TMI Blog2021 (10) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... een thoroughly examined by the AO during the course of assessment proceedings. Thus, on this issue, the order of AO cannot be held to be erroneous or prejudicial to the interest of revenue. 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, the AO has not found anything incorrect and therefore, there was no reason for him to ask for complete scrutiny. Therefore, in respect of Chapter VI-A deduction, if the AO has not made an enquiry the same cannot be considered as erroneous or prejudicial to the interest of revenue more particularly when such claim is allowed in the preceding year and is verifiable from the capital account of assessee for the year under consideration. On the issue of large amount of sundry creditors and expenses claimed in the P L A/c the same is duly explained before the AO, who after making necessary verification and enquiry from the assessee has accepted the explanation of assessee. Therefore, on the issue of increase in sundry creditor with respect to turnover as compared to the preceding year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the case of assessee was selected by directing the AO not only to consider the issues mentioned by him in the order but also the issues which may subsequently come to his notice during the assessment proceedings u/s 143(3)/ 263 of the Act. 5. The appellant craves to alter, amend and modify any ground of appeal. 6. Necessary cost be awarded to the assessee. 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. The brief facts of the case are that the assessee is engaged in the business of civil contractor. Return of income was filed on 30.09.2015 declaring total income of ₹ 81,53,490/- which was revised at total income of ₹ 1,02,03,490/- on 16.10.2015. The case of assessee was selected for limited scrutiny for four reasons, i.e. (i) contract receipt/ fees mismatch (ii) sales turnover mismatch (iii) sundry creditors and (iv) tax credit mismatch. In course of the original assessment proceedings, the assessee explained all these issues vide different letters. The AO after considering the same and after making necessary enquiries/ verification accepted the income returned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has not replied on the issues raised in show cause notice u/s 263 dt. 05.02.2020. This is incorrect in as much as all the three issues raised in the show cause notice has been replied by assessee vide letter dt. 02.03.2020 (PB 9-10). It may be noted that in respect of claim of deduction under Chapter VI-A, when this issue is not a subject matter of limited scrutiny, the AO is to confine himself to those issues only as per the CBDT Instruction No.20/2015 dt. 29.12.2015 (PB 13) where it is specifically mentioned that in case of limited scrutiny questionnaire u/s 142(1) 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. Therefore, in respect of Chapter VI-A deduction, if the AO has not made an enquiry the same cannot be considered as erroneous or prejudicial to the interest of revenue more particularly when suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced on record (ii) assessee has shown large amount of sundry creditors amounting to ₹ 4,59,61,765/- but confirmation and verification was not made during the assessment proceedings (iii) assessee has debited direct expenses of ₹ 13,69,88,804/- and indirect expenses of ₹ 58,41,645/- against total receipt of ₹ 15,31,83,951/- and shown net profit of ₹ 1,03,53,493/- which is not justified/ verified (iv) as per CBDT Instruction No.20/2015 dated 29.12.2015, if the AO notice that there is potential escapement of income exceeding ₹ 5 lacs requiring substantial verification on any other issue, the case may be taken up for complete scrutiny with the approval of PCIT/CIT. However, the AO has not made proper enquiry/investigation on the above issues and therefore, order passed by AO is erroneous and prejudicial to the interest of revenue. 8. We noticed that the assessee in response to show cause notice, vide its letter dated 02.03.2020 submitted that in course of assessment proceedings, the AO required the assessee to furnish various information vide notice u/s 142(1) dated 04.01.2017 including the issues for which assessment was taken up for limited sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undry creditors. All these four issues were examined by the AO in detail by issuing notice u/s 142(1) of the Act dated 04.01.2017 by raising six queries, which is available at page No. 4 of the assessee s paper book. The assessee explained all these queries and the mismatch between Form 26AS vis- -vis audited P L A/c with reference to the turnover/ gross receipt, TDS credit and the turnover reported in audit report as compared with ITR was explained. So far as verification of sundry creditors is concerned the same was explained by filing confirmation of M/s Krishna Infrastructure which is the main sundry creditor of ₹ 4.10 crores out of total sundry creditors of ₹ 4,59,61,765/. The sundry creditors were mainly in respect of outstanding sub-contractor payment and the explanation for increase in sundry creditors vis- -vis last year was also furnished before the CIT, which are available at page No. 6-7 of the assessee s paper book as well as the AO which are available at page No. 24 -26 of the assessee s paper book. It may be noted that on the issue of mismatch of turnover and TDS credit, the ld. PCIT has not raised any issue but in respect of sundry creditors he has raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. We draw strength from the decision as relied by the ld AR, in the case of Torrent Pharmaceuticals Ltd. Vs. DCIT (2018) 173 ITD 130 (Ahd.) (Trib.) wherein the Coordinate Bench has observed as under: Even after the insertion of Explanation 2, the Revisional Commissioner is expected to show that the view taken by the AO is wholly unsustainable in law before embarking upon exercise of revisionary powers. The revisional powers cannot be exercised for directing a fuller inquiry to merely find out if the earlier view taken is erroneous particularly when a view was already taken after inquiry. If such course of action as interpreted by the Revisional Commissioner in light of the Explanation 2 is permitted, Revisional Commissioner can possibly find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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