TMI Blog2021 (5) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO to make fresh assessment on the issues which were not the subject matter of the limited scrutiny. CIT(A) has exceeded jurisdiction u/s 263 of the Act by directing the AO to make fresh assessment on the issues which were not the subject matter of the assessment framed on the basis of limited scrutiny. Further, no contrary decision was brought to our notice by the Ld. DR. Hence the appeal of the assessee and set aside the impugned order passed by the Ld. Pr. CIT u/s 263 - Decided in favour of assessee. - ITA No. 463/Chd/2019 - - - Dated:- 13-5-2021 - Shri N.K. Saini, Vice President And Shri R.L. Negi, Judicial Member For the Assessee : Shri Sudhir Sehgal, CA For the Revenue : Sh. Sandeep Dahiya CIT (DR) ORDER PER R.L. NEGI, JUDICIAL MEMBER: The assessee has preferred the present appeal against the order dated 31 /01 /2019 passed by the Learned Principal Commissioner of Income Tax, Patiala, [ in short the Ld. Pr. CIT] U/s 263 (1) of the Income Tax Act, 1961 (hereinafter referred to as Act ), whereby the Ld. Pr. CIT has set aside the assessment order passed u/s 143 (3) of the Act, holding that the said order is erroneous and prejudicial to the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal against the said order passed by the Ld. Pr. CIT. 4. Initially, the assessee challenged the impugned order by raising the following grounds: 1. That the notice issued u/s 263 by the Principal Commissioner of Income Tax (hereinafter referred to as Pr CIT ) and the order passed u/s 263 is illegal, bad in law and against the facts of the case. 2. That the Ld. Pr. CIT has erred in invoking the provisions of section 263 of the Income Tax Act on the ground that the assessment order passed by the Assessing Officer for AY 2014-15 is not only prejudicial to the interest of Revenue but is also erroneous on account of exemption claimed u/s 54, on account of opening balance of capital amounting to ₹ 65,91,538/- and on account of agriculture income amounting to ₹ 2,42,500/-. 3. That the proceeding and the order passed by the Ld. Pr. CIT u/s 263 is perverse as it is based on general observation and not specific to the facts of the case. 4. That the Ld. Pr. CIT has passed the order u/s 263 of the Act on surmises and conjectures and therefore is liable to be set aside. 5. That the appellant seeks leave to add, amend, alter, abandon or substitute any of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 7. Akash Ganga Promotors Develpoers vs. Pr. CIT ITA No 164/CTK/2019 8. The Ld. Counsel further submitted that since the impugned order is contrary to the ratio laid down by the various Benches of the Tribunal, referred above the same is liable to be quashed. 9. On the other hand, the Ld. DR supporting the order passed by the Ld. Pr. CIT submitted that since the AO had not examined the issues pointed out by the Ld. Pr. CIT, there is no infirmity in the order passed u/s 263 of the Act. 10.We have heard the rival submissions of the parties and gone through the material on record including the cases relied upon by the parties. As pointed out by the Ld. Counsel, the Mumbai Bench of the Tribunal in the case of M/s Su- Raj Diamond Dealers Pvt. Ltd. (supra) has quashed the order passed u/s 263 of the Act in the case of limited scrutiny assessment, holding that the Ld. Pr. CIT under the garb of section 263 of the Act, cannot exceed his jurisdiction. The observations of the Bench are as under: 8. We shall now in the backdrop of our aforesaid observations deliberate on the validity of the order passed by the Pr. CIT under Sec. 263. As observed by us hereinabove, the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT u/s 263 of the Act, in a limited scrutiny assessment case holding that the Ld. Pr. CIT has wrongly assumed the jurisdiction u/s 263 of the Act. 12. Similarly, the G Bench of the Mumbai Tribunal Bench in the case of Sonali Hemant Bhavsar vs. Pr. CIT (supra) has quashed the order passed by the Pr. CIT u/s 263 of the Act in a limited scrutiny assessment by following the decision of Kolkata Bench in the case of Sanjeev Kr. Khemka vs. Pr. CIT in ITA No. l361/Kol/2016 A.Y. 2011-12. The relevant paras of the decision read as under: 6. After hearing both the parties and perusing the materials before us, we observe from the notice issued under section 143(2) of the Act for limited scrutiny dated 19.09.2016 and find merits in the contentions of the assessee that the said limited scrutiny cannot be expanded unless the AO converted it into complete scrutiny with the approval of Ld. Pr. CIT and if the A.O. after considering the submissions of the assessee does not come to the conclusion of potential escapement the Ld. Pr. CIT cannot hold the order to be erroneous on the ground that AO ought to have reached to such conclusion. The case of the assessee is squarely covered by the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Hon'ble ITAT in the case of Inder Kumar Bachani (HUF) vs ITO 99 ITD 621 (Luck) and ITAT Mumbai 'G' Bench in the case of M/s. Westlife Development Ltd. Vs Principal C.l.T. in ITA NO.688/Mum/2016 have taken a view that when an Assessment order passed u/s 147 of the Act was illegal the Ld. CIT cannot invoke the jurisdiction u/s 263 of the Act against such void or non-est order. In the second decision cited the Hon'ble Mumbai bench of the Tribunal has specifically framed the following questions: - 1. Whether the assessee can challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of order passed u/s 263? 2. Whether the impugned assessment order passed u/s 143(3) dated 24-10-2013 was valid in the eyes of law or a nullity as has been claimed by the assessee? 3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non-est assessment order? On question no. 1 and 3 which is relevant to the present case the Hon'ble Mumbai bench of the Tribunal has taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion while holding the order of AO as erroneous in so far prejudicial to the interest of Revenue. In view of the above we hold that the Id. CIT has in his order u/s. 263 of the Act exceeded the jurisdiction by holding the order of AO as erroneous in so far as prejudicial to the interest of Revenue on those items which are not emanating from the AIR. Thus, we are inclined to adjudicate only those matters which are emanating from the AIR as discussed above. 4.2 The assessment was framed by AO for the A.Y. 2011-12 under section 143(3) of the Act vide order dated 29.03.2014 after making certain additions/ disallowances to the total income of assessee. Subsequently, Ld. CIT u/s 263 of the Act observed certain errors in the order of AO, therefore, he was of the view that the order passed by the AO is erroneous in so far as prejudicial to the interest of Revenue on account of no proper-enquiry before completing assessment as discussed below: - (i) The assessee has deposited in its bank account in HDFC bank Goa for ₹ 17.56 lakh and out of that there was a withdrawal only ₹ 1.50 lakh but the AO has made the addition only to the extent of ₹ 4 lakh on account of une ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h only was made against total cash deposit of ₹ 17,56,000/- without taking any explanation from the assessee. (2) The balance deposits in another account with HDFC, Porvorim, Goa was not considered in assessment. (3) Interest income from all savings accounts and FDRs was not considered at the time of assessment. (4) Submission of assessee regarding explanation of credit card payment of ₹ 3,76,225/- was partly accepted in assessment without proper verification. (5) Although a salaried person, the assessee's bank account reflects huge transactions/transfer entries, which required further investigation. (6) Long term capital gain of ₹ 19,74,763/- was not properly verified. (7) Loan transactions and interest on loans required proper verification. (8) Salary was received in cash without TDS, which should have been viewed adversely. (9) LIC premium was paid for a minor but assessee's capital account did not reflect the same. (10) Lastly, the assessee declared income from commission/brokerage in the previous two AYs but no such income was shown in this year. An incorrect assumption of facts or an incorrect application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Id. AR before us submitted that the necessary enquiries were made by the AO at the time of assessment. Thus the order of the AO cannot be held erroneous and prejudicial to the interest of Revenue on account of non-enquiry whereas the Id. DR vehemently supported the order of the Id. CIT. 5. We have heard the rival contentions perused the materials available on record. From the foregoing discussion, we find that order of AO has been treated erroneous and prejudicial to the interest of revenue on the ground that proper enquiry was not made by the AO. Therefore, Ld. CIT held that the order of AO is erroneous and prejudicial to the interest of revenue. However, after examining the order of Authorities Below and other relevant records our observations are as follows: - a) deposit of cash of ₹ 17.56 lakh in HDFC bank a/c No.03151930000609 From the order or AO, we find that the AO at the time of assessment proceedings has applied his mind while determining the undisclosed income from the said bank account for ₹ 4 lacs. Thus, the AO after considering the bank statements of the assessee has consciously made the addition of ₹ 4 lakh as unexplained cash credit aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdictional High Court in the case of CIT vs. M/s. J.L. Morrison (India) Ltd. (ITA No 168 of 2011) in GA No 1541 of 2012 dated 15.05.2014, wherein it was held as under: - By sections 3 and 4, the Indian Income-tax Act. 1922, imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by a person must be regarded as income liable to tax. In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision. We also rely on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Max India Limited reported in 295 ITR 282 wherein it was held as under : When the CIT passed the impugned order under s. 263, two views were inherently possible on the word profits occurring in the proviso to s.80HHC(3) and therefore, subsequent amendment of s. 80HHC made in the ITA No.l361/Kol/2016 A.Y. 2011-12 S.K. Khemka Vs. Pr. CIT-15 Kol. Page 12 year 2005, though retrospective, did not render the order of the AO erroneous and prejudicial to the interest of the Revenue, and CIT could not exercise powers under s. 263. In view of the above pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case of Ajit Gupta vs. ITO (supra), the F Bench of the Delhi Tribunal has held that since the claim of deduction under section 80HHG was not the subject matter of limited scrutiny made by the AO under section 143 (2)(i), the same could not be gone into by the Ld. CIT by exercising jurisdiction under section 263 of the Act. 14.Admittedly, the case of the assessee was selected for limited scrutiny under CASS for the reason that there is substantial increase in the capital in the relevant year and the AO passed the assessment order and accepted the return filed by the assessee after examining the issue regarding increase in capital account as the assessee had credited his capital account with agricultural income of ₹ 2, 47,500 /- and the capital gain amounting to ₹ 54,56,000 /- from sale of flat. The assessee has reflected that same in its capital account, copy of which is available at page 2 of the paper Book. Further in response to the letter dated 07.10.2016 issued by the AO during assessment proceedings, the assessee submitted his reply explaining the reason for increase in capital. The copy of reply is available at page 7 to 9 of the paper book filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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