2022 (3) TMI 1233 - AT - Income Tax

Revision u/s 263 - Case of limited scrutiny to verify large cash deposits into savings bank account - HELD THAT - AO has completed assessment after verifying cash deposits in savings bank account and has made additions when the assessee was unable to explain source for part of cash deposits. It is an admitted position of law that in limited scrutiny assessments scope of verification is limited to the issues mentioned in the notice issued under CASS system. AO cannot travel beyond the issues on which assessment has been taken up for scrutiny - once the AO does not have power to go beyond the issues on which he has taken up case for scrutiny then obviously PCIT cannot term the assessment order passed by the AO as erroneous insofar as it is prejudicial to the interests of revenue on issues other than the issue taken up by the Assessing Officer in scrutiny assessment proceedings. In this case on perusal of materials available on record we find that the learned PCIT has revised assessment order on the issues other than the issue considered by the AO in assessment proceedings - PCIT has exceeded her jurisdiction in examining issues other than the issues which is subject matter of limited scrutiny assessment proceedings before the AO. Hence we are of the considered view that revision order passed by the learned PCIT u/s.263 - Appeal of assessee allowed.

Summary

Issues:
Appeal against order of Principal Commissioner of Income Tax-2, Chennai for assessment year 2014-15.

Analysis:
The appeal was filed by the assessee against the order of the Principal Commissioner of Income Tax-2, Chennai, pertaining to the assessment year 2014-15. The assessee raised multiple grounds of appeal challenging the legality and jurisdiction of the order. The facts of the case revealed that the Assessing Officer had completed the assessment under section 143(3) of the Income Tax Act, 1961, determining the total income of the assessee. Subsequently, the case was taken up for revision proceedings under section 263 of the Act based on the proposal by the Principal Commissioner of Income Tax. The PCIT proposed to revise the assessment order on the grounds related to rental income from a property and claimed agricultural income without possession of agricultural land. The assessee contended that the assessment order was not erroneous or prejudicial to the revenue's interests as it was a limited scrutiny case focusing on cash deposits. The PCIT, however, held the assessment order as erroneous and prejudicial to revenue's interests, setting it aside for a de novo assessment. The assessee challenged this decision before the Appellate Tribunal.

The Appellate Tribunal considered the arguments presented by both parties and reviewed the orders of the authorities below. It noted that in limited scrutiny assessments, the verification scope is confined to issues mentioned in the notice under the CASS system. The Assessing Officer is not authorized to go beyond the specified issues during scrutiny. Therefore, the PCIT cannot declare the assessment order as erroneous or prejudicial to revenue based on issues beyond the scope of the scrutiny. The Tribunal found that the PCIT had exceeded her jurisdiction by revising the assessment order on matters not considered by the Assessing Officer during the assessment proceedings. Consequently, the Tribunal concluded that the revision order passed by the PCIT under section 263 of the Act was invalid and unsustainable. As a result, the Tribunal allowed the appeal filed by the assessee and quashed the PCIT's order under section 263 of the Act.

In conclusion, the Appellate Tribunal's decision favored the assessee by ruling that the PCIT had overstepped her authority in revising the assessment order beyond the issues examined during the limited scrutiny assessment. The Tribunal emphasized the importance of adhering to the scope of scrutiny and upheld the principle that the PCIT cannot revise an assessment order based on issues not within the purview of the initial scrutiny.