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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
Feeling aggrieved by revision-order dated 19.03.2020 passed by learned Pr. Commissioner of Income-Tax, Bhopal [“PCIT”] u/s 263 of Income-tax Act, 1961 [“the Act”], which in turn arises out of assessment-order dated 30.12.2017 passed by ITO-1(2), Bhopal [“AO”], the assessee has filed this appeal.
When this appeal was called for hearing, none appeared for revenue. However, the hearing of case was proceeded with following Order-Sheet :-
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16 As permitted in the Order-Sheet, Ld. DR for revenue submitted a Written- Note on 04.10.2023, which is duly considered in subsequent adjudication.
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16 3. The registry has informed that that the present appeal is filed after a delay of 35 days and therefore time-barred. Ld. AR submitted that the impugned order was received on 19.03.2020 and the appeal was filed on 22.06.2020. Therefore, the delay has occurred during Covid-19 Pandemic. Ld. AR further placed reliance on the order of Hon’ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 read with Misc. Applications, by which suo motu extension of the limitation-period for filing of appeals w.e.f. 15.03.2020 under all laws has been granted and hence there is no delay in fact. We are satisfied with submissions of Ld. AR. Therefore, this appeal is proceeded with for hearing, there being no delay.
Brief facts leading to present appeal are such that the assessee filed return of income of relevant assessment-year which was subjected to scrutiny-assessment and the AO completed assessment u/s 143(3) vide order dated 30.12.2017. Subsequently, Ld. PCIT examined the record of assessment-proceeding and viewed that the assessment-order passed by AO was erroneous in so far it was prejudicial to the interest of revenue which attracted revisionary-jurisdiction u/s 263. Accordingly, Ld. PCIT issued show-cause notice dated 20.02.2020 wherein he identified four (4) issues as basis for terming AO’s order as erroneous-cum-prejudicial to the interest of revenue. These issues relate to (i) Members’ contribution received by assessee, (ii) Interest on advances, (iii) Non-deduction of tax at source out of payments made to educators, and (iv) Deduction of Employee Benefit Expenditure claimed by assessee. These issues are elaborately mentioned in the notice issued by Ld. PCIT, the same is re-produced here for the sake of immediate reference:
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16
5. By the aforesaid show-cause notice, the assessee was asked to explain as to why the assessment-order may not be revised. In response, the assessee filed a reply dated 16.03.2020, which is re-produced in Para No. 3 of the revision-order passed by Ld. PCIT. But the Ld. PCIT was not satisfied with assessee’s submission. Further, he also observed that since the section 263 has been amended and Explanation 2, as reproduced below, had been introduced therein, the assessment-order is deemed to be erroneous-cum- prejudicial to the interest of revenue if the same had been passed without inquiries or verification which should have been made:
“Explanation 2 – “For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of revenue, if in the opinion of the Principal Commissioner or Commissioner - (a) The order is passed without making inquiries or verification which should have been made; (b) The order is passed allowing any relief without inquiring into the claim; (c) …. (d) …”
6. Finally, Ld. PCIT concluded that the AO has not carried out the inquiry/verification which he should have done and hence the assessment- order is erroneous in so far as it is prejudicial to the interest of revenue. Accordingly, Ld. PCIT passed revision-order u/s 263 whereby the assessment-order was set aside to the file of AO with a direction to re-frame assessment after taking into account the issues raised by him.
Aggrieved by such revision-order, the assessee has filed this appeal on various grounds.
Originally, the assessee has raised following grounds in Appeal-Memo (Form No. 36):
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16 9. Subsequently, the assessee has also raised following ‘additional grounds’:
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16
Ld. AR for assessee prayed that the ‘additional grounds’ are legal in nature; go to the root of the matter; and can be adjudicated on the basis of material available on record. Therefore, in view of the decision in National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383 (SC), the ‘additional grounds’ deserve to be admitted. On perusal and consideration, we find merit in the prayer of assessee. We further note that the present appeal before us against the impugned-order is the first-appeal and the ‘additional grounds’ are not exactly ‘additional grounds’ though they are referred so; in fact they are the grounds which have not been mentioned in Appeal Memo (Form No. 36) and filed separately. Therefore, there is no difficulty in adjudicating these so-called ‘additional grounds’. Further, Ld. DR for Revenue has also not made any objection against consideration of ‘additional grounds’. Being so, the ‘additional grounds’ are accepted and taken for adjudication.
In additional Ground No. 1, the assessee claims that the order passed by Ld. PCIT is bad in law as the Ld. PCIT has exceeded his jurisdiction by directing the AO to make fresh assessment on the issues which were not a part of “limited scrutiny”. Further, in additional Ground No. 2, the assessee claims that the notice issued u/s 143(2) is an invalid notice as it does not specify the reasons/issues of “Limited Scrutiny” and consequently the assessment-order passed u/s 143(3) itself is invalid and therefore the revision-order passed by Ld. PCIT in sequel of assessment-order is also M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16 invalid. We shall be dealing both of these grounds analogously since the learned Representatives of both sides have made a common pleading for these grounds and the underlying facts/material is also common.
Apropos to these grounds, Ld. AR carried us to the assessment-order and documents filed in Paper-Book and submitted that the assessee filed return of income of relevant assessment-year on 17.12.2016. Thereafter, the case of assessee was selected under Computer Aided Scrutiny Selection (CASS) for “Limited Scrutiny” through notice dated 16.09.2017 u/s 143(2) issued by AO. Ld. AR carried us to following documents filed in Paper-Book to show that the case of assessee was under “Limited Scrutiny”:
(i) Page 1 of assessment-order wherein the AO has clearly mentioned
“the case was selected for scrutiny under CASS (Limited Scrutiny)”; the same is scanned and re-produced below:
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16 (ii) Notice dated 16.09.2017 u/s 143(2) which is titled “Limited Scrutiny (Computer Aided Scrutiny Selection)”. This notice is also scanned and re-produced below for immediate reference:
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16 13. Ld. AR submitted that there cannot be any doubt that the case of assessee was selected for “Limited Scrutiny” and not for “Complete Scrutiny”. Ld. AR further submitted that it is also a fact that the “Limited Scrutiny” was not converted into “Complete Scrutiny”. Having said so, Ld. AR drew our attention to first Para of the notice u/s 143(2), re-produced above and submitted that the space provided underneath the heading “Following issue(s) have been identified for examination” is blank and the AO has not mentioned any issue either in that space or by way of annexure to the said notice u/s 143(2).
Then, Ld. AR referred to Para No. 3 of CBDT Instruction No. 20/2015 dated 29.12.2015 which reads as under:
“3. 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. In ‘Limited Scrutiny’ cases, the reasons/issues shall be forthwith communicated to the assessee concerned. b. The Questionnaire under section 142 (1) of the Act in ‘Limited Scrutiny’ cases shall remain 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. c. These cases shall be completed expeditiously in a limited number of hearings.”
Thereafter, Ld. AR contended that the notice dated 16.09.2017 issued by AO u/s 143(2) is an invalid notice in as much as it does not mention the issues identified for “Limited Scrutiny” and thereby it violates the Para No. 3(b) of CBDT Instruction No. 2/2015 (supra). He submitted that when the notice itself is invalid, the assessment-order passed at the behest of such notice is also invalid and so also the revision-order passed by Ld. PCIT qua assessment-order is also invalid. Therefore, additional Ground No. 2 of assessee should be allowed.
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16 16. Without prejudice, Ld. AR submitted that at the best one may say that the points taken up by AO in the questionnaire dated 27.11.2017 and 04.12.2017 issued u/s 142(1) to the assessee as the reasons/issues of “Limited scrutiny”; these questionnaire are scanned and re-produced below for an immediate reference:
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16 17. Ld. AR submitted that even if we consider the points raised by AO in the above questionnaires dated 27.11.2017 and 04.12.2017 as reasons/ issues of “Limited Scrutiny”, then also all of the four (4) issues taken up by Ld. PCIT for conducting revision, are not covered by any of these points raised in these questionnaires; therefore also the PCIT is very much wrong in terming the AO’s order as erroneous on those four (4) issues which were never within the scope of scrutiny subjected by AO. Ld. AR strongly contended that in numerous decisions, it has been held that the PCIT cannot undertake revisionary action qua the issues which were not at all subject- matter of Limited Scrutiny by AO. To support his stand, Ld. AR relied upon recent decisions of (i) Hon’ble Orissa High Court in PCIT Vs M/s Shark Mines and Miners Pvt. Ltd. of 2023, order dated 02.03.2023, and (ii) a decision of this very Bench of ITAT, Indore in M/s Parth Developers, Dhar Vs. PCIT ITA No. 419/Ind/2022 order dated 28.07.2023. Therefore, Ld. AR prayed, the additional ground No. 1 also deserves to be allowed.
On these grounds, Ld. DR for revenue has made following submission in Para No. 3 to 6 of her Written-Note:
“3.1 The assessee has taken the following additional grounds: - I. That the order of the Pr. CIT passed u/s 263 of the Income tax Act is bad in law as the Ld. Pr. CIT exceeded his jurisdiction by directing the AO to make fresh assessment considering the issues which were not the subjected issue under the limited scrutiny as the notice issued u/s 143(2) was relating to limited scrutiny and it was never converted into complete scrutiny. II. That the notice issued u/s 143(2) is an invalid notice as it does not specify the points covered under limited scrutiny and M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16 therefore the order passed u/s 143(3) without issuing a valid notice u/s 143(2), which is a statutory requirement is an invalid order. Thus, the subsequent proceedings initiated by the Ld. Pr. CIT u/s 263 against an invalid order passed u/s 143(3) are void ab initio.
4. In regard to the additional grounds, it is to submit that notice u/s 143(2) was duly issued and served on the assessee by the A.O. The notice duly mentions that the case is selected for 'limited scrutiny' purposes. But as claimed by the assessee the reasons were not communicated with the notice issued. It is to note here that the assesse has participated in the assessment proceedings all along and no such objection was raised before the A.O. nor before any other authority. Therefore, provisions of section 292B and 292BB would apply squarely here. The provisions are reproduced as under:- 292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. 292BB. Where an assessee has appeared in any proceeding or co- operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was— (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.
The main grievance of the assessee is that the reasons for limited scrutiny were not communicated to him along with the notice u/s 143(2) of the Act. It is to note here that the instruction No. 20 of 2015 in this regard was issued on 29/12/2015 by CBDT (copy attached) and this being the first year therefore, the AO’s were not completely aware of the requirements and the procedure and though the reasons for scrutiny was not initiated along with notice u/s 143(2), the same were made known to the assessee and the notice did contain the information that the return was selected for limited scrutiny Therefore, there is no non-compliance to the CBDT instructions and no prejudice has been caused to the assessee. Further, because the assessee has M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16 not raised any objection during the assessment proceedings whatsoever, the proceedings are squarely covered u/s 292B and 292BB of the Act.
The above mentioned CBDT instruction mentions that the concerned assessees should be intimated that their cases falls either in 'Limited Scrutiny' or ‘Complete scrutiny’ through notices issued u/s 143(2) of the Act and the procedure prescribed is that in Limited Scrutiny cases, the reasons/issues shall be forthwith (emphasis provided) communicated to the assessee concerned. Thus, this is a procedural condition to be followed. The dictionary meaning of the word 'forthwith' is 'immediately, without delay'. Therefore, it is not necessary that the reasons should be incorporated in the notice u/s 143(2) itself. It would suffice if the reasons are to be communicated thereafter. The intention behind such a condition is that the assessee should be made aware of the reasons for the scrutiny of his return of income. In the present case, though the reasons have not been incorporated/annexed to the notice u/s 143(2) the assessee was made aware of the reasons for limited scrutiny and in compliance thereof, the assessee has also provided all the required details on the subsequent date. Therefore, no prejudice has been caused to the assessee even if the reasons are not provided along with the notice u/s 143(2) of the Act. Only where the AO believes that there is income, which has to be brought to tax but is not the issue for the limited scrutiny, he needs to get the permission of the Commissioner/relevant authority to proceed with complete scrutiny assessment. However, for the case under appeal there was no need for the AO to obtain permission from the higher authorities to proceed, as this is not the case here. Hence the additional grounds raised
by the assessee deserve to be rejected.”
19. We have considered rival submissions of both sides and perused the material held on record in the light of provisions of law and judicial decisions to which our attention has been drawn. At first, we find that both sides are ad idem that the assessee’s case was selected under “Limited Scrutiny”. Further, the notice u/s 143(2) though included a heading “Following issue(s) have been identified for examination” but it remained blank and no issue had been mentioned. But it is also a fact the said notice u/s 143(2) was issued and served within the prescribed time and by prescribed authority upon assessee and the assessee does not have any grievance in so far issuance or service is concerned. The assessee accepts the said notice as proper and valid in every respect except that the reasons/issues of limited scrutiny were missing. Now, the question is M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16 whether the notice can be said to be invalid in such a situation? To resolve this issue firstly we look into the provision of section 143(2) of Income-tax Act, 1961 and find that the law empowers the AO to undertake scrutiny but there is nothing like “Limited Scrutiny” or “Complete Scrutiny” prescribed in Income-tax Act. These two types of scrutiny assessments have been introduced through CBDT Instructions for ease of the taxpayers and the intention and purpose is that the AO confines his exercise of scrutiny to specific points/issues if the case is under “Limited Scrutiny” and does not go beyond. That is why Para No. 3 of the CBDT Instruction No. 20/2015 prescribers for communication of reasons/issues to assessee but the communication of reasons/issues is, in our view, a procedural requirement and cannot obliterate the validity of scrutiny, particularly when the assessee has participated in conduct and completion of scrutiny without raising any objection. Notably, it is also not a grievance of assessee that the AO had exceeded jurisdiction of “Limited Scrutiny” at any stage of assessment or in completing assessment. Therefore, it leads us to infer that the AO has acted within the scope of “Limited Scrutiny” and no prejudice was caused to the assessee by non-mention of reasons/issues in the notice. Ld. DR is also very much right in claiming that the year 2015-16, with which we are concerned in present appeal, was the first year and therefore the AOs were not completely aware to provide the reasons of scrutiny in the notice u/s 143(2) but the fact is that the notice did contain the information that the case of assessee was selected for “Limited Scrutiny”. We also find merit in the M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16 contention of Ld. DR that the case of department, in worst situation, is also rescued by section 292B which clearly provides thus:
“292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. Therefore, we do not find any invalidity in the notice u/s 143(2) and therefore neither the assessment-order u/s 143(3) nor the revision-order could be said to be invalid. Hence, we do not find any merit in additional ground No. 2, the same is hereby dismissed.
Now, reverting to additional Ground No. 1, we agree to Ld. AR’s contention that it is a consistent view taken by ITAT, Indore that in case of “Limited Scrutiny”, the PCIT can carry out revision qua the reasons/issues for which “Limited Scrutiny” is undertaken but cannot travel beyond that i.e. the PCIT cannot invoke revisionary action qua any such issue which is not a part of “Limited Scrutiny”. In the present case, the PCIT has undertaken revision on four (4) issues. Therefore, it becomes necessary to examine which of the issues was part or not a part of limited scrutiny. This exercise has to be done by PCIT who would firstly examine the complete record of department (including the aforesaid questionnaire dated 27.11.2017 and 04.12.2017 issued u/s 142(1) issued by AO) to ascertain the reasons/issues for which limited scrutiny was initiated/done by AO and thereafter examining whether or not the four (4) issues raised by him fit in those reasons/issues of limited scrutiny. While carrying out this exercise, the PCIT shall give fullest opportunity to the assessee to make explanations and consider assessee’s explanations with full fairness without being influenced by his previous order in any manner. Only thereafter, the PCIT
M/s. Saharayan Universal Multipurpose Society Limited, Bhopal Assessment year 2015-16 shall pass a necessary order in the light of judicial view narrated earlier. We thus remand present case to PCIT for re-adjudication in terms mentioned here and accordingly additional ground No. 1 is allowed.
Since we have already allowed additional ground No. 1 and remitted this case back to PCIT to take decision afresh, there is no need to go into other pleadings made by parties on merits of the issues at this stage.
Resultantly, this appeal is allowed for statistical purposes.
Order pronounced in the open court on 22.11.2023.