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Facts
The assessee filed a return of income, and the case was selected for limited scrutiny for cash deposits. The AO completed the assessment u/s 143(3) accepting the returned income after examining the issue. Subsequently, the Ld. PCIT observed that the assessee had made investments by way of loans and advances totaling ₹78 lakhs, for which supporting documents were missing, and concluded that the AO's omission rendered the assessment erroneous and prejudicial to the Revenue, leading to a revisionary notice u/s 263.
Held
The Tribunal found that the original assessment was a limited scrutiny confined to cash deposits, which the Ld. AO had duly examined. Invoking Section 263 jurisdiction for issues (loans and advances) not covered by the limited scrutiny was deemed invalid, as the twin conditions (erroneous and prejudicial to revenue) for Section 263, as per *Malabar Industrial Co. Ltd. Vs. CIT*, were not satisfied. Therefore, the Tribunal quashed the PCIT's revisionary order.
Key Issues
Whether the PCIT can invoke Section 263 jurisdiction to revise an assessment for issues (loans and advances) not covered by the original limited scrutiny, where the AO had duly examined the limited scrutiny issue (cash deposits), thereby violating the twin conditions of being erroneous and prejudicial to the revenue.
Sections Cited
263, 143(3), 143(2), 194A
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
This is an appeal preferred by the assessee against the order of the Pr. Commissioner of Income Tax, Kolkata-5 (hereinafter referred to as the “Ld. PCIT”] dated 28.02.2022 for the AY 2017-18.
The only issue raised by the assessee in the various grounds of appeal is against the invalid exercise of jurisdiction u/s 263 of the Income-tax Act, 1961 (the Act) by the ld. PCIT, thereby rendering the order passed u/s 263 of the Act as ab initio void and ex-facie, nullity in the eyes of law.
The facts in brief are that the return of income was filed by the assessee on 06.11.2017, declaring total income of ₹4,87,850/-.
The ld. AR vehemently submitted before us that the ld. PCIT has invalidly invoked the revisionary jurisdiction u/s 263 of the Act
“Every loss of revenue as a consequence of an order of the assessing officer, cannot be treated as prejudicial to the interest of the Revenue, for example when an Income Tax officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income Tax officer has taken on view with which the Commissioner does not agree, it not be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income Tax Officer is unsustainable in law.” The ld. AR therefore prayed that the order passed u/s 263 of the Act may kindly be quashed.
The ld. DR on the other hand relied on the order of ld. PCIT.
After hearing the rival contentions and perusing the materials available on record, we find that in this case the assessment was framed u/s 143(3) of the Act, after the case of the assessee was selected for limited scrutiny by examining that all cash deposits into the bank during the instant financial year. The copy of the notice issued u/s 143(2) of the Act is available at page no.61 of the Paper Book which states that the case was selected for a limited scrutiny. Therefore, once the case of the assessee is so selected for limited scrutiny and scope is not expanded by converting the same into complete scrutiny then the ld. AO has to confine himself to the scope of the scrutiny. The ld. AO has righty framed the assessment by examining the cash deposits during the year after calling for the necessary details/ evidences from the assessee, which were duly furnished and after taking into account the said evidences accepted the stand of the assessee thereby accepting the returned income of
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 15.01.2025.