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2021 (7) TMI 204 - AT - Income TaxRevision u/s 263 by CIT - AO failed to take up the case of assessment of assessee from Limited Scrutiny to complete scrutiny - PCIT’s observation that since there was drop in G.P, AO should have taken up the case for complete scrutiny and failure to do so, makes the order erroneous - Scope of Conversion of assessment from ‘Limited Scrutiny’ to complete scrutiny - HELD THAT:- When we examine such a contention of Ld. PCIT, first we have to examine whether the AO could have taken up this issue for complete scrutiny as per the CBDT Circular No. 5/2016 - AO could not have done so, because for doing so he should have credible material or information from the records before him for forming such a reasonable view that there is a possibility of under assessment of income. Since there was no such credible material or information available on record and being satisfied by the books of account of the assessee, the AO might have made a conscious decision not to take up the case for complete scrutiny as stipulated in CBDT circular which inference we draw because the Ld. PCIT has not mentioned about any such credible material or information available on record to take the opposite view. So when there is no such material or information available on records, the AO could not have formed a reasonable view of under assessment of income on the issue of drop in G.P. Therefore since there is no credible information or material available on record to form a reasonable view that there is a possibility of under assessment, the Ld. PCIT’s allegation on this issue is noted to have been based on surmises and conjectures, so we are to the opinion that AO ought not to have taken up this issue (drop in G.P) for expanding the scope of limited scrutiny as per the CBDT Instruction No. 5/2016 dated 14.07.2016. So the fault pointed out by the Ld. PCIT on this score is erroneous. Receipts which assessee received from IOCL relating to tanker lorry - This issue was enquired into and considered by the AO; and thereafter, the AO had proceeded to tax separately the income by estimating as the income from tanker u/s 44AE of the Act. So therefore it is noted that the AO had enquired about the issue and even though the AO’s view of adopting the percentage of profit u/s 44AE of the Act, strictly doesn’t fall in its ken, however adoption of percentage of profit/estimate for the purpose of taxation on the facts of the case cannot be ground on which the Ld. PCIT can exercise his revisional jurisdiction because, assessee’s case is that there is no business income from the tanker lorry. However, the AO made addition - So there is no prejudice caused to the Revenue; and moreover it is not the case of the Ld. PCIT that despite there was credible information or material to suggest that the assessee’s tanker lorry was used for transport business of plying/running of tanker lorry, then also the AO failed to take up the issue for scrutiny by seeking approval as envisaged in the CBDT circular. Therefore, in the absence of any such material, the AO could not have taken up the case for enlarging the scope of scrutiny and further the decision of AO to apply presumptive tax rate u/s 44AD - Therefore, the Ld. PCIT erred in finding fault on this issue. Non-examination by the AO in respect of capital introduction by way of LIC / mutual fund maturity and gift etc. - It is not the case of Ld. PCIT that despite there was credible material or information with the AO to form a reasonable view that there was a possibility of under assessment unless this issue was not scrutinized, still the AO failed to act as envisaged in CBDT circular. So when there was no credible material or information available to the AO he could not have taken up the matter for further scrutiny on this issue. And the Ld. PCIT in the impugned order have not mentioned about any credible material or information on this issue in the assessment record which could have prompted the AO to have taken up the case for further scrutiny and therefore the Ld. PCIT erred in finding fault with the AO for not taking up this issue for scrutiny as stipulated by Instruction No. 5/2016 dated 14.07.2016 of CBDT. We are of the considered opinion that Ld. PCIT misdirected himself in law and facts to find that AO failed to take up the case of assessment of assessee from Limited Scrutiny to complete scrutiny as stipulated by CBDT in Instruction No. 5/2016 dated 14.07.2016. - Decided in favour of assessee.
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