Loading judgment…
Facts
The assessee's return for AY 2020-2021 was selected for limited scrutiny regarding the purchase value of a property. The Assessing Officer made an addition under Section 56(2)(x)(b)(B). The PCIT invoked Section 263, setting aside the assessment order, stating it was erroneous and prejudicial to revenue, and directed a fresh assessment including verification of unsecured loans.
Held
The Tribunal held that the Assessing Officer acted within the scope of the limited scrutiny mandate. The PCIT erred in invoking Section 263 as the issue of unsecured loans was outside the limited scope of scrutiny. Therefore, the PCIT's order was set aside, and the Assessing Officer's order was reinstated.
Key Issues
Whether the PCIT erred in invoking Section 263 when the Assessing Officer acted within the limited scope of scrutiny and whether the PCIT could direct inquiry into issues beyond the limited scrutiny's scope.
Sections Cited
143(3), 263, 56(2)(x)(b)(B), 68, 139(1), 144B
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Principal Commissioner of Income Tax Vs Room No. 418, Piramal Chamber, Lalbaug, Parel, Mumbai - 400012 …………. Respondent Appearance For the Appellant/Department : None For the Respondent/Assessee : Shri. R. A. Dhyani, CIT DR Date Conclusion of hearing : 25.08.2025 Pronouncement of order : 28.08.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is directed against the Order, dated 24/03/2025, passed by the Principal Commissioner of Income Tax, Mumbai-20 [hereinafter referred to as ‘the PCIT’] whereby the Assessment Order, dated 09/01/2021, passed under Section 143(3) of the Income Tax Act, 1961 for the Assessment Year 2020-2021 subjected to revision under Section 263 of the Act.
The assessee has raised following grounds of appeal : “1. In law and facts and circumstances of the case, The Principal Commissioner of Income Tax (PCIT, Mumbai -20) ('The learned Principal Commissioner') erred in invoking provisions of Section 263 Assessment Year 2020-21 of Income Tax Act, thereby passing the Order of Revision considering the order passed by Assessing Officer (NFAC) is prejudicial to the interest of revenue. 2 In law and facts and circumstances of the case, The Principal Commissioner of Income Tax (PCIT, Mumbai -20) ('The learned Principal Commissioner') erred in invoking provisions of Section 263 of Income Tax Act, ignoring the facts that it was a limited scrutiny with reference to taxability u/s 56(2)(X)(b)(B) of Income Tax Act, 1961 in respect of difference in value adopted for stamp duty purpose and actual purchase consideration and loan confirmations is out of the scope of Limited Scrutiny. 3 The learned Principal Commissioner has erred in ignoring the loan confirmations submitted by the appellant during the course of assessment proceedings and duly verified by the Assessing Officer (NFAC) during assessment. 4 The appellant craves leave to add, alter, modify or delete any of the grounds of appeal during the course of hearing of appeal.”
3. When the appeal was taken up for hearing none was present on behalf of the Assessee. On perusal of the impugned order and the grounds raised in the present appeal, we proceeded to hear the Ld. Departmental Representative for adjudication of the present appeal on merits on the basis material on record. We have heard the Ld. Departmental Representative and have taken into consideration the stand taken by the Assessee.
4. The relevant facts for adjudication of the present appeal, as emerging from the record, are that the Assessee, an individual, filed its return of income for the Assessment Year 2020-2021 on 09/01/2021. The return of income filed by the Assessee was selected for limited scrutiny on the issue of “Purchase Value of Property less than the value as per Stamp authority (u/s. 56(2) or any other relevant section) (Business ITR)”. During the assessment proceedings, the Assessee file reply/submission. However, the Assessing Officer was not convinced and proceeded to pass Assessment Order, dated 25/09/2022, under Section 143(3) read with Section 144B of the Act making an addition of INR.86,49,444/, 2 Assessment Year 2020-21 being Assessee’s share of deemed income taxable as Income From Other Sources as per Section 56(2)(x)(b)(B) of the Act. Subsequently, notice was issued by Ld. PCIT under Section 263(1) of the Act as the Ld. PCIT was of the view that Assessee had failed to furnished documents/details during the assessment proceeding regarding source of funds utilized by the Assessee for the purchase of immovable property. The Ld. PCIT noted that though the Assessee had stated that relevant documents/details were filed during the assessment proceedings, the same were not available on the online portal. In response to the show caused notice issued under Section 263 of the Act, the Assessee filed Submission, dated 17/03/2025, objecting to exercise of power of revision under Section 263 of the Act. However, Ld. PCIT was not convinced and proceeded to pass Order, dated 24/03/2025, under Section 263 of the Act setting aside the Assessment Order, dated 25/09/2022, passed by the Assessing Officer by relying upon the provisions contained in Explanation 2 to Section 263 of the Act giving the following direction:
6.3 Considering the facts mentioned above and relying on the judicial pronouncements, I am satisfied that the order passed by the AO is deemed to be erroneous in so far as it is prejudicial to the interests of the revenue in terms of Explanation 2 to Section 263 of the Act. Hence, the assessment order is cancelled and set- aside to the AO for making fresh assessment in the light of the discussion above. The AO shall make necessary inquiry and verification in respect of unsecured loan amounting to Rs. 1,68,40,000/-. The AO shall give opportunity of being heard to the assessee before passing necessary order.
Being aggrieved the Assessee has now preferred the present appeal before the Tribunal.
The contention raised in the grounds of appeal
is that the return
3. Assessment Year 2020-21 filed by the Assessee was selected for limited scrutiny to verify the difference between the sale consideration and the stamp duty value, and examine the taxability or otherwise of the same under Section 56(2)(x)(b)(B) of the Act. Since the Assessing Officer had acted within the scope of limited scrutiny, it could not be said that the Assessing Officer had failed to carry out necessary enquiries/verification. Therefore, the Ld. PCIT erred in invoking provision contained in Section 263 of the Act and Explanation 2 thereto.
During the course of the hearing the Ld. Departmental Representative supported the order passed by the Ld. PCIT under Section 263 of the Act submitting that no verification/enquiry was carried out by the Assessing Officer in relation to the source of funds utilized by the Assessee in purchased of the immovable property. Though the Assessee has taken a stand that the relevant documents and details were filed by the Assessee during the assessment proceeding, no such submission/documents were found to be on record. Therefore, in the present set of facts Explanation 2 to Section 263 of the Act was correctly invoked by Ld. PCIT.
Having given thoughtful consideration to the rival submission/stand and on perusal of record, we find merit in the stand taken by the Assessee. On perusal of Paragraph No. 1 of the Assessment Order it becomes evident that the income tax return filed by the Assessee for the Assessment Year 2020-2021 was selected for limited scrutiny. Paragraph No. 1 of the Assessment Order reads as under:
The assessee, Sri. Pavan Vitthal Gaikwad, PAN ANNPG7561J, is an individual and deriving income from business. The assessee filed his Return of Income for the Assessment Year 2020-21 on 09/01/2021 u/s. 139(1) of the Act declaring total income of Rs. 7,91,080/-. The return of Income was selected for Limited Scrutiny under CASS 4 Assessment Year 2020-21 for the reason Purchase Value of Property less than the value as per Stamp authority (u/s. 56(2) or any other relevant section) (Business ITR)" (Emphasis Supplied)
Further, we find that in Paragraph No.2 of the order impugned, the Ld. PCIT has also recorded as under:
The assessee is an individual and deriving income from business. The assessee filed his return of income for the A.Y. 2020-21 on 09.01.2021 u/s. 139(1) of the Act, declaring a total income of Rs. 7,91,080/-. Subsequently, the return was selected for scrutiny assessment under CASS. The assessment order u/s. 143(3) r.w.s. 144B of the Income Tax Act, 1961, was passed on 25.09.2022 and determined total income at Rs. 94,40,520/- after making addition of Rs. 86,49,444/- u/s 56(2)(x)(b) of the Act.
On perusal of above it become clear that return filed by the Assessee for the Assessment Year 2020-2021 was selected for limited scrutiny for for the Assessing Officer had made an addition of INR 86,49,444/- 56(2)(x)(b)(B) of the Act after examine the issue for which the case was selected for ‘Limited Scrutiny’ for the reason "Purchase Value of Property less than the value as per Stamp authority (u/s. 56(2) or any other relevant section) (Business ITR)". The Assessing Officer acted within the scope of mandate given under limited scrutiny, and made an addition of INR.86,49,444/- in the hands of the Assessee under Section 56(2)(x)(b)(B) of the Act. In our view, no fault can to be found with the approach adopted by the Assessing Officer. Further, we are of the view that Explanation 2 to Section 263 of the Act would not attracted in the facts and circumstances of the present case as the Assessing Officer could not have expanded the scope of limited scrutiny. It is not the case of Revenue that the Assessing Officer had sought the approval and despite having mandate to examine the issue of applicability of the Section 68 of the Act in respect of source of funds utilities for the 5 Assessment Year 2020-21 purpose of the making investment in the purchase of immovable property, the Assessing Officer failed to carry out necessary enquiry/verification. The Revenue has also not placed on record any material to show that the Assessing Officer was mandated by any provisions of the Act, rule/circular/instruction to undertake inquiry/verification into the source of funds in the facts and circumstances of the present case. The revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was vested with the Assessing Officer for framing the assessment. [Su- Raj Diamond Dealers Pvt. Ltd v. Pr. CIT [2020] 203 TTJ 137 (Mum.)]. Consequently, it was not open to the Ld. PCIT while exercising suo motu revisional power under Section 263 of the Act to find fault with the Assessment Order on the ground of it being erroneous on an issue not covered by the 'limited scrutiny' when the Assessing Officer could not have possibly examined such issue. [Principal Commissioner of Income-tax vs. Shark Mines and Minerals (P.) Ltd. [2023] 151 taxmann.com 71 (Orissa)]. In view of the aforesaid, we set aside the Order, dated 24/03/2025, passed under Section 263 of the Act and as a result, the Assessment Order, dated 09/01/2021, passed by the Assessing Officer under Section 143(3) of the Act stands reinstated. In terms of the aforesaid, Ground No. 1 and 2 raised by the Assessee are allowed while Ground No. 3 & 4 are dismissed as having been rendered academic.
In result, in terms of paragraph 10 above, the appeal preferred by the Assessee is allowed.