TMI Blog2021 (10) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... pply his mind to the specific issues, which were duly dealt by the assessing officer in the order passed by him, it cannot be said that the order passed by the assessing officer was erroneous or prejudicial to the interest of the revenue. The revenue in its wisdom has directed the assessing Officer to decide the specific issues and laid down the condition of deviation from the specific issues after fulfilling the requirement of the circular issued by the Board in this regard. Once the AO had scrupulously discharged the duty assigned to him, it cannot be said by PCIT that the order passed by the assessing officer was erroneous and prejudicial to the interests of the revenue. - Decided in favour of assessee. - I.T.A No. 115/ASR/2020 - - - Dated:- 24-9-2021 - SHRI LALIET KUMAR, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER Assessee by : Sh. Sandeep Vijh, C.A. Revenue by : Sh. Sanjay Dhariwal, CIT-DR ORDER Per Laliet Kumar, JM: The present appeal filed by the assessee feeling aggrieved by the order of Ld. Pr. CIT-1, Jalandhar dated 20.02.2020 for A.Y. 2015-16. 2. The assessee has raised the following grounds of appeal: I.T.A No. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 of the Income Tax Act, 1961. Your reply/objections, if any, to the proposed action can be filed before the undersigned by 28.01.2019 on which date your case stands fixed for hearing at 11.30 P. M. in the office of the undersigned. 5. On the basis of this issue, order u/s 263 was passed setting aside assessment order to the file of the assessing officer holding the assessment order passed on 11/12/2017 was erroneous in so far as prejudicial to the interest of revenue. 6. Feeling aggrieved by the order passed by the CIT(A), the assessee is in appeal before us on the ground mentioned hereinabove. 7. At the outset the Ld.AR had submitted that the assessment was framed by the assessing officer for a limited scrutiny and the principal CIT had invoke the revisionary power under section 263, four and issue which was not part of the reasons for which the case was selected for scrutiny assessment. It was the contention of the Ld.AR that the order of the assessing officer cannot be said to prejudicial and erroneous to the interest of the revenue as it was not necessary for the assessing officer to examine the issue beyond the scope of limited scrutiny for which the matter was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o complete scrutiny and without following such procedure and approval an inquiry on the issue which is outside the purview of limited scrutiny would be outside the jurisdiction of AO. As a necessary corollary, the Pr. CIT cannot be permitted to travel beyond the jurisdiction which was vested with the assessing officer as what cannot be done directly cannot be done indirectly. Consequently revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction originally vested with the AO while making assessment. Copy of the decision is enclosed at page no. 41 to 51 [please see para at page no. 42]. 7. In view of the submissions and decisions cited above, it is clear that the present case was taken up for limited scrutiny and the issue taken up in for invoking the jurisdiction u/s 263 was not one of the issues for which limited scrutiny was taken up. The order u/s 263 is thus bad in law and deserves to be quashed on this score itself. 8. Another fatal legal mistake in the order u/s 263 dated 20/2/2020 is that the order does no bear any Document Identification Number i.e. DIN which was made mandatory by Circular no. 19 of 2019 issued by CBDT. Copy of the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. It has been mentioned in the notice u/s 263 dated 18/1/2019 that: . . . since the remuneration/ salary to partners has not been quantified as required u/s 40(b)(ii), the Assessing Officer was required to disallow the salary/remuneration amounting to ₹ 24,00,000 debited by the assessee firm in its P L account but the Assessing Officer failed to do so. 11. In response to the above notice, a detailed reply dated 11/2/2019 was filed on 12/2/2019 which has been incorporated at para no. 2 of the order u/s 263 wherein attention of the ld. Pr. CIT was also drawn to Circular no. 739 dated 25/3/1996 issued by CBDT wherein it had been clarified in para no. 4 that for all the assessment years subsequent to the assessment year 1996-97 onwards, no deduction u/s 40(b)(v) would be admissible unless the partnership deed either specifies the amount of remuneration payable to each working partner or lays down the manner of quantifying such remuneration [please see 2nd para at page no. 3 of the order u/s 263].Copy of the circular no. 739 is enclosed at page no. 55. Since in the present case, the method of quantification of remuneration had been provided in the relevant clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Income Tax Act, the same was allowable. Copy of the decision is enclosed at page no. 77 to 83 [please see page no. 78]. g) ACIT vs. DCS International Trading reported at 37 CCH 312 (ITAT Delhi): It was held that where the salary to partners was provided in the partnership deed to be allowed as per the provision of section 40(b) of the Income Tax Act, the same was allowable. The relevant clause of salary is incorporated below para no. 3.1 at page no. 86. The decision of Delhi High Court in the case of Sood Brij Associates relied upon by the ld. Pr CIT was distinguished [para no. 5.3 at page no. 88]. This case law has been relied upon by the Pr. CIT in the impugned order to decide against the assessee. Copy of the decision is enclosed at page no. 84 to 89. h) Unitec Marketing Services vs. ACIT reported at 175 ITD 90 (ITAT Mumbai): It was held that where the clause in the partnership deed stated that salary was to be computed in accordance with the provisions of section 40(b) and distributed in profit sharing ratio the same was allowable. The relevant clause of salary is incorporated below para no. 8 at page no. 109. Copy of the decision is enclosed at page no. 90 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered here. 14. In para no. 7 the ld. Pr. CIT has stated that even though the case was selected for limited scrutiny under CASS on four reasons, it should have been converted into full scrutiny. She has also referred to instructions of CBDT. No. 20 of 2015 dated 29/12/2015 and No. 5 of 2016 dated 14/7/2016 and incorporated para 3d of instruction no. 20 of 2015. In this regard it is submitted that this reasoning cannot be used for invoking the provisions of section 263. Attention is again drawn to the various six decisions of various Tribunals on this issue mentioned at page no. 3 4 of this submission wherein the above instructions have been discussed [please see page no. 9, 34 48] and thereafter the matter was decided in favour of the assessee. In any case, the specific clause relating to remuneration of partners in the partnership deed contained a formula to quantify the salary and for that reason also, the assessing officer could not have disallowed remuneration to partners even if the case had been selected for complete scrutiny. Case laws in this regard have been mentioned at page no. 6 to 8 of this submission. Moreover even if it is accepted for the sake of argument that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 at page no. 120 and para no. 14 at page no. 117]. The facts of this case are different from the present one and thus this case is not relevant to the issue at hand. As stated above, this decision has also been distinguished by the ITAT Delhi Bench in the case of DCS International Trading (supra) while allowing relief to the assessee. 17. On the basis of the above contention it was submitted that the order passed by by the PCIT, is VOID and is required to be quashed. 18. Per contra DR for the revenue had vehemently relied upon the order passed by the assessing officer as well as by the CIT (A). 19. We have considered the rival contention of the parties and perused the material available on record, including the judgments cited at bar during the hearing by both parties. During the argument, the Ld.AR had only restricted his submission on the first ground alone, as it was the submission of the Ld. AR that if the first ground is decided in favour of the assessee then remaining grounds became academic and the order of PCIT can be quashed solely. However, in case the bench comes to the conclusion that the matter is required to be heard then the written submissions reproduced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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