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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI R.S.SYAL, VP & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM :
This appeal preferred by the assessee emanates from the order of the Ld. Pr. Commissioner of Income Tax-2, Aurangabad dated 17.10.2017 for the assessment year 2013-14 as per the grounds of appeal on record.
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The crux of the grievance of the assessee is with regard to the assumption of revisionary jurisdiction u/s.263 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) by the Ld. Pr. Commissioner of Income Tax.
The Ld. AR of the assessee submitted that this is a case of limited scrutiny and the order passed u/s.263 of the Act travelled beyond this scope of limited scrutiny which is not permitted within the purview of the Act. It is the contention of the Ld. AR that whatever were the issues selected for limited scrutiny, those were all enquired into by the Assessing Officer. But however the Ld. Pr. Commissioner of Income Tax while framing order u/s.263 of the Act was of the opinion that some issues should also have been looked into by the Assessing Officer for which according to the Ld. Pr. Commissioner of Income Tax, the order of the Assessing Officer is erroneous so as to prejudicial to the interest of the revenue.
3.1 That as per the Assessing Officer‟s order, Para-2 therein it is stated that the case was selected for scrutiny under CASS to examine the reasons for large investment in property as compared to the total income. That thereafter statutory notices u/s. 143(2) and 142(1) of the Act was issued and served on the assessee. The assessee through its Authorized Representative had produced the cash book, rough diary for purchase and sale of second hand vehicles, ledger, journal, bank book, bank statement, confirmations etc. The Assessing Officer at Para 6 of his order with regard to large investment in asset has merely narrated the facts on records and has not gone into specific enquiry or seeking for specific details from the assessee regarding the
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investment into asset. When we peruse the order passed u/s.263 of the Act, show cause notice, which is made part of the order, itself are on three issues:
(i) During the year assessee sold the property situated at Rawat for Rs.3,00,00,000/-on which encroachment expenses at Rs.1,50,00,000/- was claimed, the Assessing Officer has allowed the encroachment expenses without any verification. (ii) The Assessing Officer has also allowed the improvement expenses of Rs.44,57,734/- without verification. (iii) Interest received during the year on SB account with the TJSB Ltd. for Rs.58,896/- and Rs.230/- has not been taxed.
With regard to the first issue, when we peruse the assessment order, no enquiry has been done by the Assessing Officer. The Ld. AR of the assessee at the time of hearing also could not produce any evidence to demonstrate that the enquiry with regard to the amount of Rs.1,50,00,000/- was conducted by the Assessing Officer. This part of encroachment expenses is well within the realm of examining the reasons for large investment in property. Meaning thereby this enquiry raised by the Ld. Pr. Commissioner of Income Tax is with respect to the fact that the Assessing Officer should have done this enquiry which is within the scope of limited scrutiny itself. But unfortunately, the Assessing Officer failed to conduct any enquiry with regard to this amount i.e. Rs.1,50,00,000/- on encroachment expenses. Therefore, the observation of the Ld. Pr. Commissioner of Income Tax in his order u/s.263 with regard to this issue is held to be correct and in accordance with law.
The next issue raised by the Ld. Pr. Commissioner of Income Tax in his order that the Assessing Officer has allowed the improvement expenses of Rs.44,57,734/- without verification. That again when we peruse the assessment order, there is no verification or enquiry done by the Assessing
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Officer with regard to the improvement expenses of Rs.44,57,734/- and accordingly, there was no specific findings given by the Assessing Officer with regard to this issue before allowing these expenses. This action is well within the realm of examining the reasons for large investment in property i.e. within the scope of limited scrutiny. Therefore, the view taken by the Ld. Pr. Commissioner of Income Tax that the order of the Assessing Officer is erroneous so far as it is prejudicial to the interest of the revenue stands correct with regard to these two issues:
i) Encroachment expenses of Rs.1,50,00,000/- ii) Improvement expenses of Rs.44,57,734/-
The third aspect of the 263 order is with regard to interest received during the year on SB account with the TJSB Ltd. for Rs.58,896/- and Rs.230/- has not been taxed. This aspect is outside the purview of limited scrutiny for which the assessment order was passed. We find the CBDT Circular vide its letter F-No.225/26/2006-ITA-II (pt.), 8th September, 2010 has described the procedure for handling limited scrutiny cases wherein the Assessing Officer shall remain confined only to the specific reasons/issues for which the case has been picked up for scrutiny. In this case, the Ld. Pr. Commissioner of Income Tax wants the Assessing Officer to look into interest received by the assessee which is not covered within the purview of the limited scrutiny which essentially is limited to examining investment in property. This is not permitted within the framework of the Income Tax Act.
6.1 In view of the findings with regard to the third issue of interest received which is outside the purview of the limited scrutiny, the observation of the
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Ld. Pr. Commissioner of Income Tax is not correct while assuming revisionary jurisdiction u/s.263 of the Act. The assessee gets relief on this issue.
The Ld. AR of the assessee at the time of hearing relied on the decision of the Hon‟ble Bombay High Court in the case of CIT Vs. M/s. Fine Jewellery (India) Ltd., ITA No. 296 of 2013 and submitted that the case of the assessee is covered by this decision.
7.1 That on perusal of the facts and trail of events involved in the case before the Hon‟ble Bombay High Court, the Assessing Officer has conducted specific and detailed enquiry on all the issues raised before him and again on these same issues order as per revisionary jurisdiction u/s.263 of the Act was passed by the Ld. Pr. Commissioner of Income Tax. Therefore, the Tribunal had quashed 263 order which was upheld by the Hon‟ble Bombay High Court. The facts in the assessee‟s case herein are substantially different as we have already examined in the preceding paragraphs that the scope of limited scrutiny was to examine the reasons for large investment in property which included encroachment expenses and improvement expenses. The Assessing Officer allowed these expenses to the assessee without making any enquiry on these issues and therefore, the case of the assessee is absolutely outside the purview of the facts/substantially distinguishable on facts as involved in the case before the Hon‟ble Bombay High Court.
That further, the Ld. AR of the assessee also relied on the decision of the Pune Bench of the Tribunal in ITA No.768/PUN/2019 in the case of M/s. Storewell Construction & Engineers Vs. the Pr. Commissioner of Income Tax- 2. In this case, order u/s. 263 of the Act was passed involving issues beyond
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the scope of limited scrutiny. The Tribunal examined that as per the CBDT Circular (supra.), the Assessing Officer shall remain confined only to the specific reasons/issues for which the case has been picked up for scrutiny. In this present case of the assessee, except for the issue of interest received, other two issues are well within the realm of limited scrutiny i.e. examining large investments in property. Therefore, this decision is also substantially different on facts as compared to the case of the assessee.
In view of the above examination of facts and judicial pronouncements placed before us, we hold that only with regard to the issue involving interest received during the year on SB account, the Ld. Pr. Commissioner of Income Tax travelled beyond his jurisdiction while passing order u/s.263 of the Act and therefore, on this issue only, the assessee gets relief. That with regard to the other two issues of the 263 order i.e. encroachment expenses and improvement expenses, the assumption of revisionary jurisdiction by the Ld. Pr. Commissioner of Income Tax u/s.263 of the Act is held valid and as within the purview of the Act and on these issues the order of the Assessing Officer is erroneous so far as it is prejudicial to the interest of the revenue. The Assessing Officer to give appeal effect accordingly.
In the result, appeal of the assessee is partly allowed.
Order pronounced on 11th day of December, 2019.
Sd/- Sd/- R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 11th December, 2019. SB
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आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The Pr. CIT-2, Aurangabad. , आयकर अऩीऱीय अधधकरण, “बी” बेंच, 4. ववभागीय प्रतततनधध ऩुणे / DR, ITAT, “B” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 5.
// True Copy // आदेशानुसार / BY ORDER,
तनजी सधचव / Private Secretary आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune.
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Date 1 Draft dictated on 11.12.2019 Sr.PS/PS 2 Draft placed before author 11.12.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order