2023 (12) TMI 100 - AT - Income Tax

Revision u/s 263 - case of the assessee was selected for limited scrutiny - As per CIT sum as debited in your P L A/c as Loss on shares under Other Expenses and allowed at the time of assessment in contravention to provisions of section 71(3) of the Income Tax Act 1961 and amount as been claimed as Expenses on let out property and an amount as been claimed as Expenses against Rental Income and allowed at the time of assessment even though such expenses were not covered under Chapter IV of the Income Tax Act 1961 - as per assessee above two items cannot be looked into by the ld. Commissioner because it is a case for limited scrutiny. HELD THAT - It is pertinent to observe that we have take note of all the issues on which limited scrutiny was to be carried out. The first item in these issues is income from heads of income other than business/profession mismatch . The other head of income of the assessee is house property income and apart from the expenditure provided under Chapter (iv) of the Income Tax Act no other expenditure could be claimed. It is patently erroneous claim at the end of the assessee which has been accepted by the AO therefore this CBDT Circular is not attracted in the present case. The scrutiny of the income of the assessee is not being converted from limited scrutiny to complete scrutiny. These items duly fall within the first issue provided in the limited scrutiny itself therefore neither the decision of the ITAT Indore Bench applicable nor CBDT Circular. The assessee has not appeared before the ld. Commissioner or filed any explanation qua the proposed errors. Therefore considering the stand of both the sides as well as perusal of the impugned order of the ld. Pr. Commissioner we do not find any error in it. The appeal of the assessee is devoid of any merit and accordingly dismissed.

Summary

Issues involved:
The appeal against the order of the Principal Commissioner of Income Tax under section 263 for A.Y. 2015-16.

Issue 1 - Power of Principal Commissioner under section 263:
The assessee contested the assumption of power under section 263 by the Principal Commissioner, challenging the setting aside of the assessment order passed under section 143(3) of the Income Tax Act. The Principal Commissioner found the assessment order erroneous and prejudicial to the interest of revenue due to discrepancies in expenses claimed by the assessee.

Details for Issue 1:
The assessee filed the return of income declaring total income, and the case was selected for limited scrutiny. The scrutiny assessment was conducted by the Assessing Officer. The Principal Commissioner identified discrepancies in expenses claimed by the assessee, such as 'Loss on shares' and 'Expenses on let out property' not in compliance with relevant provisions of the Income Tax Act. The Principal Commissioner set aside the assessment order for fresh enquiry and assessment on these issues, as the assessee did not respond to the notice.

Issue 2 - Limited scrutiny and conversion to complete scrutiny:
The assessee argued that the case was for limited scrutiny and could not be converted to complete scrutiny. The counsel referred to relevant circulars and case law to support the contention that the items in question should not have been examined by the Principal Commissioner.

Details for Issue 2:
The counsel for the assessee contended that the case was for limited scrutiny and could not be converted to complete scrutiny. However, the Tribunal observed that the items in question fell within the issues identified for limited scrutiny, specifically related to income from heads of income other than business/profession mismatch. The Tribunal noted that the expenses claimed were not in accordance with the Income Tax Act, and the acceptance of such claims by the Assessing Officer was erroneous. The Tribunal found no merit in the appeal, as the assessee did not provide any explanation for the discrepancies identified by the Principal Commissioner.

Conclusion:
The Tribunal upheld the decision of the Principal Commissioner under section 263, dismissing the appeal of the assessee. The assessment order was set aside for fresh enquiry and assessment on specific issues related to expenses claimed by the assessee, which were found to be in contravention of the Income Tax Act. The Tribunal rejected the argument that the case was for limited scrutiny only, as the identified issues were within the scope of the initial scrutiny.