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TMI Blog2022 (11) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny cases. In limited scrutiny cases, the assessing officer does not get the opportunity to examine other issues which are not part of limited scrutiny. AO has not converted the limited scrutiny into full scrutiny by taking permission from the higher Income Tax Authorities. PCIT can exercise the supervisory power under section 263 only on the issues examined by the assessing officer and therefore the definition of the term record in clause (b) of Explanation 1 of section 263, means the record on which assessing officer has expressed his opinion. Hence, the plea taken by the ld DR for the Revenue, is not acceptable. It is well established that the impugned order passed u/s. 143(3) of the Act dated 21.12.2019, was passed by assessing officer, after calling for relevant information and after detailed examination of the same. The Assessing Officer has passed the assessment order after calling for details on the issue and after considering the reply and documents and after verification of the same and after due application of mind passed the assessment order, so it cannot be termed as erroneous and prejudicial to the interest of the revenue. So, the Ld. PCIT s finding fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, which can be stated quite shortly, are as follows. The Learned Principal Commissioner of Income Tax, (Ld. PCIT), called the assessment records of Shri Vijay Haribhai Patel, and it was noticed by ld PCIT that assessment order u/s 143(3) of the I.T. Act passed by the AO i.e. ACIT, Valsad Circle, Valsad, need to be revised under Section 263 of the I.T. Act 1961, as the AO has not verified the audit report submitted by the assessee and in which the auditor had pointed out that the interest on TDS not deducted on Rs.13,12,836/-, hence the same is disallowable. It was also observed by ld PCIT that there was a survey under section 133(A) of the Income Tax Act in which the assessee had declared Rs.40,00,000/- as undisclosed income for the year under consideration. It was noted that the assessee offered the undisclosed income under the head income from business or profession for taxation at normal rate. The AO has neither examined the issues emerging out of survey proceedings nor subsequent declaration of Rs.40,00,000/- by the assessee during the assessment proceedings. The AO has failed to go to the crux of the matter and pinpoint the issue on the basis of which the declaration during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fession for taxation at normal rates. The income disclosed during survey can never be a Revenue head. Assessee was supposed to make complete disclosure as to whether it represents suppressed sales, expanses or suppressed stock. However, neither AO examined the same nor sought any explanation. No penalty was also initiated on this count. 5. According to Section 68 of the I.T. Act, where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source of the same are not satisfactory on the opinion of AO, the sum so credited may be charged to income tax as the income of the assessee of that previous year. For the reference the Taxation Laws Act 2016 amendment in the Section 115BBE for A.Y. 2017-18 w.e.f. 01.04.2017 is reproduced is as under: To sum up the tax in the cases covered U/s 115BBE is worked out as under- 1. Tax on income U/S 115BBE 60% 2. Surcharge 25% of such tax 3. In case where income not included in return filed U/S 139 Penalty U/S 271AAC 10% of such tax. a) The amount of income Tax calculated on the income referred to in Sections 68, 69, 69A to 69D at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the AO, makes the order of the AO erroneous as well as prejudicial to the interest of Revenue. Therefore, ld PCIT held that assessment order u/s 143(3) of the IT. Act, 1961 in the case of Shri Vijay Haribhai Patel for A.Y.2017-18, passed on 21.12.2019, by the Assessing Officer is erroneous in so far it is prejudicial to the interest of revenue. Therefore, ld PCIT directed the assessing officer to frame the assessment De novo after making proper enquiries on aforesaid issues. 7. Aggrieved by the order of the ld. PCIT, the assessee is in appeal before us. 8. Shri Rajesh Upadhyay, Learned Counsel for the assessee, begins by pointing out that assessee s case was selected for limited scrutiny through CASS to examine the share capital/sale turnover. Having examined the limited issue of share capital/sale turnover, the assessing officer framed the assessment order. The assessing officer has also not converted the limited scrutiny case into full scrutiny case. However, ld PCIT has exercised his revisionary jurisdiction under section 263 of the Act on those issues which were not the subject matter of limited scrutiny. Therefore, order passed by ld PCIT should be quashed only on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 263(1) of the Act, which states that record shall include and shall be deemed always to have included, all records relating to any assessment proceeding in this Act, available at the time of examination by the PCIT . Therefore, ld. DR contended that the concept of limited scrutiny does not apply to the revision order passed by the ld PCIT under section 263 of the Act. 11. The Ld. DR also submitted that since the amount has been shown in the Tax Audit Report and the Tax Auditor has audited the books of accounts, as per information given by the assessee, therefore, ld. PCIT has rightly invoked his jurisdiction. The ld. DR also took us through the profit and loss account, submitted by the assessee, wherein the assessee has shown the amount disclosed during the course of survey to the tune of Rs.40,00,000/- and assessee has claimed expenses also which is not permitted. The entire amount disclosed to the tune of Rs.40,00,000/- during survey proceeding is assessable under section 68 of the Act and therefore assessee cannot claim the expenses out of such disclosed amount. However, the assessee has claimed the expenditure also, therefore, the ld. PCIT has rightly exercised his juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law . 13. Taking note of the aforesaid dictum of law laid down by the Hon ble Apex Court, let us examine whether in assessee`s case the order passed by the assessing officer is erroneous as well as prejudicial to the interest of Revenue. We note that assessee has filed his return of income on 29.12.2017, declaring total income at Rs.69,57,570/-. Later on, the assessee`s case was selected for limited scrutiny to examine the share capital/sale turnover. However, Ld. PCIT has exercised his jurisdiction on following two different issues: (i) Non-deduction of TDS on Rs.13,12,836/- and (ii) Amount declared by assessee during the survey proceedings to the tune of Rs.40,00,000/- The above noted two issues were not the subject matter of limited scrutiny, that is during the assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cochin) 6. Per contra ld. DR supported the order of Ld. Pr. CIT. 7. We have heard rival contentions, perused the records placed before us. Through this appeal assessee has challenged the revisionary power assumed by Ld. Pr. CIT u/s 263 of the Act. In the show cause notice u/s 263 of the Act it is stated that Ld. AO has not verified the issue of tax deducted at source on the payments made to contractors in light of the provisions of section 194C of the Act. 8. Now first we need to examine that whether the ld. AO was required to examine the issue for payment to contractors and tax deducted thereon Perusal of records shows that assessee s case was selected for limited scrutiny through CASS for verification of contract receipts/fees mismatch, sales turnover mismatch and tax credit mismatch . The issue of payment to contractors and tax deducted thereon was never a part of reasons for the limited scrutiny. Therefore, there was no occasion for the Ld. AO to examine this issue for payment to contractors. It is well settled that in case of limited scrutiny matter Ld. AO has to work within the parameters observed by the Central Board of Direct Taxes; instruction dated 29.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, the learned CIT was not correct in holding that the learned assessing officer has not made due inquiries on that ground as the verification of the purchases exceeding specified limit in cash was not an issue before the assessing officer. Naturally, he should not have made any enquiry on that aspect. Even though the learned assessing officer has raised the specific questions on that aspect and verified the requisite detail. Therefore, it cannot be said that the order of the learned assessing officer is erroneous and prejudicial to the interest of the revenue on this ground also. 10. In view of this, according to us the order of the learned CIT in assuming jurisdiction under section 263 of the income tax act holding that the order of the learned assessing officer passed under section 143 (3) of the act is erroneous and prejudicial to the interest of the revenue is not correct. Accordingly, the order passed by the learned CIT is unsustainable. 10. In the above referred decision Tribunal has held that when the assessment is taken up for limited scrutiny, Ld. Pr. CIT/CIT cannot hold the assessment order as erroneous and prejudicial to the interest of revenue in respect of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted Rs.13,12,836/- amount Disallowed. 16. In response to the notice under section 142(1) of the Act (supra), the assessee has submitted its reply to the assessing officer, which is placed in paper book page no. 67. The relevant portion of the reply is reproduced below: 37) During the year the Interest on Seri. TDS not Deducted of Rs.13,12,836/- was wrongly shown at our end in the paper book submitted by us. This mismatch of figure occurred as there was a system error. The audit report uploaded by us does not contain any such figure. Hence, we request you to consider this as mistake on our end and nullify the same. 38) Dering the year under assessment my assessees paid Rs.7,442/- Interest on TDS, we accept such as a definition. Therefore, we note that during the assessment stage, the assessing officer has raised the question relating to TDS and assessee has replied and then after Assessing Officer has examined the same and applied his mind and passed the assessment order. 17. About the amount declared during the survey proceedings to the tune of Rs.40,00,000/-, the assessee has shown in its profit and loss account and paid the taxes thereon. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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