2023 (3) TMI 324 - HC - Income Tax

Revision u/s 263 - scope of the issues for which ‘limited scrutiny’ has to be undertaken - CIT power to travel beyond the scope of the issues which form part of the ‘limited scrutiny’ in the original Assessment Order - HELD THAT:- What persuades this Court to reach this conclusion is the requirement in law that if the AO has to go beyond the scope of the issues for which ‘limited scrutiny’ has to be undertaken by him, he has to seek prior permission of the superior officer in terms of the CBDT Instruction No.7/14 dated 26th September, 2014 and Instruction No.20/15 dated 19th December, 2015.

Consequently, it was not open to the Pr. CIT while exercising suo motu revisional power u/s 263 of the Act to find fault with the assessment order of the AO on the ground of its being erroneous on an issue not covered by the ‘limited scrutiny’ when the AO could not have possibly examined such issue.

To reiterate, in the present case, the limited scrutiny was in respect of excess disallowance under Section 40A(3) of the Act whereas the SCN under Section 263 was regarding the FIFO method of valuation of closing stock adopted by the Assessee. These were, as rightly noted by the ITAT, unconnected issues and the assessment order could not have been held to be “erroneous and prejudicial to the interest of Revenue” when the AO could not have travelled beyond the issues forming subject matter of the ‘limited scrutiny.’

The Court is unable to find any error having been committed by the ITAT in coming to the above conclusion. No substantial question of law arises.