HUKUM SINGH,AMBIKAPUR vs. PRINCIPAL COMMISSIONER OF INCOME TAX, RAIPUR-1, RAIPUR

At the very outset of hearing of the appeal, we may herein observe that the present appeal involves a delay of 424 days. On being confronted with the aforesaid fact, the Ld. Authorized Representative (for short ‘AR’) for the assessee took us through a letter dated 29.08.2022. Elaborating on the reasons leading to the aforesaid delay, it was submitted by the Ld. AR

Per contra, the Ld. Departmental Representative (for short ‘DR’) did not raise any objection to the seeking of condonation of delay involved in filing of the present appeal by the assessee.

Having given a thoughtful consideration to the reasons leading to the effective delay of 45 days involved in filing of the present appeal, we are of the considered view that as the same had occasioned on account of

Controversy involved in the present appeal lies in a narrow compass, i.e. sustainability of the order passed by the Pr. CIT u/s.263 of the Act dated 18.03.2021, wherein the order passed by the A.O u/s. 143(3) of the Act dated 30.11.2017 was set-aside for the reason that he had while framing the assessment failed to trigger the provisions of Section 44AE of the Act. The Pr. CIT was of the view that the A.O had failed to determine the income of the assessee u/s.44AE of the Act. Elaborating his aforesaid contention, the Pr. CIT was of the view that as the assessee owned two vehicles, viz. truck (CG 15/ZC/0450) and a tractor, therefore, the income from plying of the same was to be determined as per the presumptive scheme of taxation set out u/s.44AE of the Act at Rs.1,80,000/- (i.e Rs.7,500/- per month for two vehicles). Accordingly, the Pr. CIT holding a conviction that the A.O had framed the assessment without conducting any enquiry on the aforesaid issue set-aside the order passed by him u/s. 143(3) of the Act dated 30.11.2017 with a direction to adjudicate the same afresh after affording a reasonable opportunity of being heard to the assessee.

Aggrieved the assessee has assailed the order passed by the Pr. CIT u/s. 263 of the Act dated 18.03.2021 before us.

We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities as well as considered the material available on record.

As stated by the Ld. AR and, rightly so, the case of the assessee was selected for scrutiny assessment under CASS (limited) on the issue “whether deduction claimed on account of depreciation is admissible”. Considering the fact that the case of the assessee was selected for “Limited scrutiny assessment”, we concur with the claim of the Ld. AR that as per CBDT Instruction No.20/2015 dated 29.12.2015, the scrutinizing of the assessee’s case was to be confined only to such specific reasons/issues, for which, the case had been picked up for scrutiny. Also, as provided in the aforesaid CBDT Instruction No.20/2015 (supra), in case the A.O in the course of the limited scrutiny assessment proceedings felt that apart from the CASS information there was potential escapement of income of more than Rs.10 lac, then the same could be taken for complete scrutiny with the approval of the administrative Principal Commissioner of Income Tax/Commissioner of Income Tax. Ostensibly, it is a matter of fact borne from record that the case of the present assessee was at no stage converted into complete scrutiny.

Considering the aforesaid factual position, we find substance in the claim of the Ld. AR that now when the case of the assessee was selected for limited scrutiny, therefore, the scope of jurisdiction of the A.O was confined to the specific issue for verification of which the same was picked up for scrutiny assessment. Carrying our aforesaid observation further, we are of the considered view that now when the scope of jurisdiction of the A.O while framing limited scrutiny was confined to the reasons which had formed the basis for selecting the case of the assessee for scrutiny assessment, then, the Pr. CIT in the garb of revisional proceedings u/s.263 of the Act could not have traversed beyond the issues for which the case was selected for limited scrutiny assessment. Our aforesaid conviction is supported by the order of the ITAT, Mumbai in the case of M/s. Su-Raj Diamond Dealers Pvt. Ltd. Vs. Pr. CIT, ITA No.3098/Mum/2019 dated 27.11.2019 and that of ITAT, Raipur in the case of Chhattisgarh State Beverages Corporation Limited Vs. Principal Commissioner of Income Tax, (2023) 221 TTJ 379 (Raipur).

Considering the aforesaid position of law, we shall now deal with the contention of the Ld. AR that the Pr. CIT in the garb of revisional proceedings had traversed beyond the scope of his jurisdiction; and in a way had sought to deal with issues which the A.O was divested of his

As observed by us hereinabove, the case of the assessee was selected for limited scrutiny for verifying as to whether or not deduction claimed on account of depreciation was admissible. Ostensibly, the assessee had in his return of income disclosed his income from the business of running a stone crusher as per his regularly maintained books of accounts at Rs.2,97,965/-, Page 10-12 of APB. On a perusal of the Trading & Profit & Loss account of the assessee, it transpires that the aforesaid profit disclosed by the assessee on his total turnover/gross receipts worked out at 8.06%. Considering the fact that the net profit of the assessee from his aforesaid business was more than that contemplated under the presumptive provisions of Section 44AD of the Act i.e. @ 8% of the amount of total turnover/gross receipts, therefore, the assessee had categorically made a reference of the said fact in his computation of income for the year under consideration. To sum up, it was the case of the assessee that the profit disclosed by him from his “eligible business” of running a stone crusher was more than that worked out on a presumptive basis under section 44AD of the Act. As the assessee had disclosed his business profit at an amount higher than that determined on presumptive basis u/s.44AD of the Act, therefore, in our considered view his claim for depreciation of

Apart from that, we are of the considered view that as the aforesaid vehicles i.e. truck and tractor were being used by the assessee in his business of running a stone crusher, therefore, there was no justification for the Pr. CIT to have observed that the income from plying of said vehicles was to be separately determined u/s.44AE of the Act. Alternatively, we find that even if the income of the aforesaid vehicles i.e. truck and tractor was to be determined on a presumptive basis at Rs.1,80,000/- u/s.44AE of the Act, then the net income from plying of said vehicles of i.e. Rs.6,75,503/- [receipts : Rs.7,20,240/- (-) depreciation on truck: Rs.12,224/- (-) depreciation on tractor :Rs. 32,513/- (-) indirect expenses (allocated on a pro-rata basis) : Rs. 1,34,908/-] would be required to be excluded from the net returned profit of the assessee. Resultantly, though the determination of the deemed income of the assessee on a presumptive basis u/s. 44AE with respect to the aforesaid vehicles would lead to an addition of Rs. 1,80,000/- (supra), but at the

Considering the aforesaid facts, we are of the considered view that the income disclosed by the assessee by duly accounting for the receipts from the aforesaid vehicles in his regular books of accounts, as against determining the income from plying of the same on a presumptive basis u/s.44AE can by no means be held to be prejudicial to the interest of the revenue.

We, thus, in terms of our aforesaid deliberations are of the considered view that as the assessee had duly accounted for his income from the business of running a stone crusher as per his regular books of accounts, which is found to be higher than the deemed income worked out as per the presumptive mechanism set out in Sec. 44AD of the Act, therefore, the order passed by the A.O allowing the assessee’s claim for depreciation cannot be held as erroneous. Apart from that, we are also of the view that accounting of the aforesaid income by the assessee as per his regular books of accounts as against that determined on a presumptive basis u/s.44AE of the Act is also in no way prejudicial to the interest of the revenue.

We, thus, in terms of our aforesaid deliberations, are unable to concur with the order passed by the Pr. CIT u/s.263 of the Act dated 18.03.2021, wherein he had set-aside the order passed by the A.O u/s.143(3) dated 30.11.2017 holding the same as erroneous in so far it was prejudicial to the interest of the revenue. Accordingly, we herein set- aside the order passed by the Pr. CIT u/s.263 of the Act dated 18.03.2021 and restore the order of the A.O u/s.143(3) dated 30.11.2017.

In the result, appeal of the assessee is allowed in terms of our aforesaid observations. Order pronounced in open court on 10th day of July, 2023.