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TMI Blog2023 (1) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... we noted that the limited scrutiny can be enlarged to complete scrutiny, but subject to certain conditions that during the course of assessment proceedings, if it comes to the notice of the AO that there is a potential escapement of income exceeding Rs.5 lakhs in normal CIT charge and in metro CIT charge Rs.10 lakhs requiring special verification on any other issue, then he can take up for complete scrutiny with the approval of the PCIT concerned. In this case, the AO was not of such view that any other issue requires verification. The above CBDT Instructions later clearly establishes that it is not open for the AO to travel beyond the reasons for selection of the scrutiny for limited scrutiny and on that aspect the assessment order completed in this case in accordance with the CBDT Instruction No.20/2015 dated 29.12.2015. Considering the instruction issued by the CBDT No.20/2015 dated 29.12.2015 and in particular sub-clause (d) of Clause-3, we are of the view that once the AO cannot examine any other issue except the issue as selected for limited scrutiny assessment, the PCIT can examine the only issue which was before the AO during the course of scrutiny assessment and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee company filed its return of income for the AY 2015-16 on 30.11.2015. The assessee s case was selected for scrutiny assessment through CASS for limited scrutiny assessment by issuance of notice u/s.143(2) of the Act. This is an admitted fact and recorded in the assessment order. As per limited scrutiny, notice issued dated 28.07.2016, the case was selected for limited scrutiny on the following issues: i. Import turnover mismatch ii. Custom Duty Payment Mismatch Further, a notice was issued from the Office of the AO on 05.06.2017 and on the above two issues, the following details were called for: i. Breakup of purchases party wise. ii. Breakup of domestic purchases and imports along with party-wise details. iii. Details of trade creditors along with opening and closing balances. iv. Details of LCs availed/proofs of payments made in respect of Imports/domestic purchases. v. Proof for customs duty paid and Invoice value of imports. vi. Details of invoice value of imports assessed for the purpose of customs duty. This may be treated as communication u/s.142(1) of IT Act, 1961 and non-compliance entails initiation of penalty u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manpower and these expenses were revenue in nature and charged to P L account. In this way, the assessee was able to upgrade^ to manufacturing activities. Therefore, the entire business was already commenced and the expenses being revenue in nature ought to be allowed. 7. In the case under consideration, the Assessing Officer has accepted the claim of the assesses without making due verification and without conducting the necessary enquiries. 8. In view of the above, there is a total lack of application of mind on the part of the Assessing Officer and this is fit case to invoke the provisions of Sec.263 of the Act. Therefore, in conclusion the Assessing Officer has failed to make a complete verification with respect to the aspect as discussed supra and had passed the Assessment Order u/s 143(3) of the Act, without proper diligent application of mind and enquiry, and hence in my considered opinion the assessment order so passed is both erroneous and prejudicial to the interest of the revenue. Accordingly, the assessment order is hereby set aside u/s 263 of the Act, with a direction to the Assessing Officer to examine the issue, as discussed in the order, during the Accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y issue in the present appeal relates to the validity of power of revision exercised by the ld. PCIT u/s.263 of the Act. Admittedly, the assessment was completed by the Assessing Officer under limited scrutiny assessment in order to verify the following two items. a) Large other expenses claimed in the Profit and Loss account. b) Mismatch between income/receipt credited to profit and loss account considered under other heads of income and income from heads of income other than business of profession the Assessing Officer completed the assessment after due verification of these items. From the perusal of Sub Clause (d) of Clause 3 of the said CBDT Instruction No.20/2015, dated 29th December, 2015, the Assessing Officer is empowered to take up any other issue for assessment with the approval of the ld. PCIT/CIT concerned, which has come to the notice of the Assessing Officer that there is potential escapement of income exceeding G5 lakhs for non-metro and Rs.10 lakhs in the case of metro. In the present case, admittedly, the Assessing Officer was in receipt of information from the Deputy Commissioner of Income tax, Central Circle- 1, Madurai vide letter dated 18.09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a binding effect and the revenue are bound to act upon them. It is not necessary to labour on that question, but the most question is whether the Scheme encompassed ladies and minors. I am clearly of the view that it did not. If it did not include them, any discussion on the binding character of the orders of the Board have no relevance. The Vice President Mr. Mathur took note of the fact that the scheme of the Board made a distinction between the adult male assessees and assessees who are ladies and minors. He rightly observed that the distinction was done because the Government found some unscrupulous assessees having huge income may be trying to reduce the rate of the tax applicable to them by showing the income in the names of ladies and minors to whom lower rate of tax was applicable. He rightly observed that in the case of ladies and minors the proper enquiries required to be made was only to confirm whether ladies and minors were benamidars of some other assessees whose income was taxable at higher rate of tax. Was that done? Certainly not. Having missed the central point, the Tribunal fell into a grievous error in holding that the assessment had to be completed within the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irected towards ascertainment of the core question, namely, when and from where did funds come and whether the case of the assessee in regard thereto was gullible. The enquiry not having directed towards that question, it was no equiry. The scheme did not liberalise matters for the assessee, who was a lady, wife of a trader. The assessment, thus, on the basis of such enquiry was clearly erroneous. 18. That brings us to the question of jurisdiction of the Commissioner under section 263 to cancel assessment and direct a fresh assessment. If the assessment is erroneous, it must toe presumed to be prejudicial to the interest of the revenue. The finding of the Commissioner in this case was that the order of the assessment was prejudicial to the interest of the revenue, as the assessee may have been a mere benamidar of her husband. It is true that the Commissioner did not record a concluded finding that she was a benamidar. But if he had done so, he would have laid himself open to the charge that the dice had been loaded against the assessee, the Commissioner, therefore, rightly only ordered further investigation into the claim of the assessee upon this finding if the funds had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel for the assessee filed copy of judgment of the Hon ble Madras High Court in the case of CIT v. Smt. Padmavathi in TCA No.350 of 2020 dated 06.10.2020 and also filed copy of CBDT Instruction No.20/2015 dated 29.12.2015. 11. We have heard the rival contentions and gone through the facts and circumstances of the case. Admitted position of facts in the present case before us is that the original scrutiny assessment was taken up for limited scrutiny under the following two heads: i. Import turnover mismatch ii. Custom Duty Payment Mismatch 12. The PCIT passed revision order to revise the assessment u/s.263 of the Act, for making disallowance of pre-operative expenses i.e. depreciation expenses debited only relating to employee benefits, administrative expenses, etc., amounting to Rs.1,40,01,528/-. According to the PCIT, the AO has accepted the claim of the assessee without making any due verification and without conducting the necessary enquiries. Hence, he set aside the assessment. Now before us, the same was challenged on the issue that once the assessment framed u/s.143(3) of the Act, by issuing notice u/s.142(1) of the Act, for limited scrutiny can PCIT revis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. Now, we have gone through the CBDT Instruction No.20/2015 dated 29.12.2015 and the relevant directions reads as under: Subject : Scrutiny Assessments-some important issues and scope of scrutiny in cases selected through Computer Aided Scrutiny Selection ( CASS )-reg .- The Central Board of Direct Taxes ( CBDT ), vide Instruction No. 7/2014 dated 26-9-2014 had clarified the extent of enquiry in certain category of cases specified therein, which are selected for scrutiny through CASS. Further clarifications have been sought regarding the scope and applicability of the aforesaid Instruction to cases being scrutinized. 2. In order to facilitate the conduct of scrutiny assessments and to bring further clarity on some of the issues emerging from the aforesaid Instruction, following clarifications are being made: i. Year of applicability : As stated in the Instruction No. 7/2014, the said Instruction is applicable only in respect of the cases selected for scrutiny through CASS-2014. ii. Whether the said Instruction is applicable to all cases selected under CASS: The said Instruction is applicable where the case is selected for scrutiny under CASS only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that particular case. Such cases shall be monitored by the Range Head concerned. The procedure indicated at points (a), (b) and (c) above shall no longer remain binding in such cases. (For the present purpose, Metro charges would mean Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Ahmadabad). 4. The Board further desires that in all cases under scrutiny, where the Assessing Officer proposes to make additions or disallowances, the assessee would be given a fair opportunity to explain his position on the proposed additions/disallowances in accordance with the principle of natural justice. In this regard, the Assessing Officer shall issue an appropriate show-cause notice duly indicating the reasons for the proposed additions/disallowances along with necessary evidences/reasons forming the basis of the same. Before passing the final order against the proposed additions/disallowances, due consideration shall be given to the submissions made by the assessee in response to the show-cause notice. 5. The contents of this Instruction should be immediately brought to the notice of all concerned for strict compliance. 15. After going through the case law of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances have been viewed very seriously by the CBDT and in one case the Central Inspection Team of the CBDT was tasked with examination of assessment records on receipt of a I lee at ions of several irregularities. Amongst other irregularities, i; was found that no reasons had been recorded for expanding the scope of limited scrutiny, no approval was taken from the PCIT for the conversion of the limited scrutiny case to a complete scrutiny case and the order sheet was maintained very perfunctorily. This gave rise to a very strong suspicion of mala fide intentions. 16. Now, under contentions are, the CBDT Instruction No.20/2015 dated 29.12.2015, which are relevant to the assessment year, the clause (b) (d) are very important, which clarifies the issue and for the sake of clarity, these are extracted as under: b) The Questionnaire under section 142(1) of the Act in Limited Scrutiny cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the Limited Scrutiny issues. d) During the course of assessment proceedings in limited Scrutiny cases, if it comes to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or which case has been picked up for scrutiny and the scope of enquiry be restricted to the limited scrutiny issues only. The expansion of scope of scrutiny from limited scrutiny to complete scrutiny is that during the course of assessment proceedings, which comes to the notice of the AO that the potential escapement of income exceeding Rs.5 lakhs for normal CIT charge and exceeding Rs.10 lakhs for monetary limits for metro CIT charge. The case can be taken up for complete scrutiny with the approval of the PCIT / CCIT concerned, which means that the AO is empowered to enlarge the scope of limited scrutiny case to the complete scrutiny assessment in view of the above condition only and that also through quasi-judicial powers. 18. Now, we have to examine what the PCIT can do while invoking the revision power u/s.263 of the Act, for revising the assessment order framed by the AO. According to us, the AO while passing an order of assessment performs a quasi-judicial functions, revision power lies with the PCIT. It is trite law that the jurisdiction exercised by the revisional authority pertains to his appellate jurisdiction. The jurisdiction u/s.263 of the Act can be exercised onl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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