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TMI Blog2021 (7) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter was selected for limited scrutiny, revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was originally vested with the A.O while framing the assessment as also held consistently by various Benches of the Tribunal. The transactions reflected in the financial statements are sum total of various independent transactions undertaken during the year, and the balance sheet represent a consolidated picture of the financial position of the assessee at the end of the year and similarly, the profit/loss account represent the consolidated position of revenues and costs and net profit during the financial year. It is likely that some of the transactions are directed connected and some are indirectly connected, however, they all have a common thread in terms of impacting the financial position of the assessee and for tax purposes, in determination of net taxable income. The reasoning adopted by the PCIT that transactions of cost of construction will have an effect on closing work in progress and taking sales turnover and closing WIP into account, all these transactions taken together will effect the determination of net taxable income is no do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interest of the revenue. 2. That the ld Pr. CIT has legally erred in not passing a speaking order against the submissions of the appellant. As such, the order passed u/s 263 is void ab-initio. The action of the Ld. CIT was wholly unreasonable, uncalled for and bad in law. 3. That under the facts and Circumstances, the Pr. CIT has ignored the 'True and fair approach, the 'Principles of the natural justice' and the 'Tax neutrality. 4. That under the facts and circumstances, the assessee has rightly assessed the value of the WIP and has rightly assessed the Agriculture income. 2. At the outset, the ld AR submitted that there has been a delay in filing the present appeal. It was submitted that the due date of filing of the present appeal was 25/04/2020, however, due to 'Covid-19' pandemic, a national lockdown was declared by the Government w.e.f. 22/03/2020 as a result of which the appeal could not be filed within due date. It was submitted that the lockdown may be treated as sufficient cause as no postal services, offices and transport were allowed to operate by the Government and even the courts have held that the period of lockdown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination:- (i) Sale Consideration of property in ITR is less than sale consideration reported in CIB (ii) Mismatch in sale Turnover reported in Audit report and ITR (iii) Value of Property transferred as reported in AIR is higher than the value of property transferred as reported in return of Income. 6. It was submitted that the issues under consideration were considered by the A.O vide the notice u/s 142(1) dated 08/06/2017 on point no. 6,7 and 8 of the notice and was duly replied by the assessee. The A.O. also provided AIR and CIB data during the course of hearing in order to let assessee know reasons of mismatch in AIR and CIB data. All the issues were relating to value of sale deeds executed and their mismatch with regard to the ITR, Audit report, CIB and AIR data. On perusal of all the sale deeds, the A.O. noticed certain wrong calculation of LTCG and made an addition of 3,83,990/-. As it was the case of the Limited Scrutiny and all the reasons for the scrutiny were dealt by the A.O., the order passed by the A.O. is neither erroneous nor prejudicial to the revenue and hence notice u/s 263 of the Act cannot be issued and order so passed is bad in law. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernible that the AO has made enquiry and deliberation on all the points and as per CBDT Circulars (supra), he is not allowed to travel beyond the ambit of the points for which the case was selected for limited scrutiny So, as all the due compliances have been made by the A.O., the order passed u/s 143(3) is not erroneous and revision u/s 263(1) is totally uncalled for. 10. It was further submitted that the reasons that the valuation of the Closing WIP and ascertainment of Taxable income is part of the reasons listed for limited scrutiny as alleged by the ld PCIT is not correct. The Sales Turnover in the case of real estate business is determined through the executed Sale Deeds and has nothing to do with the Closing Stock of WIP. In his order, the ld PCIT has not made any conclusive findings that how the ascertainment of correct taxable income and Closing stock of the WIP is one of the reasons mentioned in the CASS and hence, the order so passed is a non-speaking order and must be quashed. 11. It was further submitted that during the year under consideration, the cost incurred till date was debited in the Books of Accounts. The Project was completed till 15th September,2015. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culture income from the HUF of her mother Smt. Barji devi. The assessee has no agriculture land and all the land held by the assessee is held as Stock in trade . The assessee has ancestral property held by Mother Smt. Barji Devi which generates yearly income of ₹ 2.5 to 3 lakhs. The assessee along with his brother receive a part of agriculture income from the HUF of her mother, which is exempt from tax as her mother has no other income and receives only agriculture income. So, the agricultural income is taken in the capital account and not in the computation of Income. 15. Per contra, the ld. CIT/DR submitted that in view of para 4 of the instruction issued by the CBDT, if there is potential escapement of income above ₹ 5 Lac, the AO is required to convert the limited scrutiny case into a comprehensive scrutiny case after taking the prior approval of ld. PCIT and if the AO does not get the limited scrutiny case converted to comprehensive scrutiny case, the assessment order becomes erroneous as it is prejudicial to the interest of Revenue and provisions of section 263 of the Act are applicable. In support, reliance was placed on order dated 08.11.2019 of Cochin Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year which is under assessment. If any discrepancy is noticed, the AO was to examine discrepancy in the taxable income. In this case closing stock of WIP was shown less by ₹ 39,01,560/- which directly affect the net taxable income of the assessee. This crucial issue which is the basic issue for examination at the time of scrutiny assessment was not examined by the assessee. Books of accounts are produced for the verification by the AO. However, no examination of books of accounts was carried out during the assessment proceedings. One of the reasons of limited scrutiny was mismatch in sales turnover reported in audit report and 1TR. Sales turnover is the only factor which determine the closing stock of WIP. This issue of closing stock of WIP was not examined and order was passed without application of mind. Since the issues of limited scrutiny were not examined during the assessment proceedings and order has been passed mechanically, the issues raised by the AR are not correct and hence not accepted. 6. While holding so, AO failed to take note of various facts which were available on record. Some of the relevant facts relating to the issue in hand are summar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law. However an opportunity to the assessee to state its case is to be allowed in the interest of natural justice. 16. We have heard the rival contentions and perused the material available on record. There is no dispute that the case of the assessee was selected for limited scrutiny under CASS on account of mismatch of sales turnover as reported in audit report, ITR, AIR and CIB data. The A.O. issued notice u/s 143(2) of the Act and enquired about the issues under consideration and in response, the assessee submitted copies of the sale deeds executed during the year under consideration and also submitted reconciliation of sales turnover with financials, ITR, AIR and CIB data which is also placed on record before us. Being satisfied, the AO completed the assessment u/s 143(3) without any adverse finding regarding the issues for which the matter was selected for limited scrutiny. 17. There is no dispute that scope of enquiry in case of limited scrutiny is only to the extent of the issues for which case was selected for scrutiny under CASS. The CBDT has issued instructions from time to time in this respect and has specifically instructed the taxing authorities that scope of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting Complete Scrutiny in such cases. 18. Thus the AO is duty bound to follow the instructions in case limited scrutiny assessment proceeding are proposed to be converted into complete scrutiny and without following said procedure and necessary approval of the competent authority conducting an enquiry on the issue which is outside the limited scrutiny would be beyond the jurisdiction of the AO. As a necessary corollary, the Pr. CIT u/s 263 cannot be permitted to traverse beyond the jurisdiction that was vested with the A.O while framing the assessment as what cannot be done directly cannot be done indirectly. Therefore, where the matter was selected for limited scrutiny, revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was originally vested with the A.O while framing the assessment as also held consistently by various Benches of the Tribunal as referred supra. 19. A contention which has been raised by the ld CIT/DR is that where there is a potential escapement of income, the AO is required to convert the limited scrutiny case into a comprehensive scrutiny case after taking the prior approval of ld. PCIT and if the AO does not get t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r AO to record his satisfaction though after completion of current assessment proceedings and invoke jurisdiction u/s 147 of the Act subject of course to satisfaction of conditions specified therein rather than the ld. PCIT invoking jurisdiction u/s 263 of the Act. As we have discussed earlier, the revisional jurisdiction u/s 263 cannot be exercised for broadening the scope of jurisdiction that was originally vested with the A.O for limited scrutiny while framing the assessment and enlarging his scope of limited enquiry. 20. The decision in case of Baby Memorial Hospital (supra) is distinguishable as in that case, the assessee itself had agreed that PCIT is justified in giving direction to work MAT income after adding back the provision for doubtful debts and basis such concession on part of the assessee, the Tribunal has held that the argument of the assessee that in case of limited scrutiny, the PCIT could not exercise jurisdiction u/s 263 is devoid of merit. Therefore, the said decision doesn t support the case of the Revenue. 21. Now, coming back to reasoning adopted by the ld PCIT to invoke his jurisdiction u/s 263 in the instant case. As per ld PCIT, the reason for whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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