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2021 (10) TMI 649 - AT - Income TaxRevision u/s 263 - scope of limited scrutiny - case of assessee was selected for limited scrutiny for four reasons, i.e. (i) contract receipt/ fees mismatch (ii) sales turnover (iii) sundry creditors and (iv) tax credit mismatch - HELD THAT:- The assessee explained all these queries and the mismatch between Form 26AS vis-à-vis audited P&L A/c with reference to the turnover/ gross receipt, TDS credit and the turnover reported in audit report as compared with ITR was explained. So far as verification of sundry creditors is concerned the same was explained by filing confirmation of M/s Krishna Infrastructure which is the main sundry creditor of ₹ 4.10 crores out of total sundry creditors of ₹ 4,59,61,765/. The sundry creditors were mainly in respect of outstanding sub-contractor payment and the explanation for increase in sundry creditors vis-à-vis last year was also furnished before the CIT - on issue of mismatch of turnover and TDS credit, the ld. PCIT has not raised any issue but in respect of sundry creditors he has raised the issue in Sec.263 order ignoring that this issue has been thoroughly examined by the AO during the course of assessment proceedings. Thus, on this issue, the order of AO cannot be held to be erroneous or prejudicial to the interest of revenue. Only when the AO notices that there is potential escapement of income exceeding ₹ 5 lacs then the case may be taken for complete scrutiny. However, on verification of the issues taken up for limited scrutiny, the AO has not found anything incorrect and therefore, there was no reason for him to ask for complete scrutiny. Therefore, in respect of Chapter VI-A deduction, if the AO has not made an enquiry the same cannot be considered as erroneous or prejudicial to the interest of revenue more particularly when such claim is allowed in the preceding year and is verifiable from the capital account of assessee for the year under consideration. On the issue of large amount of sundry creditors and expenses claimed in the P&L A/c the same is duly explained before the AO, who after making necessary verification and enquiry from the assessee has accepted the explanation of assessee. Therefore, on the issue of increase in sundry creditor with respect to turnover as compared to the preceding year, therefore, in our view, the order passed by the AO cannot be held to be erroneous or prejudicial to the interest of revenue. The ld. PCIT has directed the AO to pass the assessment order afresh ignoring that when the case is selected for limited scrutiny, the jurisdiction of CIT for holding the order erroneous or prejudicial to the interest of revenue is confined only to the issue of limited scrutiny and not to direct the AO to pass a denovo assessment afresh by raising issues beyond what is permitted in the limited scrutiny. Hence, the direction given by Ld. CIT is also bad in law. We are not in agreement with the view taken by the ld. Pr.CIT in the facts and circumstances of the case and therefore we hold that the assessment order, subjected to revision u/s 263, is not erroneous and prejudicial to the interest of the revenue - Decided in favour of assessee.
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