismatch, and Tax Credit Mismatch. The AO, following CBDT instructions, confined the assessment within the identified issues and accepted the income as returned. The PCIT, under section 263, held that the case required complete scrutiny due to potential income escapement exceeding the limit. However, the Tribunal emphasized that the AO's duty was to address the specific issues under limited scrutiny, not beyond. Relying on a similar case precedent, the Tribunal concluded that the PCIT's attempt to expand the scope of scrutiny was unwarranted, leading to the allowance of the appeal.

Condonation of delay in filing appeal due to COVID-19:
The appellant sought condonation of a 60-day delay in filing the appeal, attributing it to the COVID-19 pandemic. The Tribunal accepted the delay, considering the circumstances beyond the appellant's control and proceeded to hear the appeal on merits.

Assessment order passed by the AO and its correctness:
The AO's assessment order dated 07.11.2017 was challenged by the PCIT under section 263 as erroneous and prejudicial to revenue. The PCIT highlighted discrepancies and the need for complete scrutiny. However, the Tribunal found that the AO's adherence to limited scrutiny guidelines and addressing specific issues did not render the assessment order erroneous or prejudicial. Citing the AO's fulfillment of duties assigned under limited scrutiny, the Tribunal ruled in favor of the appellant, emphasizing the correctness of the assessment order.

Grounds of appeal raised by the assessee:
The appellant raised multiple grounds of appeal, contesting the PCIT's jurisdiction, the correctness of the assessment order, and the addition made by the PCIT. The appellant argued that the limited scrutiny case did not warrant examination beyond identified issues and cited precedents to support the appeal. Ultimately, the Tribunal allowed the appeal on legal grounds, aligning with the appellant's contentions and previous case law.

---