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TMI Blog2022 (8) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... h is a sine qua & precondition, pre requisite for making direction u/s.263 and in absence of this, the impugned order passed u/s.263 is invalid, void-ab-initio and thus, liable to be quashed." 2. Succinctly stated, the case of the assessee company was selected for limited scrutiny under CASS u/s.143(2) of the Act. Original assessment was framed by the AO vide his order passed u/s.143(3) of the Act, dated 21.04.2016, wherein the income of the assesee was determined at Rs.2,92,770/-. 3. After culmination of the assessment proceedings the Pr. CIT called for the assessment records of the assessee. On a perusal of the records, it was observed by the Pr. CIT that the Assessing Officer had framed the assessment without making necessary verifications and examination of certain aspects, viz. (i) that though the share capital and the securities premium of the assessee company as on 31.03.2015 was Rs.33,98,000/- and Rs. 14,91,01,200/-, respectively, however, the Assessing Officer had failed to make any inquiry/examination of the said issue; (ii) that though the assessee company had made an investment of Rs.15.25 crores in unquoted equity shares/unsecured loans/advances, however, the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed him to carry out verifications and examination of certain issues which had not formed the basis for which the case was selected for limited scrutiny assessment. In order to buttress his aforesaid claim the Ld. AR had taken us through the specific reasons for which the case of the assessee was selected for limited scrutiny u/s. 143(2) of the Act (Page No.1 of APB), which reads as under (relevant extract) : "i. Low income and high loans/advances/ investments ii. Investment in unlisted equities iii. Low income and high investment." It was submitted by the Ld. AR that one of the issues (out of two issues) on the basis of which the Pr. CIT had held the order passed by the Assessing Officer u/s.143(3) of the Act, dated 21.04.2016 as erroneous, viz. verification of the loss of Rs.26,90,317/- on derivatives did not form the basis for which the case of the assessee was selected for limited scrutiny under CASS. Elaborating on his aforesaid contention, it was submitted by the ld. AR that now when the aforesaid issue had not formed the basis for selection of the assessee's case for limited scrutiny under CASS, therefore, the Pr. CIT in the garb of his revisionary jurisdiction coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see company as regards its investments, the latter had furnished with him the requisite details/information qua the investments in question. On the basis of his aforesaid contentions, it was the claim of the Ld. AR that in so far the investment of Rs. 11.42 crore (out of 15 crore) was concerned i.e, the opening balance of investment as on 31.03.2014, the Assessing Officer could by no means be held as being in error in failing to have verified and examined the source of such investment as the same did not pertain to the year under consideration but was admittedly made in the preceding year. As regards the balance investment of Rs.3.58 crores [Rs. 15 crore (-) Rs.11.42 crores], it was submitted by the Ld. AR that the Assessing Officer in the course of assessment proceedings had specifically queried about the said investments in question and, the assessee in its reply to the same had furnished the complete details before him. It was submitted by the Ld. AR that as the fresh investment of Rs.3.58 crore (supra) was clearly sourced out of the amount of Rs.3.65 crores (supra) which was available with the assessee out of the short-term loan/advances that were received back during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from derivatives i.e, an issue which was extraneous to the reasons for which the case was selected for limited scrutiny under CASS. In sum and substance, now when pursuant to the selection of the assessee's case for limited scrutiny under CASS the jurisdiction of the Assessing Officer was circumscribed qua only those issues which had formed the reason for picking up of its case for such scrutiny, therefore, the failure on his part in not making verification or examination of any other extraneous issue by no means could have justifiably formed a reason for holding the order passed by him as erroneous in so far it was prejudicial to the interest of the revenue u/s 263 of the Act. As per CBDT Instruction No. 20/2015, dated 29.12.2015, scrutiny in cases which are selected through CASS has to be confined only to the specific reasons and issues for which the case has been picked up for scrutiny. Accordingly, now when the Assessing Officer pursuant to the selection of the case of the assessee for limited scrutiny through CASS was not vested with any jurisdiction for adverting to and therein dealing with issues which did not form part of the reasons for which the case was picked up for lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014 had clarified the extent of enquiry in certain category of cases specified therein, which are selected for scrutiny through CASS Further clarifications have been sought regarding the scope and applicability of the aforesaid instruction to cases being scrutinized. 2. In order to facilitate the conduct of scrutiny assessments and to bring further clarity on some of the issues emerging from the aforesaid Instruction, following clarifications are being made: i. Year of applicability: As stated in the Instruction No. 7/2014, the said Instruction is applicable only in respect of the cases selected for scrutiny through CASS-2014. ii. Whether the said Instruction is applicable to all cases selected under CASS: The said Instruction is applicable where the case is selected for scrutiny under CASS only on the parameters) of AIR/CIB/26AS data. If a case has been selected under CASS for any other reason(s)/parameter(s) besides the AIR/CIB/26AS data, then the said instruction would not apply. iii. Scope of Enquiry: Specific issue based enquiry is to be conducted only in those scrutiny cases which have been selected on the parameter(s) of AIR/CIB/26AS data. In such cases, the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board further desires that in all cases under scrutiny, where the Assessing Officer proposes to make additions or disallowances, the assessee would be given a fair opportunity to explain his position on the proposed additions/disallowances in accordance with the principle of natural justice. In this regard, the Assessing Officer shall issue an appropriate show-cause notice duly indicating the reasons for the proposed additions/disallowances along with necessary evidences/reasons forming the basis of the same. Before passing the final order against the proposed additions/disallowances, due consideration shall be given to the submissions made by the assessee in response to the show- cause notice. 5. The contents of this Instruction should be immediately brought to the notice of all concerned for strict compliance. Now, the case of the assessee before us was selected for limited scrutiny through CASS, for the reasons, that there were viz. (i). Large other expenses claimed in the P&L A/c.; and (ii). Low income in comparison to High Loans/advance /Investment in shares.. Accordingly, it can safely be concluded that the assessment framed by the A.O fell within the realm of the limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the reason, that he had failed to carry out proper investigation as regards the issue of valuation of the "closing stock as reflected in the audited accounts of the assessee. We are of a strong conviction that now when the case of the assessee was selected for limited scrutiny for the reasons viz. (i). Large other expenses claimed in the P&L A/c.; and (ii). Low income in comparison to High Loans/advance /Investment in shares, therefore, no infirmity could be attributed to the assessment framed by the A.O on the ground that he had failed to deal with other issues which though did not fall within the realm of the limited reasons for which the case was selected for scrutiny assessment. In other words, the Pr. CIT in the garb of his revisional jurisdiction u/s. 263 cannot be permitted to traverse beyond the jurisdiction that was vested with the A.O while framing the assessment. In sum and substance, revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was vested with the A.O while framing the assessment. As a matter of fact, what cannot be done directly cannot be done indirectly. Accordingly, in terms of our aforesaid observations, we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te details and the explanation furnished by the assessee accepted the same, therefore, the Pr. CIT in exercise of his revisional jurisdiction could not have substituted his view as as against the possible and plausible view that was arrived at by the AO as regards the aforesaid issue under consideration, we are unable to persuade ourselves to subscribe to the same. Ostensibly, the Pr. CIT on a perusal of the assessment records noticed that the assessee company had during the year under consideration made substantial investment in unquoted equity shares. Observing, that the AO had not made any enquiry as regards the investments made by the assessee in unquoted equity shares during the year, the Pr. CIT held the assessment framed by the AO vide his order passed u/s 143(3), dated 21.04.2017, to the said extent, as erroneous in so far it was prejudicial to the interest of the revenue under Sec. 263 of the Act, observing as under : " 1. The case of the assessee was selected for the reason 'Low income in comparison to very high investment' and 'Large increase in investment in unlisted equities during the year'. From the balance sheet of the assessee it is seen that as at 31st March, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) : "Explanation 2 - For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, - (a). the order is passed without making inquiries or verification which should have been made. (b) to (d)...................................................................................." We, thus, in terms of our aforesaid observations are principally in agreement with the view taken by the Pr. CIT that the order passed by the AO under Sec. 143(3), dated 21.04.2017 is erroneous in so far it is prejudicial to the interest of the revenue under Sec. 263, on the said count i.e, failure on the part of the AO in carrying out verifications as regards the substantial investments made in equity shares by the assessee during the year under consideration. Although, we have principally concurred with the Pr. CIT on the aforesaid issue, but at the same time find some substance in the claim of the ld. AR, that as stated by the assessee before the AO in the course of the assessment proceedings, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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