TMI Blog2021 (2) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting in Form 26AS and non verification of discount claimed by the assessee as well as the connected issue relating to free services related to MRI and CT Scan test. Thereafter CIT has held that the order dated 29.09.2017 is set aside on the issue with the direction to the Assessing Officer to pass the same denovo in the case of the assessee in accordance with law after making the necessary examination and verification regarding the issues under discussion. We therefore, find that the directions by the ld. Pr. CIT to carry out the fresh assessment is limited to the issue mentioned relating to non-verification of receipts, discount claimed by the assessee and related free services provided by the assessee. These issues are clearly subject matter of limited scrutiny and therefore, the contention so advanced by the ld. AR cannot be accepted. AO has examined the expenses claimed in the profit and loss account and made certain disallowances and these disallowances were subject matter of appeal and since the Ld. CIT(A) has decided the appeal of assessee on the disallowances of expenses claimed in the P L A/c, therefore, with reference to the expenses, the order of AO has since me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest of the Revenue and finding of the ld. Pr CIT are hereby sustained. Expenditure claimed on account of discount offered by the assessee in relation to CT scan and MRI test and the related free services provided by the assessee to the patients - In the instant case, where there are discounts claimed to the extent of 19% and above of gross receipts so reported and there are no details available on record except the quantum of discount and an explanation that the discount has been given to the patients as per agreement with PBM Hospital and more so, when the matter was selected for the precise reason of examination of such huge commission payments, it is ordinarily expected that the Assessing officer examine these transactions thoroughly rather than just relying on the information submitted by the assessee company. It is not a question of kind and extent of enquiry and hence, a difference of approach and methodology of examination of a particular transaction as done by the AO and as suggested by the ld Pr CIT. No doubt every Assessing officer has his unique style of functioning and no hard and fast rule can be laid down as to how he should conduct the enquiry in dischar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... others (PBM). Assessee explained the same as per the letter placed at PB 42-43. The AO after considering the same and examining the other expenses made addition of ₹ 20,74,797/- U/s 40A(3) and ₹ 1 lacs out of the various expenses debited to P L A/c and thus completed the assessment at income of ₹ 1,06,65,957/-. 3. Against the assessment order assessee filed appeal before the Ld. CIT(A) who vide order dated 31.01.2019 in Appeal No.354/18-19 deleted both the additions/ disallowances made by the AO. The Ld. CIT on the basis of audit objection issued notice U/s 263 of the Act as reproduced in his order wherein he observed that AO has (i) not verified the receipt as reflected in Form 26AS (ii) not verified the discount claimed on account of free services given to BPL and other as per the contract entered with the Government of Rajasthan by calling the required document and (iii) not scrutinize the final accounts submitted before the AO. Therefore, the order passed by AO is erroneous and prejudicial to the interest of Revenue. 4. The assessee in response to show cause notice vide its letter dated 16.03.2020 submitted that in course of assessment proceedings, asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bills and vouchers produced before him. It may be noted that the case of assessee was selected for limited scrutiny and as per CBDT Instruction No.20/2015 dated 29.12.2015 it is specifically mentioned that in case of limited scrutiny, questionnaire U/s 142(1) of the Act shall remain confined to specific reasons/ issues for which case has been picked up for scrutiny. 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, AO has not found anything incorrect and therefore, there was no reason for him to ask for complete scrutiny though on verification of the expenditure claimed in the P L A/c he has made disallowance. Thus, the order of AO so far as his ambit under the limited scrutiny is concerned cannot be held to be erroneous or prejudicial to the interest of revenue. 7. It was submitted that the ld. PCIT has observed that AO has not examined the expenditure of ₹ 1,19,35,260/- claimed on account of discount on CT/MRI test whereas all relevant expenditure pertaining to such test has been claimed in the P L A/c. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 9. It was submitted that the case of assessee was selected for limited scrutiny for the reason of large other expenses claimed in the P L A/c. The AO has examined the expenses claimed in P L A/c and made certain disallowances. These disallowances were subject matter of appeal. Thus, the Ld. CIT(A) has power U/s 251 of the Act to enhance the assessment not only on the issues for which disallowance was made by AO but to all expenses debited in P L A/c. Hon ble Gujarat High Court in case of CIT Vs. Ahmedabad Crucible Co. 206 ITR 574 has held that powers of the AAC are not confined to the subject matter of appeal but extend to the subject matter of assessment. Hon ble Supreme Court in case of CIT Vs. Nirbheram Deluram 91 Taxmann 181 has held that appellate powers conferred on AAC is not confined to the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicial to the interests of the revenue, he, may, after giving the assessee and opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment for cancelling the assessment and directing as fresh assessment. Accordingly, the records of the assessee were called for an examined with all material available therein for forming an informed opinion in the case. At the outset the AR of the assessee has mentioned in brief the show cause notice as issued by this office and submitted that the AO examined all the issues while completing the assessment order. However, this submission of the AR of the assessee is not acceptable. The AR of the assessee also submitted that the appeal in this case has been decided on 31.01.2019 allowing part relief to his assessee and these issues cannot be further examined u/s 263 of the Income Tax Act, 1961. However, from the records of this office, it is seen that the assessee went in for appeal before CIT (A) on the issue of disallowance made u/s 40A(3)of the Act and lump sum addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to this issue. 2. The AO has not verified the various discounts claimed as to whether Government of Rajasthan i.e. Rajasthan Mecicare Services. 3. The AO has not verified as to whom free services have been rendered related to MRI and CT scan test in F.Y. 2014-15. 4. The AO has not called for the required documents and has not scrutinized the final accounts presented before him/her. 7. This omission as made by the Assessing Officer resulting in an order which is erroneous as well as prejudicial to the interest of Revenue. It has necessitated the initiation of proceedings under section 263 of the Income Tax Act. This order has been done in a very mechanical way. This action of the AO has resulted in an erroneous passing of assessment order u/s 143(3) of Income Tax Act, 1961 which required high level of care while finalzing assessment order. The order dated 29.09.2017 u/s 143(3) passed by the AO is clearly prejudicial to the interest of Revenue and clearly calls for invocation of section 263 of the Income Tax Act, 1961. 8. Keeping the above discussion in view by the virtue of the powers conferred on the undersigned under the provisions of Section 263 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as the connected issue relating to free services related to MRI and CT Scan test. Thereafter at para 8 of his order, the ld. Pr. CIT has held that the order dated 29.09.2017 is set aside on the issue with the direction to the Assessing Officer to pass the same denovo in the case of the assessee in accordance with law after making the necessary examination and verification regarding the issues under discussion. We therefore, find that the directions by the ld. Pr. CIT to carry out the fresh assessment is limited to the issue mentioned at Para 6 of his order relating to non-verification of receipts, discount claimed by the assessee and related free services provided by the assessee. These issues are clearly subject matter of limited scrutiny and therefore, the contention so advanced by the ld. AR cannot be accepted. 14. The second contention which has been raised by the ld. AR is that the AO has examined the expenses claimed in the profit and loss account and made certain disallowances and these disallowances were subject matter of appeal and since the Ld. CIT(A) has decided the appeal of assessee on the disallowances of expenses claimed in the P L A/c, therefore, with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of his receipts. Further, merely because the reported receipts are more than what has been reflected in Form 26AS, it cannot be presumed that what has been reflected in Form 26AS has been included in the receipts as the question is not about the sum total of receipts rather the question is about the particular receipts pertaining to the financial year which are reflected in the Form 26AS are reported to tax or not. We find that it is only during the course of revisionary proceedings that such reconciliation has been submitted by the assessee for the first time and given the fact that the Assessing Officer has not examined the same, the ld. Pr. CIT has remitted the matter to the Assessing Officer for necessary verification. It is therefore, a case of complete lack of enquiry on the part of the Assessing Officer of the issue in respect of which the case has been selected for limited scrutiny and given such failure on the part of the Assessing Officer to carry out the necessary verification and examination, the orders so passed by him is clearly erroneous and prejudicial to the interest of the Revenue and finding of the ld. Pr CIT are hereby sustained. 16. Now coming to the othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discounts claimed as to whether discounts of the claimed as per contract with Rajasthan Medicare Relief Society and to whom free service has been rendered relating to MRI and CT scan and how the same has been accounted for in the profit and loss account. In this regard, useful reference can be drawn to observations of the Coordinate Bench in case of Subhlakshmi Vanijya (P.) Ltd. vs Commissioner of Income-tax-I, Kolkata, reported in 60 taxmann.com 60 (Kolkata - Trib.) wherein it was held under: It is imperative for the Assessing Officer to conduct enquiry to satisfy himself about the genuineness of transactions. Scope of the term 'enquiry' can be diverse in different circumstances. There cannot be straight jacket formula to positively conclude as to conducting or non-conducting of 'enquiry' by the Assessing Officer. It depends on the facts and circumstances of each case. Where the facts are just ordinary and prima facie there is nothing untoward the recorded transaction, in such circumstances, the obtaining of the documents and the application of mind thereon, without a further outside enquiry, may mean that the Assessing Officer did conduct enquiry, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry. In our considered view, it is a clear case of no enquiry on part of the Assessing officer and the order thus passed is clearly erroneous and prejudicial to the interest of the Revenue. In light of same, where the AO shuts his eyes and the ld PCIT discovers the glaring discrepancies regarding claim of discount expenses during the course of his examination of records, we donot think there is any infirmity or illegality in ld Pr CIT exercising his revisionary jurisdiction u/s 263 of the Act. 18. Before parting, we may add that we have also gone through other legal authorities on the subject as brought to our notice by the ld AR which have been rendered in the context of specific facts and circumstances of the individual cases, however, the same doesn t support the case of the assessee company. 19. We accordingly upheld the order passed by the ld Pr CIT u/s 263 of the Act setting aside the assessment order passed by the Assessing officer for the limited purposes of examining the issues of mismatch of receipts and discounts claimed in the profit/loss account and to decide the same as per law after making necessary examination and verification. In the result, the appeal file ..... X X X X Extracts X X X X X X X X Extracts X X X X
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