“limited scrutiny”

Assessment proceedings conclude and become final if a scrutiny notice under Section 143(2) is not served within the prescribed statutory period. This case also clarified the historical position that reassessment under Section 147/148 was restricted to issues for which reasons were recorded, a view superseded by Explanation 3 to Section 147.

An assessment order becomes erroneous and prejudicial to the revenue under Section 263 if the Assessing Officer fails to conduct a proper inquiry or investigation, even if the return appears prima facie correct. The Income-tax Officer has a duty to investigate and cannot remain passive.

The selection of cases for scrutiny must be completed within the time prescribed by CBDT instructions. The department is bound by its own standards and cannot act with discrimination or selectively apply them.

Assessing officers cannot introduce issues for inquiry that were not part of the original limited scrutiny, without adhering to mandatory procedural requirements.

An Assessing Officer cannot travel beyond the scope of issues selected for limited scrutiny during the assessment proceedings.

Revisionary powers under Section 263 cannot be invoked to find fault with an assessment order on an issue not covered by 'limited scrutiny' where the Assessing Officer could not have examined such an issue.

An assessment order cannot be held erroneous and prejudicial to revenue if the Assessing Officer (AO) could not have travelled beyond the issues forming the subject matter of 'limited scrutiny'. The Principal Commissioner of Income Tax (PCIT) cannot invoke Section 263 to set aside an assessment on grounds not forming part of the limited scrutiny.

An Assessing Officer can initiate reassessment proceedings under Section 147 even if a scrutiny notice under Section 143(2) was not issued within the prescribed time, provided the conditions for Section 147 are met. An intimation under Section 143(1)(a) does not preclude recourse to Section 147.