SUN ARK ALUMINIUM INDUSTRIES PVT. LTD.,VIRUDHUNAGAR vs. ITO, CORPORATE CIRCLE,, MADURAI

The AO does not have the Jurisdiction to deal with issues beyond the scope of scrutiny, the Assessment cannot also be held to be prejudicial by the PCIT. 6 Any other grounds that may be raised at the time of hearing….”

4.0 We have heard the rival submissions in the light of material available on records. The assessee is a company engaged in the manufacturing of aluminium powder where aluminium ingots given converted in aluminium atomized power and sold to customers. The return of income for 2018-19

Page 2 of 6 ITA. No:2071/Chny/2025 was originally filed by the assessee again on 15.12.2018 declaring loss of Rs.3,22,55,546/- which stood revised on 25.03.2019 declaring total loss of Rs.3,20,43,623/-. The case of the assessee was taken up for limited scrutiny under the e-assessment scheme 2018 vide notice u/s 143(2) of the Act dated 22.09.2019 for examining the following issues:-

1). Exports / Imports 2). Duty drawback.

The Ld.AO issued notice to the assessee u/s 142(1) of the Act on 17.12.2021 calling for the requisite details and documents thereon in accordance with law on the issues that are to be looked into by him under limited scrutiny. The assessee responded to the said notice by furnishing the requisite invoices with documentary evidences. These facts are mentioned in para 2 – 4 of the assessment order framed u/s. 143(3) r.w.s. 144B of the Act dated 19.04.2021 wherein the return of income was accepted by the Ld.AO. This assessment was sought to be revised by the Ld.PCIT vide issuance notice u/s 263 of the Act dated 08.03.2024 on the ground that the assessee had made imports to the tune of Rs.2,33,85,577/- whereas as per ITR, the assessee had shown total purchases of Rs.5,03,57,247/-. The Ld.PCIT takes note of it in para 2.1 of his order that the assessee during the course of assessment proceedings had submitted that purchases include local procurement of raw materials for business operation. In other words, the total purchases disclosed in the ITR comprises of both domestic as well as import purchases. Further, the assessee in response to the show cause notice issued u/s 263 of the Act had filed a detailed reply on 13.03.2024 before the Ld. PCIT enclosing complete details of import purchases together with the import documents thereon. It was also submitted before the Ld. PCIT that since the original scrutiny assessment was selected for limited scrutiny under the e-

Page 3 of 6 ITA. No:2071/Chny/2025 assessment scheme of 2019 which mandated and warranted the Ld.AO to examine only imports, the Ld.AO had confined himself to the verification of import purchases of the assessee. Hence, there was no occasion for the Ld.AO, as per law, to look into domestic purchases. Hence, no error could be attributed in the order passed by the Ld.AO much less causing any prejudices to the interest of the revenue. The Ld. PCIT simply stated that the assessee had shown import purchase of Rs.2,49,71,125 as per the import documents, whereas the show cause notice issued by Ld. PCIT u/s 263 of the Act reflect a different figure of Rs.2,33,85,577/-. With these observations, the Ld. PCIT concluded that there was complete lack of enquiry by the Ld.AO with regard to total purchases of Rs.5,03,57,247/- and accordingly set aside the assessment order considering it as erroneous and prejudicial to the interest of the revenue. Aggrieved, the assessee in appeal before us.

5.0 At the outset, it is not in dispute that the case was selected for limited scrutiny only to examine the import purchases, among others as listed out supra. Hence, the Ld.AO confined himself to verify only those items that are contemplated to be examined under limited scrutiny, which had been done by him. It is not in dispute that the assessee had indeed furnished the details of import purchases together with import documents thereon before the Ld.AO in the scrutiny assessment proceedings itself. But the Ld. PCIT is only trying to expand the scope of limited scrutiny by stating that the Ld.AO ought to have examined the entire purchases of Rs.5,03,57,247/-. In our considered opinion, the Ld. PCIT cannot expand the scope of limited scrutiny by invoking revision jurisdiction u/s 263 of the Act. The grievance of the revenue could be addressed by converting the case of the assessee from limited scrutiny to complete scrutiny during the course of assessment proceedings subject to obtaining prior approval of the Ld. PCIT as per the CBDT Circular issued in the context of limited

Page 4 of 6 ITA. No:2071/Chny/2025 scrutiny cases. This has admittedly not been done by the revenue in the instant case. But the Ld.AO had strictly adhered to the issues that are contemplated in the limited scrutiny notice and framed the assessment. However, it appears that there was some difference in value of import purchases between the import documents and the import purchases shown in the assessment records. To this limited extent, we deem it fit to modify the order passed by the Ld. PCIT u/s 263 of the Act by giving a direction to the Ld.AO to examine the reconciliation of these two figures alone. We hold that the assumption of revision jurisdiction of the Ld. PCIT u/s 263 of the Act on the remaining sum representing domestic purchases is completely flawed and void ab initio. The Ld.AO shall examine the entire import documents furnished by the assessee and shall take a conscious decision in accordance with law uninfluenced and unfettered by any decision he had taken earlier in this regard and pass the giving effect order in accordance with law. With this direction, the grounds raised by the assessee are partly allowed for statistical purposes.

6.0 In the result, the appeal of the Assessee is partly allowed.

Order pronounced in the court 24th ,October, 2025 at Chennai.