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TMI Blog2021 (4) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... , reasons for selection, the Bank accounts in questions were before the ld. Pr. CIT. On this issue of turnover, the order of the Assessing Officer has merged with the order of the ld. CIT(A) dt. 28/04/2017. What the Assessing Officer missed, is also missed by the ld. CIT(A). The ld. Pr. CIT cannot order the Assessing Officer to follow the order/directions of the ld. CIT(A) on issues which were not part of the appellate order of the ld. CIT(A). Under these circumstances, the ld. Pr. CIT cannot exercise his powers u/s 263 of the Act, to revise the order that has merged with the order of the ld. CIT(A). For these reasons, we uphold the technical contention of the assessee and quash the order passed by the ld. Pr. CIT u/s 263 of the Act and allow the appeal of the assessee. - ITA No. 2173/Kol/2018 - - - Dated:- 24-2-2021 - Sri J. Sudhakar Reddy, Hon ble Accountant Member And Sri Aby T. Varkey, Hon ble Judicial Member For the Assessee : Shri Soumitro Choudhury, Advocate For the Revenue : Shri Tushar Dhwal Singh, CIT, D/R ORDER PER J. SUDHAKAR REDDY, AM :- This appeal filed by the assessee is directed against the order of the Learned Principal Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he two businesses) as being attributable to deposits from rice trade and in the same manner ₹ 1,78,07,619/- X (Amount of income declared from truck plying/Total declared business income from the two businesses) as being attributable to deposits from the business of plying of trucks. Once this attribution has been made, the provisions of section 44AD would apply to the deposits from rice trade and the provisions of section 44AE would apply to deposits attributable to the plying of trucks. This is of course subject to the other conditions prescribed in the said sections of the Act. Income is to be calculated accordingly. 4. Conclusion :- In the result, the appeal is treated as Partly Alloed. 2.1.1. The ld. Pr. CIT on 05/07/2018, issued a show cause notice u/s 263 of the Act, proposing to revise the assessment order passed by the Assessing Officer u/s 143(3) of the Act on 25/08/2016. The assessee replied to this show-cause notice on 08/08/2018. The ld. Pr. CIT, rejected the explanation of the assessee and passed an order u/s 263 of the Act on 24/08/2018. At para 12 and 13, he ordered as follows:- 12. The AO is directed (a) to verify, examine and determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer should have acted in accordance with para 4 of the CBDT Instruction No. 7/2014 and sought the approval of the ld. Pr. CIT for converting the case into a complete scrutiny and not doing so, empowers the ld. Pr. CIT to invoke his powers u/s 263 of the Act, as it falls within the parameters laid down in Explanations 2(a) and 2(c) of Section 263 of the Act. On the argument of the merger of the assessment order with the order of the ld. CIT(A), he submitted that, the ld. CIT(A) had not adjudicated on this matter and that mere preference of an appeal cannot be considered as determination of the matter by the ld. CIT(A). He submitted that the issue of examination of non-cash deposit in the bank a/c was not before the ld. CIT(A) and hence there is no whisper on this issue. He submitted that the Assessing Officer has not applied his mind and instead of examining the source of total deposits in the bank account, has only examined the source of the cash deposits. He submitted that the order of the ld. Pr. CIT be upheld, 5.1. In reply, the ld. Counsel for the assessee reiterated his contention that the Assessing Officer s powers in limited scrutiny is confined to the reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer is prohibited from examining any other issue or matter than what was the reasons for selecting the case for limited scrutiny, then the Assessing Officer cannot be accused of non-application of mind or negligence. 8.1. The ITAT Mumbai G Bench of the Tribunal in the case of ITA No. 742/M/2019; Assessment Year 2015-16, order dt. 17/05/2019, held as follows:- 6. After hearing both the parties and perusing the materials before us, we observe from the notice issued under section 143(2) of the Act for limited scrutiny dated 19.09.2016 and find merits in the contentions of the assessee that the said limited scrutiny can not 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 can not hold the order to be erroneous on the ground that AO ought to have reached to such conclusion. The case of the assessee is squarely covered by the decision of Kolkata Bench in the case of Sanjeev Kr. Khemka vs. Pr. CIT in ITA No.1361/Kol/2016 A.Y. 2011-12 dated 02.06.2017 wherein the co-ordinate bench of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment Ltd. Vs Principal C.I.T. in ITA NO.688/Mum/2016 have taken a view that when an Assessment order passed u/s 147 of the Act was illegal the Ld.CIT cannot invoke the jurisdiction u/s 263 of the Act against such void or non-est order. In the second decision cited the Hon'ble Mumbai bench of the Tribunal has specifically framed the following questions :- 1.Whether the assessee can challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of order passed u/s 263? 2. Whether the impugned assessment order passed u/s 143(3) dated 24-10- 2013 was valid in the eyes of law or a nullity as has been claimed by the assessee? 3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order? On question no. 1 and 3 which is relevant to the present case the Hon'ble Mumbai bench of the Tribunal has taken the view that when the original assessment proceedings are null and void in the eyes of law for want of proper assumption of jurisdiction then such va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT has in his order u/s. 263 of the Act exceeded the jurisdiction by holding the order of AO as erroneous in so far as prejudicial to the interest of Revenue on those items which are not emanating from the AIR. Thus, we are inclined to adjudicate only those matters which are emanating from the AIR as discussed above. 4.2 The assessment was framed by AO for the A.Y. 2011-12 under section 143(3) of the Act vide order dated 29.03.2014 after making certain additions/ disallowances to the total income of assessee. Subsequently, Ld. CIT u/s 263 of the Act observed certain errors in the order of AO, therefore, he was of the view tht the order passed by the AO is erroneous in so far as prejudicial to the interest of Revenue on account of no proper- enquiry before completing assessment as discussed below:- (i) The assessee has deposited in its bank account in HDFC bank Goa for ₹17.56 lakh and out of that there was a withdrawal only for ₹1.50 lakh but the AO has made the addition only to the extent of ₹4 lakh on account of unexplained cash credit. Therefore, certain unexplained cash credit of the assessee has been under assessed by the AO. ii) There was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. (2) The balance deposits in another account with HDFC, Porvorim, Goa was not considered in assessment. (3) Interest income from all savings accounts and FDRs was not considered at the time of assessment. (4) Submission of assessee regarding explanation of credit card payment of ₹ 3,76,225/- was partly accepted in assessment without proper verification. (5) Although a salaried person, the assessee's bank account reflect huge transactions/transfer entries, which required further investigation. (6) Long term capital gain of ₹ 19,74,763/- was not properly verified. (7) Loan transactions and Mrs. Sonali Hemant Bhavsar interest on loans required proper verification. (8) Salary was received in cash without TDS, which should have been viewed adversely. (9) LIC premium was paid for a minor but assessee's capital account did not reflect the same. (10) Lastly, the assessee declared income from commission/brokerage in the previous two AYs but no such income was shown in this year. An incorrect assumption of facts or an incorrect application of law will always make the order passed by the Assessing Officer erroneous. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime of assessment. Thus the order of the AO cannot be held Mrs. Sonali Hemant Bhavsar erroneous and prejudicial to the interest of Revenue on account of non enquiry whereas the ld. DR vehemently supported the order of the ld. CIT. 5. We have heard the rival contentions perused the materials available on record. From the foregoing discussion, we find that order of AO has been treated erroneous and prejudicial to the interest of revenue on the ground that proper enquiry was not made by the AO. Therefore, Ld. CIT held that the order of AO is erroneous and prejudicial to the interest of revenue. However, after examining the order of Authorities Below and other relevant records our observations are as follows:- a) deposit of cash of ₹17.56 lakh in HDFC bank a/c No.03151930000609 From the order or AO, we find that the AO at the time of assessment proceedings has applied his mind while determining the undisclosed income from the said bank account for ₹ 4 lacs. Thus the AO after considering the bank statements of the assessee has consciously made the addition of ₹ 4 lakh as unexplained cash credit against which assessee claimed to have filed appeal before Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. M/s. J.L. Morrison (India) Ltd.(ITA No 168 of 2011) in GA No 1541 of 2012 dated 15.05.2014, wherein it was held as under:- By sections 3 and 4, the Indian Income-tax Act, 1922, imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by a person must be regarded as income liable to tax. In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision. We also rely on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Max India Limited reported in 295 ITR 282 wherein it was held as under : When the CIT passed the impugned order under s. 263, two views were inherently possible on the word profits occurring in the proviso to s.80HHC(3) and therefore, subsequent amendment of s. 80HHC made in the ITA No.1361/Kol/2016 A.Y. 2011-12 S.K. Khemka Vs. Pr. CIT-15 Kol. Page 12 year 2005, though retrospective, did not render the order of the AO erroneous and prejudicial to the interest of the Revenue, and CIT could not exercise powers under s. 263. In view of the above proposition, and respectfully following principl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e genuineness and verification of unsecured loans, the details and explanation regarding which were duly supplied to the Assessing officer and the Assessing officer being satisfied with the evidences given by the ITA Nos. 1464/Chd/2017- M/s Bhandari Knit Exports, Ludhiana assessee competed the assessment at the returned loss of ₹ 10,21,815/- That neither the Assessing officer was authorised nor there was any occasion to the Assessing officer to scrutinize and make enquiries, about the other factors of the case as it was a limited scrutiny assessment case, hence, the enquiry, if any, was restricted to the limited issue of unsecured loans which was duly done by the Assessing officer and no fault has been found by the Ld. CIT(A) in that respect. Under the circumstances, the order passed by the Assessing officer cannot be said to be erroneous. 9. The propositions of law laid down in these case-law is that, when the Assessing Officer completed assessment u/s 143(3) of the Act, after examining the issues for which the case has been selected for limited scrutiny, then it cannot be held that there is an error in the order of the Assessing Officer, for the reason that he has not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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