2023 (11) TMI 1046 - AT - Income Tax

Revision u/s 263 enlarging scope of limited scrutiny - assessee case was selected for scrutiny assessment under limited scrutiny category - as per CIT assessee has paid rent of shop and godown but not deducted TDS u/s. 194I, assessee has claimed payment of interest in the profit loss account and deducted TDS u/s. 194A of the Act and hence, due to short deduction or no deduction of TDS, 30% of these expenses need to be disallowed by invoking the provisions of section 40(a)(ia) and there is delayed remittance of employees contribution of EPF - assessee s case was selected for limited scrutiny under CASS for High value cash withdrawals during the year reported and Large value cash deposit during demonetization period. HELD THAT - Assessee s case was selected for scrutiny for verification of high value cash withdrawals and large value of cash deposits made during demonetization period. Apart from this, the AO was not authorized to look into any other issue. Even though on merits, the assessee has a case on each of the proposed disallowance by PCIT in his revision order passed u/s. 263 of the Act. Thus PCIT want to enlarge the scope of limited scrutiny for which power is not available with the PCIT u/s. 263 of the Act, for the reasons stated in Co-ordinate Bench decision in the case of Duckwoo Autoind Pvt 2023 (1) TMI 361 - ITAT CHENNAI Appeal filed by the assessee is allowed.

Summary

Issues involved:
The issues involved in the judgment are the condonation of delay in filing the appeal and the revision order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961.

Condonation of Delay:
The appeal filed by the assessee was found to be barred by limitation by 252 days as it was filed after the due date. The assessee provided reasons for the delay, citing health issues and personal circumstances. The PCIT objected to condoning the delay, but the Tribunal considered the reasons provided as reasonable and hence, condoned the delay, allowing the appeal to be admitted.

Revision Order under Section 263:
The main issue in the appeal pertained to the revision order passed by the PCIT under section 263 of the Act, revising the assessment framed by the Assessing Officer (AO) for the assessment year 2017-18. The PCIT's revision was based on three primary grounds: non-deduction of TDS on rent paid, disallowance of expenses due to TDS deductions, and delayed remittance of employees' EPF contribution.

The assessee contended that TDS was not applicable on a portion of the rent paid, correct TDS was deducted on interest payments, and the delayed EPF contribution was only a part of the total amount mentioned. The PCIT, however, found the assessment order erroneous and prejudicial to revenue, proposing to revise it under section 263.

Judicial Interpretation and Decision:
The Tribunal considered the scope of limited scrutiny under which the case was selected, focusing on high-value cash transactions. Referring to legal precedents and CBDT instructions, the Tribunal emphasized that the PCIT cannot enlarge the scope of limited scrutiny beyond the specific reasons/issues for which the case was picked up. The Tribunal held that since the AO was not authorized to examine other issues beyond the limited scrutiny scope, the PCIT's revision order was not valid. Relying on previous decisions, the Tribunal quashed the revision order and allowed the appeal of the assessee.

Conclusion:
In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the PCIT's attempt to enlarge the scope of limited scrutiny beyond the authorized parameters was not permissible under the law. The Tribunal's decision was based on legal interpretations and precedents, ultimately leading to the quashing of the revision order passed by the PCIT.