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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGH & SHRI MANJUNATHA.G
आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT:
This appeal by the assessee is arising out of the Revision order passed by the Principal Commissioner of Income Tax (Central), Chennai-2 in Order No.ITBA/REV/F/REV5/2021-22/104139271(1) dated 23.03.2022. The assessment was framed by the DCIT, Crcle 1(1), Trichy for the assessment year 2017-18 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 22.12.2019.
At the outset, it is noticed that the appeal filed by the assessee is barred by limitation by 252 days. The order of PCIT dated 22.03.2022 was communicated to the assessee on 22.03.2023 as per Form 36. The appeal has to be filed on or before 22.05.2023 but was filed only on 30.01.2023. The assessee has filed affidavit for condonation of delay along with medical certificate, stating the following reasons:- As is said misfortune never comes in single but in battalion the Managing Partner (Myself) was laid up with Jaundice for about two months from the middle of May 2022 and thereafter it was the turn of my uncle (Father's Brother) who was looked after by me (The Managing Partner) was affected with Cancer and had ultimately passed away in December 2022 and then the case of my representative who had an uncontrolled diabetic and Blood pressure did not attend his office for about 3 months from November, 2022. Immediately on the return to office of my representative from the Tamil month THAI I got prepared the appeal and submitted the same. When these facts were confronted to ld.CIT-DR, he objected for condoning the delay. We find the cause as reasonable and hence, condone the delay and admit the appeal.
The only issue in this appeal of assessee is as regards to the revision order passed u/s.263 of the Act by the PCIT revising the AO for the relevant assessment year 2017-18 u/s.143(3) of the Act dated 27.12.2019.
Brief facts are that the assessee firm is engaged in the business of sale of silk and readymade garments and filed its return of income for the relevant assessment year 2017-18 on 30.10.2017. The assessee’s case was selected for limited scrutiny under CASS for the following reasons:- (i) High value cash withdrawals during the year reported (ii) Large value cash deposit during demonetization period Accordingly, assessment was completed after examining large cash deposits and high value receipt of cash deposited during demonetization period. Subsequently, the PCIT issued show-cause notice for revising the assessment u/s.263 of the Act dated 10.03.2022 stating that (i) the assessee has paid rent of shop and godown amounting to Rs.25,43,400/- but not deducted TDS u/s.194I of the Act, (ii) the assessee has claimed payment of interest of Rs.4,17,654/- in the profit & loss account and deducted TDS of Rs.1,31,821/- u/s.194A of the Act and hence, due to short deduction or no deduction of TDS, 30% of these expenses need to be disallowed by invoking the provisions of section 40(a)(ia) of the Act and (iii) Further there is delayed remittance of employees
EPF to the tune of Rs.7,15,106/- as per Form No.3CD, Sl.No.20(b). This is also to be added to the returned income of the assessee.
According to PCIT, in view of the above three items to be added to the returned income of the assessee, the AO framed assessment without examining the same and hence, he issued show-cause notice proposing revision of assessment.
The assessee before PCIT contended that out of total rent paid of shop and godown of Rs.25,43,400/- a sum of Rs.24,00,000/- is paid to H.H. The Prince Arcot Endowments and Department has issued ‘Nil’ TDS certificate and therefore, no TDS was deducted but on the balance amount of Rs.1,43,400/- being different small amounts for different godowns no TDS is applicable. Further, as regards to interest payment, the assessee has already deducted correct TDS of Rs.1,31,821/- on the interest payment of Rs.4,17,654/- and hence, no disallowance can be made by invoking the provisions of section 40(a)(ia) of the Act. Further, it was explained that the delayed payment of PF and ESI is only Rs.3,38,508/- which is employees contribution which is hit by the provisions of section 2(24)(x) of the Act and not the entire amount
Rs.7,15,106/- which includes employer’s contribution of Rs.3,78,598/-. But the PCIT was not convinced and he after reproducing the reply of assessee held the assessment order as erroneous insofar as it is prejudicial to the Revenue and proposed to revise the order passed by Revenue u/s.143(3) of the Act dated 22.12.2019 u/s.263 of the Act and directed the AO accordingly. Aggrieved, assessee came in appeal before the Tribunal.
We have heard rival contentions and gone through facts and circumstances of the case. First, the argument of ld.counsel for the assessee is that the assessee’s case was selected for scrutiny for verification of high value cash withdrawals and large value of cash deposits made during demonetization period. Apart from this, the AO was not authorized to look into any other issue. Even though on merits, the assessee has a case on each of the proposed disallowance by PCIT in his revision order passed u/s.263 of the Act. According to ld.counsel, once limited scrutiny issue is not under dispute, no revision is possible in view of the decision of Hon’ble Madras high Court in the case of CIT vs. Smt. Padmavathi in Tax Case Appeal No.350 of 2020, order dated 06.10.2020, wherein the Hon’ble High Court has considered this issue and held as under:-
The assessing officer in his limited scrutiny, has verified the source of funds, noted the sale consideration paid, the expenses incurred for stamp duty and other charges. Furthermore, the assessee in their reply dated 11.01.2019 to the show cause notice dated 26.10.2018 issued by the PCIT has specifically stated that the assessment was getting time barred, assessing officer took upon himself the role of a valuation officer under Section 50(C)(2) and found that the guideline value was not actual fair market value of the property and the actual consideration paid was the fair market value and therefore, he did not choose to make any addition under Section 50(C) of the Act.
Similar view is taken by the Co-ordinate Bench of this Tribunal in the case of Duckwoo Autoind Pvt. Ltd., vs. PCIT in order dated 21.12.2022, wherein the Tribunal vide paras 17 to 20 quashed the revision order and held as under:- 17. Combined reading of instructions issued by CBDT and particularly, the CBDT Instruction No.20/2015 dated 29.12.2015, sub-clause (b) of Clause (3) categorically states that questionnaire issued u/s.142(1) of the Act, in a limited scrutiny case, shall remain confine 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. Sub clause (d) of Clause-3 further reads the expansion of the scope of limited scrutiny and there are certain conditionality. The conditionalities are that during the course of assessment proceedings, in a limited scrutiny case, if it comes to notice to the AO that there is a potential escapement of income exceeding Rs.5 lakhs for normal CIT charge and for metro CIT charge, monetary limit shall be Rs.10 lakhs requiring substantial verification on any other issue, then the case may be taken up for complete scrutiny with the prior approval of the PCIT/CCIT concerned. The another condition put forth by the CBDT is that such approval thereof accorded by the PCIT in writing after being satisfied about imports of the issues necessitating complete scrutiny in that particular case. Further condition that such cases shall be monitored by the Range Head and procedure indicated in Sub-clauses (a) (b) (c) above no longer be remain pending in such cases, which means and reading together clause (b) and (d) itself clarified that in case, the limited scrutiny cases are picked up for scrutiny assessment, the AO shall remain confine to the only reasons / issues for 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.
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 only when the following two conditions are satisfied
a) The order passed by the AO should be erroneous and b) It should be prejudicial to the interest of the Revenue.
These conditions are conjective. The order of assessment passed by the AO cannot be interfered by any other reason. The object of the provisions of Sec.263 of the Act, is to correct an order which is erroneous as well as prejudicial to the interest of the Revenue. The purpose behind incorporating the said provision in the statute is to ensure that interest of the Revenue is safeguarded against erroneous order passed by the AO as the Department, has no right to file an appeal against the order of the AO. It has no power as a substitute of the power of the AO to make assessment, whereas the revision power u/s.263 of the Act, is certainly available where the order of the AO is erroneous as well as prejudicial to the interest of the Revenue. But, according to us, there is no straight jacket formula for categorizing an order to be erroneous as well as prejudicial to the interest of the Revenue, but depends upon the facts of each case.
In the present case, now whether the AO has power to examine in other aspect in a limited scrutiny or not is vital question. The CBDT Instruction
No.20/2015 dated 29.12.2015 sub-clause (b) to Clause (3) categorically limits the power in limited scrutiny case and which confines only to the specific reasons/issues for which case has been picked up for scrutiny and further, the scope of enquiry shall be restricted to limited scrutiny issues only. This is the clear intention of the CBDT. Further, going through the above said instructions, 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. But, 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.
In view of the above discussions, 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 any other issue, which has not been subject matter of the AO for the assessment in a limited scrutiny assessment. Hence, we quash the revision order and allow the appeal filed by the assessee.
When these were confronted to ld.CIT-DR, he only relied on the revision order.
After hearing rival contentions and going through the facts of the case, we noted that this case was selected for scrutiny
(i) High value cash withdrawals during the year reported (ii) Large value cash deposit during demonetization period Now, the PCIT want to enlarge the scope of limited scrutiny for which power is not available with the PCIT u/s.263 of the Act, for the reasons stated in Co-ordinate Bench decision in the case of Duckwoo Autoind Pvt. Ltd., in supra. Hence, we quash the revision order and allow the appeal of assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 15th September, 2023 at Chennai.