TMI Blog2023 (1) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... Per Bench : This is an appeal filed by the assessee against the order of the ld CIT(E), Hyderabad dated 29.03.2021 passed in DIN Letter No.ITBA/REV/F/REV5/2021-22/1041946780(1) for the assessment year 2017-2018, on the following grounds :- 1. For that the order of the forum below is arbitrary, illegal and without jurisdiction both in fact and law, hence liable to be quashed. 2. For that Ld. CIT erred in exercising jurisdiction u/s 263 of the IT Act treating the assessment erroneous and prejudicial to the interest of revenue on the issues which are not subject matter of assessment. Therefore the order dated 29/03/2022 passed u/s 263 of the IT Act is without jurisdiction and liable to be quashed and set aside. 3. For that Ld. Pr. CIT erred in passing the order by setting aside the assessment without appreciation of the submission of the assessee, without appreciating the details furnished and also without stating why the submission is not acceptable. Therefore the order u/s 263 is an unreasoned order and liable to be quashed. 4. For that Ld. Pr. CIT erred passing an order u/s 263 of the IT Act without' rejecting the documents furnished or recording it t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT set aside the assessment completed by the AO directing the AO for verification of the issues raised in the show cause notice. 4. Now, the assessee is in appeal before the Tribunal against revisionary order passed by the ld. Pr.CIT u/s.263 of the Act. 5. Ld. AR before us submitted that in the course of assessment, the assessee furnished the ledger copy of the compensation expenses. It was also submitted that this expenditure is not penal in nature it is paid to the employees who lost their life in a fire accident in the hospital premises of the trust. The entire payment has been made through bank. It was also submitted by the ld. AR that all the relevant copies substantiating the claim of the assessee were produced before both the authorities below. Further the ld. AR reiterated his submissions as were placed in the statement of facts filed along with the grounds of appeal before the Tribunal, which reads as under :- 1. That the Assessee is Trust and the main activities of the Trust are Running Hospital and Educational Institutions. The assessee trust is registered u/s 12AA of the Income tax Act. For the financial year 2016-17 relevant to the Assessment year 2017-18 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rifying the present issues can never be erroneous for exercising jurisdiction u/s 263 of the IT Act. Therefore the initiation of proceeding u/s 263 is not only contrary to the administration instruction issued by CBDT but also violation of provisions law.' 6. That although the administrative instruction provides restriction that an Assessing officer shall not expand the scope of enquiry/investigation beyond the issues flagged for limited scrutiny, the Assessing officer by examining all the Books of accounts like: i. Copies of Bank statement ii. Computation of income iii. Complete set of Audit report and enclosures iv. All Individual ledgers of Income and expenditure Account v. Details of Amount paid to specified persons vi. Copies of certificate of registrations vii. Copies of the trust deed Bye-Iaw has verified all these issues in course of assessment. It is evident from the Notice issued u/s 142(1) of the IT Act as well as from the assessment order itself. Copies of the Notice u/s 142(1) and assessment order u/s143(2) furnished before Ld. CIT for verification. 7. That it is also the settled principles of law that ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure. Copies of the challans evidencing such payment were furnished before Ld. CIT(Exemption) for verification. 10.That the assesse trust runs Hospital, many educational institutions. Puja expenses are incurred for carrying on the day to day activities in hospital and educations institutions. This expenditure is made in business exigencies. In order to determine Business expenditure the test of commercial expediency would be adjudicated from the point of view of the Business man and not from the point of view of revenue. Ld. Assessing officer Considering number of educational institutions, Hospitals functioning under the Trust, Number pujas carried on different occasions, Business exigencies and the turn over of the Assesse trust allowed the expenditure claimed under the head Puja expenses. Further in comparison to the turnover of the asses se the expenses in terms of puja expenses is only 0.03 percent of the turnover and it is very negligible. Ld. Assessing officer taking into consideration the nature of activities carried on by the assesse, exigencies of puja expenses for such activities and evidences furnished in support of the expenditure allowed the claim. While allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. That prior to exercise of jurisdiction two conditions precedent that the assessment is erroneous and so far as prejudicial to the interest of revenue has to be satisfied. One of the two conditions is cause and the other one is its effect. Therefore both the conditions must be read cojointly. If the cause is there and the effect is not jurisdiction u/s 263 can't be exercised and vice versa. In the present case there is neither the existed of the cause nor the effect for exercise of jurisdiction u/s 263 of the IT Act. Therefore the present order is without jurisdiction and liable to be quashed and set aside. 6. Apart from the above, ld. AR further submitted that the issue involved in the present appeal of the assessee has already been settled by this Bench of the Tribunal in the case of M/s Shark Mines Minerals Pvt. Ltd., passed in ITA No.128/CTK/2019, order dated 18.08.2022, wherein the Tribunal in para 10 has held that, once such fetters are placed on the AO in respect of limited scrutiny, the AO is barred from looking into any other issues other than those issues which are the subject matter in the limited scrutiny. Accordingly, ld. AR submitted that the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the record and also gone through all the case laws cited by the parties. Section 263 of the Income-tax Act seeks to remove the prejudice caused to the revenue by the erroneous order passed by the Assessing Officer. It empowers the Commissioner to initiate suo moto proceedings either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner is well within his powers to treat an order as erroneous on the ground that the Assessing Officer should have made further inquiries before accepting the wrong claims made by the assessee. The Assessing Officer cannot remain passive in the face of a claim, which calls for further enquiry to know the genuineness of it. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also those produced by the assessee before him. The Assessing Officer was statutorily required to make the assessment under Section 143(3) after scrutiny and not in a summary manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rework MAT income after adding back the provision for doubtful debts, as necessary examination/verification has not been made during the assessment. 7.4 In this case, the assessment was based on limited scrutiny with reference to AR information and no addition was made by the Assessing Officer on that count. In our opinion, even in a case of limited scrutiny assessment, the Assessing Officer is duty bound to make a prima facie enquiry as to whether there is any other item which requires examination and in the assessment, the potential escapement of income thereof exceeded Rs.10 lakhs. He ought to have sought the permission of CIT /DIT to convert the 'limited scrutiny assessment' into a 'complete scrutiny assessment'. If there is no escapement of income, which would have been more than Rs.I0 lakhs, the Pr. CIT could not exercise jurisdiction u/s, 263 of the LT. Act. In the present case, the assessee itself agreed that the Pr. CIT is justified in giving direction to rework MAT income after adding back the provision for doubtful debts. Now, the argument of the Ld. AR that in case of limited scrutiny assessment, the Pr. CIT could not exercise jurisdiction u/s, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tarini Industries Ltd. (supra). The Id. AR has referred to two decisions of the coordinate bench of the Tribunal in the case of Mrs. Sonali Hemant Bhavsar, ITA No.742/M/2019 and in the case of Sanjeev Kumar Khemka, 1361/Kol/2016. These two decisions have already been referred by the coordinate bench of the Tribunal in the case of Baby Memorial Hospital Ltd. (supra). Further the Id. AR has relied on the decision of Hon'ble Supreme Court in the case of Kiran Singh Ors. [1995] 1 SCR 117 (SC). In the peculiar facts and circumstances of the present case, the case laws cited by the Id.AR of the assessee are not applicable. 15. From the provisions of Section 263 of the Act, it is clear that any order passed by the AO, the Pr.CIT/CIT can invoke his revisonary power, if he considers that the order passed by the AO is erroneous and prejudicial to the interest of Revenue within the Section 263 of the Act. The CBDT has issued circular regarding limited scrutiny in which there is no any whisper regarding revisonary powers that the Pr.CIT/CIT cannot exercise within the statutory limit as prescribed by the Income Tax Act, 1961. If the Pr.CIT/CIT cannot interfere with the limited scru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s originally earmarked for ' Limited scrutiny', the AO shall be required to form a reasonable view that there is possibility of under assessment of income if the case is -not examined under 'Complete scrutiny' and the case may be converted from limited scrutiny to complete scrutiny, which requires administrative approval from pr. CIT/CIT/Pr. DIT/DIT, as prescribed in para 3(d) of earlier instruction dated 29.12.2015. 30. From a careful reading of the impugned order passed u/s.263 of the Act, we clearly observe that the assessee company had shown gross turnover /revenue from operation of Rs.63,97,71,157/- for financial year 2013-14 but as per statement in 26AS, the assessee had shown Rs.16,91,82,966/- from works contract bit it had disclosed its gross receipts in the profit and loss account only Rs.15,69,31,397/- resulting that the gross receipts is understated by Rs.1,22,51,569/- which should have been verified by the AO during scrutiny proceedings. The AO by way of notice u/s.142(1) initiated enquiry on this issue but after filing reply of the assessee in compliance to the said notice, the AO as an adjudicator and investigator did not bother to deliberate thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stify, which includes an order of enhancement or modification assessment or cancelling the assessment with a direction to pass fresh assessment order. Since both the issues were not considered by the AO in the original assessment order, Ld. Pr. CIT consider it necessary to direct the AO to enquiry the matter and reframe the assessment accordingly . iv.) If the Tribunal does not follow its earlier order on similar facts and circumstances, then the matter should be referred to larger Bench. This preposition was laid down in the case of ACIT vs. Chandragiri Construction Co. (21 taxmann.com 167)(TM). The Findings of Hon'ble Third Member are as under in para-S of the order: The Tribunal is to follow the decision of another Bench where facts are the same. This is a treaty law. The only other alternative is to refer the matter to the larger bench if the Members of this Bench are not willing to follow the earlier order. In this case, there is no dispute that the facts and circumstances are the same as appearing in the assessment year 2002-03 except change in figures and it is also true that the very same Members decided the issues for assessment year 2002-03 in favour of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, 1961 ('Act'), Central Board of Direct Taxes, by virtue of its powers under section 119 of the Act, in supersession of earlier instructions/ guidelines on this subject, ere by directs that the cases selected for scrutiny during the Financial Year 2014-20 5 under CASS, on the basis of either AIR data or cm information or for non re-conciliation with 26AS data, the scope of enquiry should be limited to verification these particular aspects only. Therefore, in such cases, an Assessing Officer shall confine the questionnaire and subsequent enquiry or verification only to the specific point(s) on the basis of which the particular return has been selected for scrutiny. 3. The reason(s) for selection of cases under CASS are displayed to the Assessing Officer in AST application and notice u/s 143(2), after generation from AST, is issued to the taxpayer with the remark '- Selected under Computer Aided Scrutiny Selection (CASS) . The functionality in AST is being modified suitably to flag the reasons for scrutiny selection in cases. This functionality is expected to be operationalised by 15th October, 2014. Further, the Assessing Officer while issuing no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. AR was regarding issues raised in the revisonary proceedings u/s.263 of the Act which were not the subject matter of consideration under the limited scrutiny before the AO. Ld. AR submitted that the Pr. CIT cannot travel beyond the issues for which the case was selected for scrutiny. Since the issues raised in the revisionary proceedings were fresh, therefore, the requisite two conditions precedent to be satisfied for exercising of jurisdiction u/s.263 of the Act that the assessment done by the AO should be erroneous and must be prejudicial to the interest of revenue, shall be in existence for invoking proceedings u/s.263 of the Act. 9. As per the submissions of the ld. CIT-DR the AO was duty bound in the limited scrutiny to ask for converting the same into full scrutiny when he came across the issues which required or it would have resulted in addition and consequently the assessment order was erroneous and prejudicial to the interest of revenue. He further submitted that the decision of the coordinate bench of the Cochin Tribunal in the case of Baby Memorial Hospital Ltd., 111 taxmann.com 189, which was followed by the coordinate bench of this Tribunal in the case of Sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. There could be such cases, where the AO while looking into issues which have been raised in the limited scrutiny, connected issues come up which could result in under assessment or escapement of assessment. It is in such cases, the AO is to take permission from the CCIT/Pr. CIT to expand the scope from limited scrutiny to complete scrutiny. Once such permission is granted and complete scrutiny is permitted, everything is opened to the AO to examine. Thus, in order to convert into a completed from limited scrutiny, connected issues should come up from limited scrutiny to give powers of the AO is to expand and get the permission for the complete scrutiny. In no other cases, the AO can go beyond what is directed in the limited scrutiny. 11. In the present case, the limited scrutiny was in relation to excess liability shown in respect of trade payable and second issue was disallowance u/s.40A(3) of the Act. The show cause notice in respect of 263 shows that the issue was in respect of adoption of FIFO method of valuation of its closing stock. This issue is nowhere connected to the issue of excess liability shown or disallowance u/s.40A(3) of the Act. This is absolutely fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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