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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by revision-order dated 27.03.2023 passed by learned Pr. Commissioner of Income-Tax, Indore-1 [“PCIT”] u/s 263 of Income-tax Act, 1961 [“the Act”], which in turn arises out of assessment-order dated passed by learned National e-Assessment Centre, Delhi [“AO”] u/s 143(3) of the act for Assessment-Year [“AY”] 2018-19, the assessee has filed this appeal on the grounds raised in Appeal-Memo (Form No. 36).
Indra Prakash Bhargava, Ujjain v. PCIT,Indore. AY 2018-19 2. Heard the learned Representatives of both sides at length and case- records perused.
Brief facts of the case are that the assessee filed return of income of relevant assessment-year which was subjected to “Limited Scrutiny Assessment’ to examine the issue of “Expenditure of personal nature”.
Ultimately, the AO completed assessment u/s 143(3) accepting the returned income without making any disallowance or addition. Subsequently, Ld. PCIT examined the record of assessment-proceeding and viewed that the assessment-order passed by AO is erroneous in so far it is prejudicial to the interest of revenue which attracts revisionary-jurisdiction u/s 263.
Accordingly, Ld. PCIT issued show-cause notice dated 21.02.2023 wherein he identified two (2) issues which the AO did not examine/enquire.
These issues are (i) the assessee debited “loss by theft” amounting to Rs. 1,05,725/- to P&L A/c, and (ii) the assessee incurred expenses like conveyance expenses, interest on car loan, mobile expenses, telephone expenses and internet expenses which contained personal element but the AO did not make enquiries. Even the Assessee himself offered personal element of Rs. 28,930/- but the AO did not make any addition in assessment-order.
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 which is re-produced in Para No. 2 of the revision- order. But the Ld. PCIT was not satisfied with assessee’s submission. Further, he also observed that since the section 263 has been amended and Indra Prakash Bhargava, Ujjain v. PCIT,Indore. AY 2018-19 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) …”
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 examining issues raised by him.
Aggrieved by such revision-order, the assessee has filed this appeal.
By means of various grounds raised in the Appeal Memo which are not being reproduced for the sake of brevity, the appellant-assessee requires us to adjudicate whether or not the revision-order passed by Ld. PCIT u/s 263 is valid in the eyes of law?
Ld. Representatives of both sides made their respective submissions on the issues identified by Ld. PCIT one by one. We sum up the arguments and contentions of both sides as also our analysis issue-wise as under:
(i) Regarding issue of loss by theft of Rs. 1,05,275/-:
Para No. 1 of assessment-order clearly mentioned and learned
Indra Prakash Bhargava, Ujjain v. PCIT,Indore. AY 2018-19 Representatives of both sides are also ad idem that the case of assessee was subjected to “Limited Scrutiny Assessment” to examine only “Expenditure of personal nature”.
When it is so, the issue of “loss by theft” raised by Ld. PCIT was not within the scope of “Limited Scrutiny Assessment” done by AO. It is consistently held by Indore Bench of ITAT in past that in the case of limited scrutiny, the revision qua any issue beyond the scope of limited scrutiny is not valid. Respectfully applying the same view, we agree that the PCIT has wrongly invoked revisionary jurisdiction qua this issue.
(ii) Regarding disallowance of personal expenses:
Ld. AR for assessee does not deny the fact noted by Ld. PCIT that the assessee himself admitted before AO for a disallowance of Rs. 28,930/- on account of personal element of expenses. But, however, he insists that the amount of disallowance has a very low tax impact which may not exceed even Rs. 5,000/-; therefore revision should not have been done for such insignificant amount.
Ld. DR for revenue supports the revision-order on this issue and prays to uphold the same.
On a careful consideration, we find that although the amount involved is petty yet for deciding validity of revision, the amount is irrelevant. On facts, we find from the order of PCIT, Para No. 1.1(4), 3(ii) and 3.2 that the assessee himself accepted disallowance of Rs. 28,930/- before AO. However, the AO has completed assessment at returned income without making any disallowance. Thus, the order of AO is certainly erroneous-cum-prejudicial to the interest of revenue to that extent. Therefore, we agree that the PCIT has rightly invoked revisionary jurisdiction qua this issue.
Indra Prakash Bhargava, Ujjain v. PCIT,Indore. AY 2018-19 9. In view of above, we are of the view that the Ld. PCIT was justified to invoke revisionary action qua one issue, namely disallowance of personal expenses but not for other issue, namely the loss by theft claimed by assessee. Being so, we are persuaded to modify and thus partly uphold the revision-order passed by PCIT to the extent it relates to the issue of disallowance of personal expenses. The assessee succeeds partly in this appeal.
Resultantly, this appeal is partly allowed.
Order pronounced in the open court on 21.09.2023.