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Facts
The assessee filed an appeal against the revision order issued by the Principal Commissioner of Income Tax (PCIT). The PCIT's order involved proceedings under section 263 of the Income-tax Act, 1961, pertaining to the assessment year 2015-16. The core issue revolved around whether the assessment, initially conducted under "limited" scrutiny, was erroneous.
Held
The Tribunal held that for a "limited" scrutiny to be converted into a "complete" one, the Assessing Officer (AO) needed to obtain necessary approvals. The AO's failure to do so rendered the assessment erroneous and prejudicial to the revenue. The Tribunal found no reason to accept the Revenue's arguments and noted that various High Courts have settled the issue in favor of the assessee.
Key Issues
Whether the assessment, conducted under limited scrutiny, was erroneous due to the Assessing Officer not obtaining necessary approvals to convert it to a complete scrutiny?
Sections Cited
263
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Income Tax Appellate Tribunal, “DB” BENCH, AGRA
Before: SHRI SATBEER SINGH GODARA & SHRI MANOJ KUMAR AGGARWAL
O R D E R PER SATBEER SINGH GODARA, JUDICIAL MEMBER:
This assessee’s appeal for assessment year 2015-16, arises against Pr. Commissioner of Income Tax-1, Agra’s DIN & Order No. ITBA/REV/F/REV5/2020-21/1031990790(1), dated 31.03.2021, involving proceedings u/s 263 of the Income-tax Act, 1961, (hereinafter referred to as the ‘Act’). 2. Heard both the parties at length. Case file perused.
Meenakshi Metal Ind. LLP 3. It emerges during the course of hearing that the assessee has raises first and foremost legal issue between the parties about the correctness of the learned PCIT’s revision directions under challenge. This is for the precise reason that even the learned PCIT detailed discussion in para 4 at page 3 makes it clear that although it was as instance of “limited” scrutiny before the Assessing Officer, it was incumbent for the latter authority to take recourse to the necessary approvals for converting the said “limited” scrutiny to a “complete” one; and, therefore, his in-action to this fact renders the assessment framed on 06.12.2017 as an erroneous one causing prejudice to interest of the Revenue.
It is in the factual backdrop that the assessee vehemently argued that once it was a case of “limited” scrutiny, the Assessing Officer action not converting it into complete one so as to examine the closing stock valuation neither could be called as an erroneous one nor causing prejudice to interest of the revenue.
The Learned CIT-DR on the other hand quotes (2023) 149 taxman.com 202 (Kerala) Sahyadri Agencies Ltd. vs. PCIT that even such a failure on the Assessing Officer’s part could very well attract revision jurisdiction of the prescribed authority; and, therefore, we ought to affirm the PCIT’s revision directions herein.
We have given a thoughtful consideration to the foregoing rival submission and see no reason to accept Revenue’s arguments. We make it clear that the scope of a “limited” scrutiny has been examined by various hon’ble high court’s including PCIT Vs. Weilburger Coatings (India) Ltd. (2023) 155 taxmann.com 550 (Cal.) has admittedly settled the issue in assessee’s favour as against the hon’ble Kerala high court Meenakshi Metal Ind. LLP deciding it in department’s favour. No guidance has come to our notice from hon’ble jurisdictional high court of judicature at Allahabad. Faced with this situation, we adopt the view getting in assessee’s favour to reverse the learned PCIT’s section 263 revision direction.
This assessee’s appeal is allowed. Order pronounced in the open court on 10.02.2025