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Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by the assessee against order dated 31/03/2022 by the Ld.Pr.CIT, Bangalore – 3 for A.Y. 2017-18 on following grounds of appeal:
Brief facts of the case are as under: 2.1 Assessee filed its return of income on 31/10/2017 declaring Nil income and current year loss of Nil. Return was processed u/s. 143(1) and the case was selected for limited scrutiny under CASS to verify the following: a) Expenses incurred for earning exempt income b) Sales turnover / receipts c) Investments / advances / loans 2.2 Thereafter, the Ld.AO completed the assessment on the income filed by the assessee. Subsequently 263 proceedings was initiated by the Ld.Pr.CIT on 19/03/2022 for the following reasons.
2.3 The Ld.AR submits that the assessee filed response to the said notice on 28/03/2022, objecting the revisionary proceedings. The relevant objections filed by the assessee before the Ld.Pr.CIT, are reproduced as under:
2.4 The Ld.Pr.CIT after considering the above submissions, directed the Ld.AO to verify the claim of depreciation of Rs. 32,33,40,632/- on carriageway asset, and bring to tax, in accordance with law, after affording sufficient opportunity of being heard to the assessee. 2.5 Aggrieved by the order of Ld.Pr.CIT, assessee is in appeal before this Tribunal.
3. The primary objection by the Ld.AR is regarding the validity of revisionary proceedings. It is submitted by the Ld.AR that, the assessee’s case was selected under limited scrutiny for verifying only three aspects being; i) Expenses incurred for earning exempt income ii) Sales turnover / receipts iii) Investments / advances / loans 4. The Ld.AR submits that, the issue considered by the Ld.Pr.CIT in the impugned order does not arise out of the assessment order. He Page 8 of Ld.AO during the assessment proceedings, that would grant the Ld.Pr.CIT, the right to consider any claim in the revisionary proceedings.
He further submitted that, the ambit of the original assessment proceeding for limited scrutiny under CASS, was admittedly in respect of only three issues that, is referred hereinabove, in response to which assessee furnished complete details during the assessment proceedings. It is the submission of the Ld.AR that, the Ld.Pr.CIT could not have, at all, entered into the issue of depreciation that was beyond the scope of original assessment, and therefore, the Ld.Pr.CIT was not right in directing the Ld.AO to consider the depreciation issue by holding the assessment order to be prejudicial in so far as erroneous to the interest of revenue. The Ld.AR placed reliance on the decision of Hon’ble Pune Tribunal in case of The Deccan Paper Mills Co. Ltd. vs. CIT in & 1635/Pun/2014, Aakash Ganga Promoters & Developers vs. Pr.CIT in ITA No. 164/CTK/2019 by order dated 18/12/2019 and R&H Property Developers Pvt. Ltd. vs. Pr.CIT in ITA No. 1906/Mum/2019 by order dated 30/07/2019 and Mrs. Sonali Hemant Bhavsar vs. Pr.CIT in ITA No. 742/Mum/2019 by order dated 17/05/2019 in support of its contentions.
On the contrary, the Ld.DR placed reliance on the impugned order and submitted that there was patent error on the face of the assessment order as the same has been passed without application of kind. We have perused the submissions advanced by both sides in the light of records placed before us.
Page 9 of According to the provisions of section 263 of the Act, after examination of records, the ld CIT finds that the order is erroneous and prejudicial to the interest of the revenue, then, he has power to revise such orders. Therefore, the mandate given to the Ld.AO was to examine only the three issues referred to hereinabove in the preceding paras of this order. The Ld.Pr.CIT holds that the assessment order is erroneous for the reason that Ld.AO has not examined the issue of depreciation claimed by the assessee on carriageway asset.
There is no dispute that the case of the assessee was picked up for scrutiny under the category of limited scrutiny which is established from the assessment order and also the notice issued under section 143(2) of the Act. The CBDT has issued instructions instruction Nos.7/2014, 20/2015 and 5/2016 and also the CBDT letter dated 13 No.2017, according to which the Ld.AO couldn’t have travelled beyond the scope of the scrutiny which are relied by the Ld.AR. For the sake of convenience we extract the relevant portions thereof hereunder: "CBDT Instruction No. 7/2014 The reason(s) for selection of cases under CASS are displayed to the Assessing Officer in AST application and notice u/s 143(2), after generation from AST, is issued to the taxpayer with the remark ".Selected under Computer Aided Scrutiny Selection (CASS)". The functionality in AST is being modified suitably to flag the reasons for scrutiny selection in AIR/CIB/26AS cases. This functionality is expected to be operationalized by 15th October, 2014. Further, the Assessing Officer while issuing notice under section 142(1) of the Act which is enclosed with the first questionnaire would proceed to verify only the specific aspects requiring examination/verification. In such cases, all efforts would be made to ensure that assessment proceedings are completed expeditiously in minimum possible number of hearings without unnecessarily dragging the case till the time-barring date. CBDT Instruction No. 20/2015
As far as the returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial Year-one is 'Limited scrutiny' and other is Complete Scrutiny'. The assessees concerned have duly been intimated about their cases falling either in 'Limited scrutiny' or 'Complete Scrutiny' through notices issued under section 143(2) of the Income-tax Act, 1961 ('Act'). The procedure for handling 'Limited scrutiny' cases shall be as under: (a) . . . . (b) The Questionnaire under section 142(1) of the Act in 1 Limited scrutiny cases shall be nut in 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. CBDT Instruction No. 5/2016 "4. It is further clarified that in cases under 'Limited scrutiny/the scrutiny assessment proceedings would initially be confined only to issues under 'Limited scrutiny' and Questionnaires, enquiry, investigation etc. would be restricted to such issues. Only upon comers ion of case to 'Complete Scrutiny' after following the procedure outlined above, the AO may examine the additional issues besides the issue(s) involved in 'Limited Scrutiny'. The AO shall also expeditiously intimate the taxpayer concerned regarding conducting 'Complete Scrutiny' in such cases." CBDT Letter dated 30-11-2017 J Instances have come to notice of CBDT where some Assessing Officers are travelling beyond their jurisdiction while making assessments in Limited scrutiny cases by initiating inquiries on new issues without complying with mandatory requirements of the relevant CBDT Instructions dated 26-9-2014, 29-12-2015 and 14-7-2016. These instances 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, it 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." 8. The above CBDT instructions and the letter clearly establish that it is not open for the Assessing Officer to travel beyond the reason for selection of an assessee that for limited scrutiny. 9. In such circumstances it has to be seen, whether, the Ld. PCIT was justified in holding the assessment order to be erroneous Page 11 of Revenue as the Ld.AO not considering the aspect which is beyond the purview of limited scrutiny. This issue has been considered by various benches of this Tribunal.
In case of Deccan Paper Mills Co. Ltd. (supra) Hon’ble Pune Bench of the Tribunal held, that: "40. Now, coming to the aspect of book profits which was considered by the Commissioner and the order of the Assessing Officer was held to be erroneous and prejudicial to the interest of revenue. In this regard, it may be pointed out that the case of assessee was picked up for scrutiny under CASS for the limited purpose of verifying the Chapter VI-A deduction. Once the case is picked up for specific purpose under CASS, then it is outside the purview of the Assessing Officer to look into any other aspect other than the aspect for which it is picked up. Hence, the Assessing Officer has not formed any opinion in respect of computation of book profits in the hands of assessee. Once, no such opinion has been formed by the Assessing Officer, the Commissioner has erred in holding the order of the Assessing Officer to be erroneous and prejudicial to the interest of revenue in this regard. Accordingly, we reverse the findings of the Commissioner. Accordingly, we hold that the order passed by the Commissioner under section 263 of the Act is invalid and the same is quashed for both the assessment years."
In case of R & H. Property Developer (P.) Ltd. (supra) it was held that: 'As a matter of fact, what cannot be done directly cannot be done indirectly. Accordingly, in terms of our aforesaid observations, we are of the considered view that as the A.O had aptly confined himself to the issue for which the case of the assessee was selected for limited scrutiny, therefore, no infirmity can be attributed to his order for the reason that he had failed to dwell upon certain other issues which were clearly beyond the realm of the reason for which the case of the assessee was selected for limited scrutiny as per the AIR information. We thus not being able to concur with the view taken by the Pr. CIT that the order passed by the A.O under sec. 143(3), dated 10-10-2016 is erroneous, therefore, set aside his order and restore the order passed by the A.O. As we have quashed the order passed by the Pr. CIT under sec. 263 on the ground of invalid assumption of jurisdiction by him, therefore, we refrain from adverting to and therein adjudicating the contentions advanced by the Id. A. R on the merits of the case, which thus are left open."
Similar, is the view taken consistently by the benches of this Tribunal in the other two cases also, relied upon by the assessee.
Page 12 of In the circumstances, in view of the consistent view taken in similar matters we are of the considered opinion that when the assessing officer is bound to follow the CBDT instructions and while following such instructions and after verification of the material furnished by the assessee on the aspect covered by the limited scrutiny, is not open for the Ld. PCIT to say that not adverting to the other aspects of the competition would render the assessment order erroneous and prejudicial to the interest of the Revenue. We are therefore of the opinion that the impugned order cannot be sustained and, the same is liable to be quashed. We accordingly quash the same. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 29th August, 2022.