ITA No. 627/PUN/2019-Assessment Year : 2014-15
INCOME TAX APPELLATE TRIBUNAL, PUNE “B” BENCH, PUNE
Shree Samastha Gujarathi Samaj, V/s. The CIT (Exemption), Pune
Assessee by : Shri Pramod Shingte, CA Revenue by : Shri Ajay Kumar Kesari, DR
Date of conclusive Hearing : 24/07/2023 Date of Pronouncement : 01/09/2023
HON’BLE SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER
AND
SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER
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Can invocation of revisionary jurisdiction u/s 263 by CIT is sustainable by holding the assessment order as erroneous and prejudicial to the interest of revenue in respect of issue which was not a reason for selection of the case for limited scrutiny?
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Facts in the case of the assessee that the return of the appellant was subjected to limited scrutiny to examine the correctness of ‘deduction claimed under the head income from other sources’ and more precisely the jurisdiction of scrutiny assessment was directed towards examination of deduction of expenditure claimed u/s 57 of the Act as against income chargeable u/s 56 of the Act.
And while vouching so the Ld. AO did neither noticed any probable escapement of income so as to set in motion a process for converting the scope of limited scrutiny into complete scrutiny, nor could such observation is emanating from the body of assessment.
Whereas the Ld. CIT(E) held the assessment as erroneous and prejudicial to the interest of the Revenue for assessing officer’s failure to examine certain income chargeable to tax u/s 56 of the Act that has escaped assessment.
The ITAT Pune hold the view that the jurisdiction of the Ld. AO was restrictive to examine all such transaction vis-à-vis expenditure relating to claim for deductions u/s 57 of the Act, therefore examination of an item outside the provisions of section 57 of the Act was extra-territorial to the Ld. AO unless authorised by necessary prior approval.
The ITAT Pune further hold the view that the issue of examination of transaction of income falling u/s 56 of the Act remained outside the scope of assessment proceeding for the buckshot reasons that no potential escapement came to the notice of Ld. AO, thus triggered no approval process for extending the scope. Had this potential escapement came to knowledge of Ld. AO, then the culmination of proceedings without first converting the same into complete scrutiny would have rendered the assessment erroneous and not otherwise.
At this stage the revisionary authority cannot substitute his view sitting into the chair of Ld. AO for not extending the scope of limited scrutiny into complete scrutiny and hold the order of assessment erroneous by finding that there is the potential escapement of deemed rent, interest on refund and incorrect allowance of depreciation etc. If this is permitted now, then it shall amount to travelling beyond the scope of limited scrutiny which is forbidden by law and we find this view has been fortified in ‘PCIT Vs Shark Mines and Minerals’ . ITAT further stated that in view of ratio laid by Hon’ble Madras High Court in ‘CIT Vs Padmavati’ reported in 120 taxmann.com 187, an assessment could not exceed prescribed scope of ‘Limited Scrutiny’ except following due process of law, therefore the Revenue has missed the bus in original proceedings in extending the scope, which unfortunately cannot be done invoking revisionary jurisdiction u/s 263 of the Act.
We further hold that when the assessment is taken up for limited scrutiny; Ld. CIT cannot hold the assessment order as erroneous and prejudicial to the interest of revenue in respect of issue which was not a reason for selection of the case for limited scrutiny and we observed that similar view also found in the decision of co-ordinate benches in ‘Deccan Paper Mills Co. Ltd. Vs CIT vide ITA No. 1013/Pun/2014’, ‘Aggarwal Promoters Vs PCIT vide ITA No. 1708/Chd/2017’, ‘Sanjeev Khemka Vs PCIT vide ITA No. 1361/Kol/2016’, and ‘ R & H Property Developer Pvt.Ltd. Vs PCIT vide ITA No. 1906/Mum/2019’.
In view of the aforestated discussion and judicial precedents, ITAT hold the invocation of revisionary jurisdiction failed to satisfy the first and foremost of twin condition laid in s/s (1) of section 263 of the Act, thus unsustainable in law, therefore quashed.