Revision u/s 263 done on issues not covered under limited scrutiny quashed as AO had already verified those issues for which limited scrutiny was conducted.
ABCAUS Case Law Citation:
ABCAUS 3201 (2019) (12) ITAT
Important case law relied upon by the parties:
Malabar Industrial Co. Ltd., (2000) 243 ITR 83(SC)
In the instant case, the appeal was preferred by the assessee against the order of the Principal Commissioner of Income Tax passed u/s 263 of the Income Tax Act, 1961 (the Act).
The crux of the grievance of the assessee was the assumption of revisionary jurisdiction by the Pr. Commissioner of Income Tax u/s 263 of the Act.
The assessee invited the attention of the Tribunal to the assessment order wherein, it was specifically stated that the case was selected for limited scrutiny under CASS. The issues for which the limited scrutiny was done were related to higher turnover reported in Service Tax Return compared to ITR and mismatch in amount paid to related persons u/s 40A(2)(b) reported in Audit Report and ITR.
It was observed that in the assessment order itself on those two issues the limited scrutiny of the assessee was done and the Assessing Officer dealt with these two issues and had accepted the income filed by the assessee. As per the assessment order, it was clearly stated that after verification of information as available on the records, information filed during the course of assessment proceedings and after verification of books of accounts, the income filed by the assessee was accepted.
It was noted that the Pr. Commissioner of Income Tax on the other hand invoked the revisionary jurisdiction u/s.263 of the Act to look into the other issues relating to the assessee which were not within the purview of the limited scrutiny.
Revision u/s 263 on issues not covered under limited scrutiny invalid
The Tribunal observed that the CBDT Circular vide its letter F-No.225/26/2006-ITA-II (Pt.), 8th September, 2010 had described the procedure for handling limited scrutiny cases wherein the Assessing Officer shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny.
The Tribunal further noted that in the instant case, the Assessing Officer had already verified those issues for which limited scrutiny was conducted. The Pr. Commissioner of Income Tax wanted the Assessing officer to look into various other issues of the assessee which were not covered within the purview of the limited scrutiny. This is not permitted within the framework of the Income Tax Act.
The Tribunal stated that on perusal of the CBDT Circular and the facts of the case, it was clear that the order of the Assessing Officer was neither erroneous nor prejudicial to the interest of the Revenue. The Hon’ble Supreme Court of India had specifically held that “in order to assume the revisionary jurisdiction u/s 263, the order of the Assessing Officer must be erroneous so far as it is prejudicial to the interest of the Revenue.”
The Tribunal held that in the facts of the instant case, the above said criteria were not met so far as the assessment order was concerned and therefore, it quashed the order passed by the Pr. Commissioner of Income Tax u/s 263 of the Act.
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