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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: HON’BLE SHRI V. DURGA RAO & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee assails the validity of revisional jurisdiction u/s. 263 as exercised by Ld. Principal Commissioner of Income Tax, Chennai-1 (Pr.CIT) vide order dated 20- 03-2022 against the assessment framed by Ld. Assessing Officer (AO) u/s.143(3) of the Act on 26-12-2019. 2. The Ld. AR advanced arguments and relied on the decision of this Tribunal in Shri Govindasamy Suresh vs. ACIT (ITA No.365/Chny/2022 dated 31-01-2023). Another argument was that 2 - due enquiries were made during the course of original assessment proceedings and therefore, the order could not be revised u/s 263 as held by this Tribunal in M/s Jakhau Salt Co. Pvt. Ltd. vs. DCIT (ITA No.367/Chny/2022 dated 24-02-2023). The Ld. CIT-DR, on the other hand, submitted that the assessee reflected low profit margin and Ld. AO should have converted ‘limited scrutiny’ into ‘complete scrutiny’. The failure to do so has rightly led to the revision of the order. Further, the assessee was obligated to get the accounts audited which were not done. Reliance has been placed on the decision of this Tribunal in M/s Sabhyamata Salterns Pvt. Ltd. vs. DCIT (ITA No.1498/Chny/2019 dated 11-12-2019). Having heard rival submissions and after perusal of case records, our adjudication would be as under. The assessee being resident individual is stated to be engaged in the business of real estate under proprietorship concern namely M/s Vetri Reals. Assessment and Revisionary Proceedings 3.1 From the records, it emerges that the assessee’s return of income was subjected to ‘limited scrutiny’ to verify ‘cash deposit during the year and cash withdrawals’. During the course of assessment proceedings, notices u/s 142(1) were issued on 09-05-2019 and 20-06- 2019 calling for requisite details for the assessee. In these notices, the assessee was, inter-alia, directed to furnish the details of cash deposits made into the bank accounts during the year as well as during the demonetization period. The assessee was also directed to file the details of cash withdrawals and application of money – cash flow statement. In the notice dated 10-12-2019, a specific query was raised that though the assessee made cash deposit of Rs.60.08 Lacs as against cash withdrawals of Rs.186.64 Lacs, the source of cash 3 - deposit was not furnished and the reasons for cash withdrawals were also not furnished. Therefore, Ld. AO proposed additions u/s 68 as well as u/s 69C of the Act. 3.2 The assessee, vide detailed reply dated 13-12-2019, filed break up of gross deposits / receipts with reconciliation and also the reasons for such cash deposits and cash withdrawals. The assessee stated himself to be engaged in construction activities which gave rise to these transactions. It was also submitted that the income was taken at 2% on gross receipts of Rs.625.22 Lacs since the assessee was promoting low budget housing. In support, sample copy of construction agreements with customer was also filed. The source of cash deposit and the reasons for which cash withdrawals were made was duly explained. Considering the same, Ld. AO accepted the returned income of the assessee. 3.3 Subsequently upon perusal of cash records, Ld. Pr. CIT invoked revisionary jurisdiction u/s 263 and put the assessee to show-cause notice on 03-03-2022. It was alleged that the assessee was a promoter, seller and builder but declared low income of 2% only. There was no break up details or sufficient material evidences for such lower income or 44AB certificate for the income from real estate business. It was unclear as to why the profits were not estimated at 8% of gross receipts. The case was selected for limited scrutiny. As per Board’s instructions, Ld. AO based on reasonable view of the possibility of under-assessment of income, could covert the ‘limited scrutiny’ to ‘complete scrutiny’. However, no such proposal was sent to Pr. CIT for taking up the case under ‘complete scrutiny’ even though credible information indicating under-assessment was available on records.
4 - Accordingly, the order was held to be erroneous and prejudicial to the interest of the revenue. Finally, the order was set aside with a direction to Ld. AO to examine the aspects afresh after affording opportunity of hearing to the assessee. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 4. From the above stated facts, it emerges that the assessee’s case was selected for ‘limited scrutiny’ to verify the ‘cash deposit during the year and cash withdrawals’. Upon perusal of notices issue u/s 142(1) as well as assessee’s replies thereto, we find that this issue was duly examined by Ld. AO during the course of original assessment proceedings and the assessee had furnished all the details as called for by Ld. AO, in this regard. Considering the nature of business, the assessee offered estimated profit of 2% which was accepted by Ld. AO and the returned income was accepted. It could thus be seen that the purpose for which limited scrutiny was undertaken, was duly fulfilled by Ld. AO and Ld. AO having accepted assessee’s explanation, chose not the make any further addition. No further action was required on the part of Ld. AO and Ld. AO did not find any other reason to probe any further into the matter 5. We find that Ld. Pr. CIT seek to revise the order only on the ground that the profit was to be estimated at higher rate of 8%. However, such an opinion is not based on any credible information or any concrete material on record. The Board’s instruction to convert limited scrutiny into complete scrutiny would apply only in cases only when there is any credible information on record warranting further probe into the tax returns of the assessee. We find that no such 5 - information was available with Ld. AO and Ld. AO had no reason to convert the limited scrutiny into complete scrutiny. The view adopted by Ld. AO was one of the possible views and the estimation of income at 2% could not be said to be without any reasonable basis considering the fact that the assessee was primarily engaged in providing low budget housing. This being so, the revision of the order could not be held to be justified.
Our view is duly fortified by the cited decision of Tribunal in Shri Govindasamy Suresh vs. ACIT (ITA No.365/Chny/2022 dated 31- 01-2023). The bench relying on another decision of Tribunal in Subbunadar Chandra Sekar vs ITO (ITA No.612/Chny/2021 dated 06-12-2022) held that in case of limited scrutiny, Ld. AO could not proceed further to examine except what is provided in para-3 of CBDT Circular No.F.No.225/402/2018/ITA.II dated 28-11-2018 which provide for conversion of limited scrutiny into complete scrutiny only where credible information was provided by any law enforcement / intelligence/ regulatory authority or agency regarding tax evasion by an assessee. Upon perusal of para-3 of above instructions, it could be seen that the scope of limited scrutiny for CASS cycles 2017 and 2018 could be widened only upon receipt of credible material or information from any law enforcement / intelligence / regulatory authority or agency regarding tax-evasion by an assessee. In such a case, the issues arising from such information could also be examined during the course of conduct of assessment proceedings in such 'limited scrutiny' cases with prior administrative approval of the concerned Pr. CIT/CIT. However, in the present case, we find that there is no such credible material or information which would justify widening the scope of 6 - limited scrutiny. Therefore, Ld. Pr. CIT, in our considered opinion, could not term the assessment order as erroneous or prejudicial to the revenue on the ground that there was credible information regarding under-assessment of income.
Similarly, this Tribunal in M/s Jakhau Salt Co. Pvt. Ltd. vs. DCIT (ITA No.367/Chny/2022 dated 24-02-2023) held that where AO called for specific information on the assessee and the assessee submitted required details, it is presumed that Ld. AO has considered all the issues with regard to the issue and applied his mind to the relevant facts in right perspective of law. This case law also supports the case of the assessee.
The decision of Chennai Tribunal in M/s Sahayamatha Salterns Pvt. Ltd. vs. DCIT (ITA No.1498/Chny/2019 dated 11.12.2019), as relied upon by revenue, is factually distinguishable. Upon perusal of para-4 of the order, it could be seen that Ld. AO failed to consider the information passed on to him by other Income Tax Authority regarding on-money consideration and therefore, the revision was held to be justified. The same is not the case here.
Therefore, on the facts and circumstances of the case, the revision of the order could not be upheld in the eyes of law. By quashing the same, we allow the appeal of the assessee.
The appeal stands allowed in terms of our above order. Order pronounced on 21st April, 2023. Sd/- Sd/- (V. DURGA RAO) (MANOJ KUMAR AGGARWAL) �ाियक सद2 /JUDICIAL MEMBER लेखा सद2 / ACCOUNTANT MEMBER चे+ई / Chennai; िदनांक / Dated : 21-04-2023 EDN/- 7 - आदेश की Uितिलिप अ7ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु4/CIT 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF