TMI Blog2021 (1) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... e CBDT circular (supra) the AO could not have initiated enquiry on the issue of section 14A of the Act and it is settled that CBDT circulars are binding on income tax authorities. Therefore in such a scenario, the Ld. PCIT could not have invoked jurisdiction u/s 263 of the Act because he could not have held the AO s order to be erroneous because the AO was justified in not enquiring in to the issue of disallowance u/s 14A read with Rule 8D in respect of exempt income, since the AO has gone as per the dictum of CBDT circular on the subject. Therefore, the AO s action/ omission of not looking into the issue of 14A of the Act cannot be a ground for the Ld. PCIT to exercise his jurisdiction since he cannot hold the AO s omission to be erroneous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up for limited scrutiny under CASS which fact can be discerned from page 9 of PB-I and he drew our attention to the notice issued on 21.03.2016 u/s 143(2) of the Act informing that the assessee s case has been selected for limited scrutiny under CASS. Thereafter the Ld. A.R drew our attention to page 89 of PB-II wherein CASS reason for limited scrutiny selection in assessee s case is given. From a perusal of the same, we note that the reason for limited scrutiny was for three items; i) Introduction of capital in NBFC/investment company ii) large deduction claimed u/s 57 of the Act iii) Mismatch of amount paid to related persons u/s 40A(2)(b) reported in audit report and ITR. 3. This fact of limited scrutiny on these three items ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of disallowance u/s 14A read with Rule 8D in respect of exempt income was not the reason for selection of the case for limited scrutiny. It was pointed out by assessee that as per CBDT Instruction No. 2/2014 dated 26.09.2014, the field officers were directed to confine their enquiries strictly to CASS reasons and they were not permitted to make enquiries in respect to the issues for which case was not selected for limited scrutiny. It was therefore contended before the Ld. PCIT that when the CBDT has prohibited the AO from making any other enquiries other than for the issues for which limited scrutiny has been selected for by CASS, the AO could not had gone into the issues of disallowance in respect of exempt income. So, according to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r plausible view on the issue, and so he pleaded that impugned action of Ld PCIT may be quashed. Per-Contra, the Ld CIT DR, fully supported the impugned order and does not want us to interfere. 6. After hearing both parties and perusal of records, we are of the opinion that the Ld. PCIT could not have exercised his revisional jurisdiction on the issue on which he found fault with the action/omission on the part of AO because in the first place the AO could not have been faulted for not conducting any enquiry on the issue of Section 14A of the Act in respect of exempt income, since the assessee s case was selected for scrutiny only for limited purpose under CASS and the issue of disallowance u/s 14A read with Rule 8D in respect of exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06.2017 wherein it has been held that : Now coming to the facts of the instant case, we find that the instant case was selected on the basis of AIR Information as evident from the order of AO under section 143(3) of the Act. There is also no whisper in the order of the AO for expanding the scope of limited scrutiny after obtaining the permission from the Administrative CIT. The ld. DR has also failed to bring anything contrary to the argument of the ld. AR. Therefore in our considered view the scrutiny should have been limited only to the information emanating from the AIR. Admittedly, the assessee has claimed to have filed an appeal before Ld. CIT(A) challenging the jurisdiction exceeded by the AO while framing the assessment order u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. We have heard the rival contentions of the parties and perused the materials on record. The primary issue in the case on hand revolves whether it is a case selected under CASS for limited scrutiny or regular scrutiny. It can be seen from the grounds of appeal that the assessee wants to contend that the very initiation of proceedings u/s 143(3) of the Act on the basis of regular scrutiny under the Act was bad in law. The proceedings under section 143(3) of the Act should have been limited to the extent of the information gathered through AIR. Accordingly the proceedings u/s 263 of the Act cannot be expanded beyond the issue raised in AIR. Thus the order u/s 143(3) of the Act beyond the points of AIR is invalid in law and so the same is w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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