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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 ..... 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 the course of survey operation was made by the assessee. Thus, as per ld PCIT, the income of Rs.40,00,000/- which was to be taxed under section115BBE of the Income Tax Act has been taxed under normal provisions and thus the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 the rate of 60% (plus surcharge @ 25% on such tax and cess, as applicable). Thus effectively the rate comes to 77.25% .If such income is reflected in the Return of Income furnished u/s 139. It may be noted that if such income is not reflected in the Return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer 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 plea. 9. Without prejudice to the above, the ld Counsel further argued that assuming (without accepting), ld PCIT has power to exercise his jurisdiction on those issues which were not the subject matter of limited scrutiny, then in that situation also, the order passed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 jurisdiction under section 263 of the Act. This way, the Ld. DR contended that the order of ld. PCIT may be upheld. 12. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 proceedings before the Assessing Officer, the TDS was not the subject matter of limited scrutiny and amount declared by assessee during the survey proceedings to the tune of Rs.40,00,000/-, was also not the subject matter of limited scrutiny. Since these matters were not the subject matter of lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 29.12.2015 and various other circular issued in this behalf. Since the assessee's case was selected for limited scrutiny on certain issues and Ld. AO has examined these issues and framed the assessments and the issue of examination of payment to contractors was not a part of the limited scrutiny reasons, in our considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned 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 issue which was not a reason for selection of the case for limited scrutiny. Similar view also taken in the following decision: (i) The Deccan Paper Mills Co. Ltd. v. CIT [1013 & 1035/Pun/2014 - order dated 10.10.2017], ITAT Pune Benches. (ii) M/s.Aggarwal Promoters v. Pr.CIT [1708/Chd/2017 - order dated 16.04.2019] ITA Chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/- 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 claimed the indirect expenses against other regular business income and not against the amount declared in survey. The profit and loss accounts were submitted before the assessing officer. The Assessing Officer has examined the profit and loss account and applied his mind and took the possible view and then after framed the assessment order, hence such order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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