2021 (12) TMI 101 - AT - Income Tax

Revision u/s 263 by CIT-A - Limited scrutiny assessment completed u/s 143(3) of the Act by the Assessing Officer - TDS liability - HELD THAT - We are of the considered view that as demonstrated from the facts this is case of limited scrutiny in which the AO is bound by such scope - AO had asked for details of TDS and the assessee had complied with by providing all the details with written submission and evidences that the TDS were deducted and deposited also in the Government account. These details have been furnished before CIT - CIT has nowhere in the order has dealt with the merits of these details furnished before him nor he could justify as to how the order of the AO was erroneous so as to be prejudicial to the interest of the Revenue. It is the settled position of law that the CIT-A must point out in his order as to how the assessment order is erroneous and prejudicial to the interest of Revenue. TDS have been deducted and deposited by the assessee in the Government account, therefore, there is no loss caused to the Revenue. In this case of the limited scrutiny assessment the AO could not have travelled beyond such scope to enquire about TDS details which was not the subject-matter of such limited scrutiny. Nonetheless these TDS details were called for by the AO and verified and they were duly submitted by the assessee. DR could not refute these facts on record. In such scenario, the assessment order is neither erroneous nor prejudicial to the interest of the Revenue. We hold that the assumption of revisionary jurisdiction u/s 263 and consequent order passed by the Pr.CIT is bad in law and deserves to be quashed. - Decided in favour of assessee.

Summary

Issues:
1. Revision of assessment order under section 263 of the Income Tax Act.
2. Justification of revision based on lack of enquiry and TDS deductions.
3. Compliance with limited scrutiny assessment scope.
4. Validity of assuming revisional jurisdiction by the Principal Commissioner of Income Tax.

Issue 1: Revision of assessment order under section 263 of the Income Tax Act:
The appeal stemmed from the Principal Commissioner's order under section 263 of the Income Tax Act, challenging the assessment order for the assessment year 2016-17. The appellant contended that the Principal Commissioner was unjustified in revising the assessment order under section 143(3) of the Act, claiming it was neither erroneous nor prejudicial to the Revenue's interest. The Principal Commissioner invoked revisional jurisdiction based on the assertion that the assessment order was erroneous and prejudicial to the Revenue's interest.

Issue 2: Justification of revision based on lack of enquiry and TDS deductions:
The appellant argued that the Principal Commissioner was unjustified in considering the assessment order as erroneous due to a lack of enquiry, especially regarding TDS deductions. The appellant demonstrated that TDS on salary, wages, and director's remuneration had been duly deducted and deposited with the Government. The Principal Commissioner's order lacked justification for setting aside the assessment and directing re-verification of TDS deductions under section 192 of the Act without addressing the appellant's submissions.

Issue 3: Compliance with limited scrutiny assessment scope:
The case involved a limited scrutiny assessment completed by the Assessing Officer under section 143(3) of the Act. The appellant emphasized that the Assessing Officer's scope was confined to specific issues, and the appellant had complied with all queries and notices related to the limited scrutiny assessment, including providing details of TDS deductions. The Principal Commissioner failed to address the submissions filed by the appellant, raising concerns about the jurisdictional limits of the revisional authority.

Issue 4: Validity of assuming revisional jurisdiction by the Principal Commissioner of Income Tax:
The Tribunal analyzed previous judgments and emphasized that the Principal Commissioner could not invoke revisional jurisdiction based on issues beyond the limited scrutiny scope. The Tribunal cited cases where the Assessing Officer's actions aligned with CBDT circulars and limited scrutiny parameters, preventing the Principal Commissioner from terming them as erroneous. The Tribunal concluded that assuming revisional jurisdiction without satisfying essential conditions was unlawful and quashed the revisional proceedings and subsequent orders.

In conclusion, the Tribunal allowed the appeal, holding that the assumption of revisionary jurisdiction under section 263 and the consequent order were unlawful. The Tribunal emphasized the importance of adhering to the limited scrutiny scope and CBDT circulars, ultimately ruling in favor of the appellant.