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2021 (1) TMI 1127 - AT - Income TaxRevision u/s 263 - Addition u/s 14A - selection of the case for limited scrutiny - HELD THAT:- PCIT could not have exercised his revisional jurisdiction on the issue on which he found fault with the action/omission on the part of AO because in the first place the AO could not have been faulted for not conducting any enquiry on the issue of Section 14A of the Act in respect of exempt income, since the assessee’s case was selected for scrutiny only for limited purpose under CASS and the issue of disallowance u/s 14A read with Rule 8D in respect of exempt income was not the reason for selection of the case for limited scrutiny. Therefore, as per the CBDT circular (supra) the AO could not have initiated enquiry on the issue of section 14A of the Act and it is settled that CBDT circulars are binding on income tax authorities. Therefore in such a scenario, the Ld. PCIT could not have invoked jurisdiction u/s 263 of the Act because he could not have held the AO’s order to be erroneous because the AO was justified in not enquiring in to the issue of disallowance u/s 14A read with Rule 8D in respect of exempt income, since the AO has gone as per the dictum of CBDT circular on the subject. Therefore, the AO’s action/ omission of not looking into the issue of 14A of the Act cannot be a ground for the Ld. PCIT to exercise his jurisdiction since he cannot hold the AO’s omission to be erroneous as well as prejudicial to Revenue and the impugned action of Ld. PCIT is akin to do indirectly what the AO could not have done directly. PCIT has ventured to exercise his revisional jurisdiction by issuing SCN without even satisfying the condition precedent to invoke the jurisdiction u/s 263 - Therefore the SCN itself is bad in law and therefore it is quashed - Decided in favour of assessee.
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