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TMI Blog2020 (10) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in law by invoking section 263 on the issues which were never the part of original assessment us 143(3) (Limited Scrutiny) and hence the order passed u/s 263 is bad in law and needs to be annulled. 2. That the limited scrutiny order passed u/s 143(3) dated 19-12-2016 was neither erroneous nor prejudicial to the interest of revenue on the facts and in the circumstances of the case, and hence the Ld. Pr. CIT, Sambalpur has erred in law by invoking section 263. Hence fresh assessment is unlawful & the order passed u/s 263 needs to be quashed. 3. That the Ld. Pr CIT Sambalpur has erred in law by utilizing section 263 for making a fresh assessment which was never intended earlier by the department as the case of the appellant is of limited scrutiny assessment. Provisions of 263 does not allow to proceed a fresh assessment which was never intended earlier by revenue. Hence the subsequent order passed us 263 needs to be quashed in toto. 4. That the order of the Ld. Pr. CIT, Sambalpur being not based on the facts of the case of the appellant and being contrary to law, should hence be quashed and the appellant be given such relief or reliefs as prayed for. 5. That the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be erroneous in so far as it is prejudicial to the interest of revenue for the reasons mentioned hereunder. 3. On perusal of the assessment record, it is seen that you derive income from Transporting and service providing business. As per Form 3CD, service tax liability of Rs. 24,66,126/- has been incurred in the previous year, which was no paid on or before the due date for furnishing the return of income Similarly, service tax liability, of Rs. 7,08,245/- relating to earlier years was not paid during the previous year. The same were required to be added to the total income of the assessee u/s 43B of the IT. Act. The A.O. has failed to do so. 4. Further, the balance of loan as at 31.03,2014 outstanding against SRE! Equipment Finance Pvt. Ltd. was of Rs, 2,25,49,948/-. The assessee debited Rs. 27.59.555/- to P & L account towards "Interest on Equipment Finance', The assessee has not deducted tax al source u/s 194A while making payment/ giving credit to the account o1 SREI Finance Pvt. Ltd. The same was required to be disallowed u/s 40(a)(ia) and added to the total income of the assessee. The Assessing Officer failed to examine the issue and passed the order without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (d) The order has not been passed in accordance with any decision which is prejudicial to the assessee. rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 8 Thus, the manner in which the Assessing Officer completed the assessment without enquiry or verification and without applying relevant provisions of the Act, which should have been made in the facts and circumstances of the case, has rendered the assessment order both erroneous and prejudicial to the interest of revenue within the meaning of section 263 of the I.T.Act. 9. In view of the above, you are directed to show-cause as to why flu-assessment order framed u/s 143(3) of the IT Act, 1961 on dt. 19 12 2018 for the A.Y.2014-15 shall not to be cancelled/ modified u/s 263 of the I T. Act 10. You are required to furnish reply to the above show-cause notice along with Audit Report, all books of account, Bank Statement and other documentary evidences for the financial year 2013-14 either in person or through your Authorized Representative before the undersigned on 08.03.2019 at 03:30 PM at Aayakar Bhawan, Ainthapali, Sambalpur, failing which it will be presumed that y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laims and had failed to verify these issues while scrutinizing the case u/s. 143(3) of the Income Tax Act, 1961. Hence, his assessment order dated 19.12.2018 is found to be both erroneous and prejudicial to the interest of revenue within the meaning of section 263(1) of the I.T. Act, 1961. 10. While holding so, I have also taken into consideration the ratio laid down by the Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 !TR 83 (SC). In that case, it has been held that in the following circumstances an order would be held erroneous - "An incorrect assumption of facts or incorrect application of law will - satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind", (Emphasis mine), 11. Similarly, the Hon'ble High Court of Calcutta in the case of Dawjee Dadabhoy & Co v. S.P. Jain (1957) 31 ITR 872 (Cal.) has held that although the words "prejudicial to the interest of revenue'5 have not been defined in the Act, it must mean that the order of assessment under challenge is such as not in accordance with law, in consequence whereof t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts made by the assessee in his return, ft was also held that the Income Tax Officer is not only an adjudicator hut also an investigator, it is his duty to ascertain the truth of the facts stated in the return of income. When the circumstances of the case are such so as to provoke an enquiry, it is his duty to make proper enquiry. Failure to make enquiry in such circumstances would make the assessment order erroneous. The Hon'ble Apex Court in the case of Smt Tara Devi Aggarwai vs. CIT, 88ITR 323 (SC), has held that the CIT may consider an order of the AO to be erroneous not only it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereotyped order which simply accepts what the assesses has stated in his return and fails to make enquiries which are called for in the circumstances of the case. Recently, the Hon'ble Apex Court in the case of Denial Merchants Pvt Ltd ws ITQ in Special Leave (C) No.(s) 23976/2017 and others order dated 29.11.2017 has upheld the judgement of Hon'ble Calcutta High Court passed on 10,04.2017 in G.A. No.599/2016, dismissing the special leave petition observing that the C!T after setting a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax, Sambalpur, for the A.Y.2014-15 dated 28/03/2019, directing set aside of the assessment order dated 19/12/2016 for adjudication of the fresh issues in relation to service tax liability, disallowance u/s.40(a)(ia) of the Act of interest payment on equipment finance and addition made alleging unexplained income u/s.68 of the Act, as discussed in the said order (dated 28/03/2019) and further directing the AO to reframe the assessment accordingly after proper appreciation of facts and in accordance with law. The issue involved in the appeal before your Honours is laid put as below: * That the revision order passed by the Ld.Pr.CIT u/s.263 of the Act, on issues which were never the part of original assessment u/s. 143(3) of the Act, completed based on limited scrutiny, is not as per law. Before going into the details, attention is invited to the brief facts of the assessee's case, laid as under: The assessee is an individual deriving income from execution of mining contract works. For the Financial year 2013-14 relevant to Assessment year 2014-15, the assessee filed his return of income on 01/05/2015 showing total income of Rs. 10,83,010/-.The return so filed was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act on account of service tax liability. (ii) Disallowance of Rs. 27,59,555/- u/s.40(a)(ia) of the Act on account of interest payment on equipment finance. (iii) Addition of Rs. 28,00,006/- as unexplained income u/s.68 of the Act. Thus, in view of the facts stated as above, it clearly follows that the case of the assessee was selected for limited scrutiny on the basis of AIR information as evident from the assessment order dated 19/12/2016 passed u/s.143(3) of the Act (refer page no. 13 of the P/b) on the following grounds viz. Contract Receipts/Fees Mismatch, Sales Turnover Mismatch & Tax Credit Mismatch. Again, there is also no whisper in the order of the AO for expanding the scope of limited scrutiny. Under such circumstances, the scrutiny should have been limited only to examining the above-mentioned three issues which the Assessing Officer had already verified in course of the assessment and has thereafter passed the assessment order u/s. 143(3) of the Act dated 19/12/2016 (copy enclosed at page nos. 12-14 of the P/b). It would be of relevance to invite attention at this juncture to the CBDT Circular [vide its letter F-No.225/26/2006-ITA-H (Pt.)] dated 8th Septembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basic requirements of invoking the said section i.e. only when the order passed by the AO is erroneous & is prejudicial to the interests of Revenue. Relevant extract of sub-section (1) of section 263 of the Income Tax Act, 1961, reproduced as under: "Sec. 263 (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing afresh assessment. " On the contrary, by travelling beyond the issues dealt in limited scrutiny, the Ld.PCIT has tried to acquire jurisdiction on issues with which the AO was never seized with. Therefore, the aforesaid finding of the Hon'ble Supreme Court clearly applies to the facts of the case which is furthermore supported by the decision of the Hon'ble Jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erits in the contentions of the assessee that the said limited scrutiny cannot be expanded unless the AO converted it into complete scrutiny with the approval of Ld. Pr.CIT and if the AO after considering the submissions of the assessee does not come to the conclusion of potential escapement the Ld. Pr. CIT cannot hold the order to be erroneous on the ground that AO ought to have reached to such conclusion............" In the instant case, undisputedly the case of the assessee was selected for limited scrutiny on the basis of AIR information on the following grounds viz. Contract Receipts/Fees Mismatch. Sales Turnover Mismatch & Tax Credit Mismatch. Again, the AO verified those issues for which limited scrutiny was conducted and has thereafter completed the assessment u/s. 143(3) of the Act vide order dated 19/12/2016 (copy enclosed at page nos. 12-14 of the P/b). Therefore, the Ld.PCIT's power to revise the impugned assessment order dated 19/12/2016, also, is restricted to the aforementioned three issues. On the contrary, the Ld. PCIT has invoked revisionary power u/s.263 of the Act by holding the order of AO as erroneous in so far as prejudicial to the interest of Revenue t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... primary issue in the case on hand revolves whether it is a case selected under CASS for limited scrutiny or regular scrutiny. It can be seen from the grounds of appeal that the assessee wants to contend that the very initiation of proceedings Mrs. Sonali Hemant Bhavsar u/s 143(3) of the Act on the basis of regular scrutiny under the Act was bad in law. The proceedings under section 143(3) of the Act should have been limited to the extent of the information gathered through AIR. Accordingly the proceedings u/s 263 of the Act cannot be expanded beyond the issue raised in AIR. Thus the order u/s 143(3) of the Act beyond the points of AIR is invalid in law and so the same is with the order passed u/s 263 of the Act. It is the further contention of the assessee that in the items which are not subject matter of AIR cannot subject matter of scrutiny. Such matters include salary of the assessee, loans & interest on loans, payment of LIC, Commission & brokerage income etc. It is the case of the assessee that in the assessment order passed u/s 143(3) of the Act, the AO has travelled beyond the points of the AIR on the basis of which the case of scrutiny was selected under CASS module. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings and proceedings u/s 263 of the Act are collateral proceedings and in such collateral proceedings, the validity of initiation of the original proceedings u/s Mrs. Sonali Hemant Bhavsar 147 of the Act can be challenged. The Mumbai bench of the Tribunal in this regard has placed reliance on several decisions, the principal decision being that of the Hon'ble Supreme Court in the case of Kiran Singh & Ors. V. Chaman Paswan & Ors. [1955] 1 SCR 117(SC) wherein the Hon'ble Supreme Court observed as follows :- "It is a fundamental principle well-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties." Now coming to the facts of the instant case, we find that the instant case was selected on the basis of AIR Information as evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credited amount of Rs. 5,76,056/- only. Thus, total deposits made in the bank were not brought to tax; (iii) There was transactions of Rs. 3 76,225/- through credit card which was not explained and thus the entire amount was liable to be added to the total income of assessee but the AO has added only a sum of Rs. 2,98,225/- to the total income of assessee. Thus, there was under assessment of income by Rs. 78,000/-; (iv) The assessee during the year has sold property for Rs. 36 lakh and exemption of Rs. 19,74,763/- was claimed by assessee u/s. 10(38) of the Act. This fact was not verified by the AO at the time of assessment proceedings. In view of above, the Ld. CIT found the order of AO is erroneous in so far as prejudicial to the interest of Revenue and therefore show-cause notice was issued u/s. 263 of the Act vide dated 13.10.2015 for the clarification of the above transactions. In compliance thereto, the assessee submitted as under : i) The deposit in HDFC bank account No. 03151930000609 was duly reflected in his IT return. Therefore, no cause has happened to the Revenue which is prejudicial to the interest of Revenue. ii) The deposit of Rs. 19,73,750/- was duly ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interest of the revenue. In view of the above, the order dated 29/03/2014 passed by ACIT, Circle-43, Kolkata is found to be erroneous and prejudicial to the interest of revenue and hence it is set aside with the direction to pass fresh assessment order after examining the evidences and documents in respect of the above issues raised after giving opportunity to the assessee and in accordance with law." Being aggrieved by this order of Ld. CIT assessee is in appeal before us on the following grounds:- "(1) For that the Ld Pr. Commissioner of Income Tax erred in exercising the power of revision for the purpose of directing the AO to hold another investigation when the order passed by the AO was neither erroneous nor prejudicial to the interest of revenue. (2) For that the Ld Pr.CIT erred and exceeded jurisdiction by giving direction in respect of the matters which are subject matters of appeal before the CIT(A), therefore order passed by Pr. CIT-15 is unlawful, beyond provision of law and therefore liable to be quashed. (3) For that the Ld Pr. CIT had alleged arbitrarily irrelevant matters, factual and untrue position in the show cause notice u/s. 263 and therefore or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT-A that the order of AO is erroneous and prejudicial to the interest of Revenue is not true. c) Credit card payment of Rs. 3,76,225/- From the order of AO, we find that the AO has made the addition of Rs. 2,78,225/- out of total credit card payment of Rs. 3,76,225/-. Therefore, it is clear that AO has applied his mind while framing the assessment proceedings u/s. 143(3) of the Act. Thus, the allegation of the AO in the impugned order or Ld. CIT u/s. 263 of the Act that there was no proper enquiry conducted by AO at the time of assessment proceedings is not true. d) Sale of property for consideration of Rs. 36 lakh. On perusal of AIR information which is placed on page 1 of the paper book, we find that no immovable property has been sold by assessee in the year under consideration. Besides the above, there is also no whisper in the assessment order for any addition on account of capital gains. Therefore, we find that the allegation of Ld. CIT that AO has not conducted sufficient enquiry in relation to sale of immovable property is not true. 5.1 In view of the above we find that Ld. CIT has passed impugned order u/s. 263 of the Act by holding the order of AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the limited scrutiny can be converted into full scrutiny after taking permission from the ld. Pr.CIT/CIT. The Assessing Officer is not only confined to the scrutiny assessment but also he should see as to whether any potentiality/escapement of the income. If he finds any potentiality/escapement of income, he should have taken permission from the Pr.CIT/CIT for converting the limited scrutiny to full scrutiny which is lack in this case. In support of legal issue, ld.CIT DR relied on the decision of the coordinate bench in the case of Baby Memorial Hospital Ltd. Vs. ACIT, [2019] 111 taxmann.com 189 (Cochin-Trib.). He also submitted that the assessing officer has made addition on the other issues which has not been challenged by the assessee. He also submitted that there is no any deliberation on the assessment order on the subject matter of the scrutiny selection i.e the AO has not applied his mind properly. He is not only an adjudicator but he is also an investigator. Further ld. CIT DR relying on the order of Pr.CIT, submitted that the case law relied on by the ld. AR is not applicable in the present case because the facts involved in the decision relied on by the ld. AR are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The facts of the case are that the assessment was completed u/s. 143(3) of the Act for the assessment year 2014-15 by accepting the income returned. On verification of records, the Pr. CIT noticed that the assessment order passed by the Assessing Officer was prima facie erroneous in so far as it was prejudicial to the interest of the revenue. The Pr. CIT found that the assessee had claimed an amount of Rs. 2,08,09,140/- being foreign exchange loss which was allowed by the Assessing Officer. According to the Pr. CIT, the foreign exchange loss was on account of foreign currency loan taken for the construction of new building and additional equipment and the loss was recognized translating the liabilities at exchange rate in effect at the balance sheet date. According to the Pr. CIT, the loss on devaluation of rupees on account of loan utilized for fixed capital was not deductible u/s. 37(1) of the Act since the expenditure is capital in nature. Therefore, it was held that the foreign exchange loss claimed as revenue expenditure is to be disallowed in the assessment 3.1 Further, it was noticed that the assessee debited an amount of Rs. 15,83,130/- in its P&L account towards p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.02.2019] ITAT Lucknow Benches. (iii) Suresh Jugraj Mutha v. Addl.CIT [ITA No.05/Pun/2016 - order dated 04.05.2018] ITAT Pune Benches. (iv) M/s.Srinidhi Mines v. ITO [3084/Bang/2018 - order dated 25.04.2019] ITAT Bangalore Benches. (v) Smt.Gurpreet Kaur v. ITO [87/Asr/2016 - order dated 24.03.2016] ITAT Amritsar Bench. 4.2 In these cases, it was held that when an assessment is selected for limited scrutiny, the Assessing Officer cannot expand the scope of limited scrutiny beyond the reasons for which the case was selected for scrutiny unless prior administrative approval is obtained from the Pr.CIT /CIT or DIT concerned. 4.3 The learned AR had also submitted that if the Assessing Officer has no power to pass an order on a particular issue, then Pr.CIT also has no power on that issue u/s 263 of the I.T. Act. In this context, the learned AR relied on the order of the Tribunal in the case of Paul John, Delicious Cashew Co. 94 ITD 131 (Cochin Tribunal), which was upheld by the Hon'ble High Court in the case reported in 200 Taxmann 154. In the case of Paul John, Delicious Cashew Co. (supra) considered by the Cochin Bench of the Tribunal, it was held that the completed ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Further details specific to CASS were called for from the assessee vide notice issued u/s. 142(1) dated 27/06/2016 and the Assessing Officer accepted the explanation offered by the assessee in response to such notice. 6.1 The Ld. DR relied on the subsequent Circular No.20/2015 dated 29.12.2015 and Instruction No.5/2016 dated 14.07.2016. He drew our attention to para 4 of the above Instruction wherein it was mentioned that when potential escapement of income exceeds Rs. 10 lakh on issues other than selected under CASS, the Assessing Officer has the power to take up the assessment for comprehensive scrutiny with the approval of the Pr.CIT/DIT concerned. In the instant case, the potential escapement of income is far exceeding Rs. 10 lakh prescribed under the above mentioned CBDT Instructions.. Therefore, the Assessing Officer could have converted the limited scrutiny assessment into a complete scrutiny assessment by obtaining approval from the Pr.CIT/DIT concerned. According to the Ld. DR, the Assessing Officer failed to convert the limited scrutiny into a complete scrutiny and thereby, there was escapement of income of more than Rs. 10 lakhs. As such the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This functionality is expected to be operationalised by 15th October, 2014. Further, the Assessing Officer while issuing notice under section 142(1) of the Act which is enclosed with the first questionnaire would proceed to verify only the specific aspects requiring examination/verification. In such cases, all efforts would be made to ensure that assessment proceedings are completed expeditiously in minimum possible number of hearings without unnecessarily dragging the case till the time-barring date. 4. In case, during the course of assessment proceedings it is found that there is potential escapement of income exceeding Rs. 10 lakhs (for non-metro charges, the monetary limit shall be Rs. 5 lakhs) on any other issue(s) apart from the information based on which the case was selected under CASS requiring substantial verification, the case may be taken up for comprehensive scrutiny with the approval of the Pr.CIT/DIT concerned. However, such an approval shall be accorded by the Pr. CIT/DIT in writing after being satisfied about merits of the issue(s) necessitating wider and detailed scrutiny in the case. Cases so taken up for detailed scrutiny shall be monitored by the Jt. CIT/Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irly while accepting or rejecting the claim of the assessee in cases of scrutiny assessments. The Assessing Officer should protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return. The order passed by the Assessing Officer becomes erroneous when an enquiry has not been made before accepting the genuineness of the claim which resulted in loss of revenue. 7.1 In the present case, the first issue for our consideration is whether the Assessing Officer having failed to convert limited scrutiny into a complete scrutiny, the assessment order would be rendered erroneous and prejudicial to the interests of the Revenue. 7.2 The Pr. CIT invoked the provisions of section 263 of the Act for considering the following two issues: "The assessee had claimed an amount of Rs. 2,08,09,140/- being foreign exchange loss was allowed in assessment The foreign exchange loss on account of foreign cur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pr. CIT u/s. 263 is rejected. 12. On going through the assessment order, there is no any whisper in the order of assessment passed by the AO regarding the subject matter of purpose for the scrutiny and he has made addition on the other subjects which was not part of the aforesaid purpose of the limited scrutiny. In these circumstances, the AO should have obtained permission from the ld. Pr.CIT/CIT. In view of this, the order passed by the AO is also erroneous and prejudicial to the interest of revenue. To support our view, we would like to place reliance on the decision of coordinate bench of the Tribunal in the case of Maa Tarini Industries Ltd., ITA No.292/CTK/2019, order dated 17.03.2020, wherein the issue of limited scrutiny is involved which is similar to the present case. The relevant observations of the Tribunal are as under :- 25. On careful consideration of the rival submissions, we are of the view that admittedly and undisputedly, from the copy of the notice by the AO u/s. 142(1) of the Act dated 13.1.2015, it is ample clear that the case of the assessee for assessment year 2014-15 was selected for Limited Scrutiny only on two issues i.e. higher turnover report in serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply of the assessee in compliance to the said notice, the AO as an adjudicator and investigator did not bother to deliberate this issue in the assessment order and in our humble opinion,until and unless inquiry started by the AO is terminated to a logical and plausible end, such kind of enquiry has to be held as inadequate and insufficient inquiry on the issues, which makes the assessment order as erroneous and prejudicial to the interest of the revenue. 31. From the material placed before us, we also observe that from the service tax return of the assessee, the assessee had shown Rs. Rs. 8,45,95,617/- as gross value of service provided under the head 00440262 (transport of goods by road) and a sum of Rs. 15,69,31,397/- as gross value of service provided under the head 00440402 (service provided in relation to mining of minerals, oil or gas) as is revealed from service tax return. However, the assessee had not accounted for the receipt of Rs. 8,45,95,617/- in its income. Moreover, this amount of Rs. 8,45,95,617/- had been grouped in "note 19"under the head "cost of materials consumed". Thus, the income credited to P&L account was understated to the tune of Rs. 16,91,91,234/- wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is duty to ascertain the truth of the facts stated in the return which the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." 34. The Hon'ble Delhi High Court also in the case of Duggal & Co. vs. CIT [220 ITR 456], held as under: " The ITO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls further enquiry. It is incumbent on the AO to further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particulars, which were also furnished by the assessee, if the Income-tax Officer without probing into the matter further had allowed the claim of the assessee for weighted deduction and if the Commissioner on the basis of materials formed an opinion that the grant of allowance made by the officer was erroneous and not warranted by law, the jurisdiction of the Commissioner under section 263 of the Act was not ousted. The Commissioner may not have recorded his final conclusion, but the question for exercising the power of revision by the Commissioner is whether the order of the Assessing Officer can be regarded as erroneous and prejudicial to the interests of the Revenue. It may be erroneous in law or in fact. It may be erroneous in the sense that the Income-tax Officer had passed the order without properly conducting the inquiry in completion of the assessment and the order may also be erroneous when the expenditure allowed was against the provisions of law." 38. From the reading of all the above decisions of Hon'ble High Courts, it is evident that their Lordships have taken the unanimous view that the Income-tax Officer is not only an adjudicator but also an investigator. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eplies of the assessee placed at assessee's paper book at pages 50-51, it is clearly discernible that the assessee explained that in its profit and loss account, the total turnover has been shown at Rs. 2,31,60,000/- and the same figure has been reflected in the tax audit report in Cl.40 of Form 3CD under the head P&L, the total turnover has been shown as same figure and, therefore, there is no mismatch in the sale turnover shown in the tax audit report and profit and loss account filed alongwith the return of income. From the reply dated 19.1.2017, we clearly note that the assessee submitted copy of audit report, complete ITR form & profit and loss account to substantiate sales turnover figure which was accepted by the AO in the assessment order after due deliberation done at page 1 para 3 & 4 of the assessment order. Further from para 5 of the assessment order, we also gather that the AO, as a result of enquiry and verification made by him, noted that the assessee has adopted percentage completion method and has estimated profit @ 3.24% of the turnover and most of the inventory was not sold and was in stock, the work-in-progress as on 31.3.2015 was thus on a higher side. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore completion of scrutiny assessment. But due to non-submission of the required details by the assessee, the AO estimated net profit @ 4.24% instead of 3.24% as declared by the assessee and completed the scrutiny assessment. In para 3.4 of the said note sheet, ld ACIT noted that in the interest of revenue, as proposed by the ld JCIT, Range-2, Sambalpur, revision u/s.263 may be initiated before 31.3.2019. With these observations, the ld ACIT sent draft notice u/s.263 of the Act to Pr. CIT, Sambalpur. The ld. Pr. CIT has approved the proposal given by ld ACIT on the same date i.e. 14.1.2019 and thereafter notice u/s.263 of the Act has been issued on the very same date to the assessee show causing for initiation of revisional proceedings u/s.263 of the Act. For proper adjudication of this contention, we find it necessary and appropriate to reproduce the provisions of section 263 of the Act, which reads as follows: " 263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Span Overseas Ltd and order ITAT Mumbai 'F' Bench in the case of Vinay Pratap Thacker (supra). 21. On the above foregoing discussion, we reach to a logical conclusion that the ld JCIT Range-2, Sambalpur prepared a proposal for revisional proceedings u/s.263 and ld ACIT, Sambalpur in the order sheet dated 14.1.2019 created an explanation from the AO that the AO should have asked the assessee produce documentary evidence related to its business like bills and vouchers, details of documents of sale of flats but the assessee failed to submit the same before the AO during the scrutiny assessment. Therefore, he alleged that in real estate business with high closing stock, the information about estimated cost of construction of the project, estimated sale value of the project, selling price of individual flats, period of construction etc should have been examined before completion of scrutiny assessment but the ld ACIT failed to consider that it was a case of limited scrutiny only on two points and from the assessment order dated 21.3.2017, it is clearly discernible that the AO has made enquiry and deliberation on both the points and as per CBDT Circulars (supra), he is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the present case, the case laws cited by the ld.AR of the assessee are not applicable.
15. From the provisions of Section 263 of the Act, it is clear that any order passed by the AO, the Pr.CIT/CIT can invoke his revisonary power, if he considers that the order passed by the AO is erroneous and prejudicial to the interest of Revenue within the Section 263 of the Income Tax Act, 1961. The CBDT has issued circular regarding limited scrutiny in which there is no any whisper regarding revisonary powers that the Pr.CIT/CIT cannot exercise within the statutory limit as prescribed by the Income Tax Act, 1961. If the Pr.CIT/CIT cannot interfere with the limited scrutiny done by the AO, then there must be any clarification in the CBDT Circular in this regard, which is not found in the Circular. Considering the above case laws and factual aspects, we are of the view that the ld. Pr.CIT has rightly exercised his powers and we do not find any reason to interfere with the same. Accordingly, we dismiss the appeal of the assessee.
16. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 05/10/ 2020. X X X X Extracts X X X X X X X X Extracts X X X X
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