SUBBUNADAR CHANDRA SEKAR,CHENNAI vs. ITO,CW-6(3), CHENNAI

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee challenges the validity of revisional jurisdiction u/s 263 as exercised by learned Principal Commissioner of Income Tax, Chennai-3 (Pr.CIT) vide order dated 30- 03-2021 against an assessment framed by Ld. Assessing Officer (AO) u/s. 143(3) of the Act on 20-12-2018 for Assessment Year (AY) 2016- 17. The grounds taken by the assessee read as under:

2. For that the Principal Commissioner of Income Tax failed to appreciate that there was no error or prejudice much less both to warrant the invocation of the powers conferred u/s.263. 3. For that the provisions of section 263 are not invocable in the facts and circumstances of the case. 4. For that the Principal Commissioner of Income Tax failed to appreciate that the case of the appellant was taken up for limited scrutiny for examination as to whether the Capital Gain/Loss is genuine and correctly shown in return of income. 5. For that the Principal Commissioner of Income Tax failed to appreciate that considering that the case was one of limited scrutiny, the Assessing Officer could only have examined the specific issues taken up for scrutiny. 6. For that without prejudice to the above, the Principal Commissioner of Income Tax failed to consider the explanations and submissions filed by the appellant during the course of revisionary proceedings.

2. The Registry has noted delay of 212 days in the appeal, the condonation of which has been sought by Ld. AR. Considering the fact that the impugned order was passed during lockdown situation arising out of Covid-19 pandemic, we condone the delay and admit the appeal for adjudication on merits.

3. The Ld. AR, Shri T.Banusekar, relied on various decision of the Tribunal and submitted that the case was selected for ‘limited scrutiny’ under CASS cycle 2017 to examine the issue of capital gains / loss as reflected in the return of income. Since the same was duly examined as required and additions were made in that respect in the assessment order, further revision of the order on other issues could not be sustained under law. The Ld. AR submitted that in the revisional order, Ld. Pr. CIT directed Ld. AO to examine the issue of cash deposit and agricultural income earned by the assessee which could not have been, otherwise, examined by Ld. AO under ‘limited scrutiny’. The Ld. AR filed written submissions which have duly been considered while 3 - adjudicating the appeal. In the written submissions, Ld. AR has drawn attention to CBDT Instruction No. F.No.225/402/2018/ITA.II dated 28.11.2018 to support the submission that ‘credible material’ or ‘information’ being provided by any law enforcement / intelligence / regularity authority / agency was a pre-condition for going beyond the scope of ‘limited scrutiny’. The issues flagged by Ld. Pr. CIT were not within the scope of ‘limited scrutiny’ before Ld. AO. The phrase ‘credible material’ has to be read in conjunction with the word ‘information’ and not to be treated as a separate limb. The ‘credible material’ as well as ‘information’ has to be an input from any external agency to enlarge the scope of ‘limited scrutiny’. The Ld. CIT-DR, Shri M.Rajan, on the other hand, submitted that the issue of cash deposit was connected with the capital gains earned by the assessee during the year and therefore, the revision was justified. Having heard rival submissions, our adjudication would be as under. 4. Upon perusal of case records, it could be seen that the assessee was subjected to ‘limited scrutiny’ under CASS to verify ‘Whether capital gains / loss is genuine and has been correctly shown in the return of income?’ During the course of assessment proceedings, Ld. AO called for requisite details and information from the assessee in that respect and chose to make certain additions as enumerated in the assessment order. Thus, the issues for which ‘limited scrutiny’ was undertaken was duly examined and verified by Ld. AO. 5. Subsequently, Ld. Pr. CIT, upon perusal of case records, termed the order as erroneous and prejudicial to the interest of the revenue for the reasons that the assessee made cash deposits of Rs.36.47 Lacs. The Ld. AO failed to verify the source of cash deposit. Further, the assessee claimed exempt agricultural income of Rs.11 Lacs, the genuineness of which was not verified by Ld. AO while passing the order. Though the assessee filed certain details and submission on these issues before revisional authority, however, rejecting the same, Ld. Pr. CIT directed Ld. AO to pass appropriate order after considering these issues. Aggrieved as aforesaid, the assessee is in further appeal before us. Our findings and Adjudication 6. The undisputed facts that emerge are that the issues which have been flagged by Ld. Pr. CIT to seek revision could not have been, otherwise, examined by Ld. AO since the case was selected under ‘limited scrutiny’ to verify the genuineness of capital gains / losses. The issues lagged for ‘limited scrutiny’ was duly examined and verified by Ld. AO. To examine other issues, Ld. AO was bound by CBDT Instruction No. F.No.225/402/2018/ITA.II dated 28.11.2018 which, inter-alia, provide as under: - Under CASS cycles 2017 and 2018, some of the cases were selected for scrutiny as a 'Limited Scrutiny' case. In limited Scrutiny' cases, Assessing Officer cannot travel beyond the issue(s) for which the case was selected. The idea behind such a stipulation is to enforce checks and balances upon powers of an Assessing Officer to do fishing and roving enquiries in cases under 'Limited Scrutiny'.

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 limited scrutiny. Therefore, Ld. Pr. CIT, in our considered opinion, could not term the assessment order as erroneous or prejudicial to the revenue since the flagged issues, could otherwise be not examined by Ld. AO during the course of regular assessment proceedings.

Similar is the decision of Kolkata Tribunal in Binod Kumar Mahato vs. Pr. CIT (ITA No.2173/Kol.2018 dated 24.02.2021), a copy of which has been placed on record. Similar is the ratio of other decisions of other benches of Tribunal, the copies of which are on record.

7 - 8. 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.