TMI Blog2023 (2) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said to be erroneous. It is the settled proposition of law that for invoking the jurisdiction u/s 263, the twin conditions namely the order is erroneous and the order is prejudicial to the interest of the Revenue must be satisfied. However, the order passed by the Assessing Officer in the instant case cannot be held to be erroneous although the same may be prejudicial to the interest of the Revenue. Thus, the twin conditions are not satisfied. Therefore, we are of the considered opinion that the learned PCIT/CIT could not have initiated proceedings u/s 263 - Appeal filed by the assessee is allowed. - ITA No. 745/Hyd/2020 - - - Dated:- 30-1-2023 - Shri R. K. Panda, Accountant Member And Shri K. Narasimha Chary, Judicial Member For the Assessee : Shri M.V. Joshi, C.A appeared for Shri P. Murali Mohan Rao, CA For the Revenue : Shri Jeeval Lal Lavidiya, DR ORDER Per R. K. Panda, A. M This appeal filed by the assessee is directed against the order dated 19.3.2020 passed u/s 263 of the I.T. Act, 1961 by the learned Pr.CIT (Central)- Hyderabad, relating to A.Y.2015-16. 2. Facts of the case, in brief, are that the assessee company was engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above, it was submitted that the Assessing Officer had verified the interest declared and since the income did not pertain to the current year, he did not add the same. It was further argued that once no sum is credited in the books of account any figure reflected in Form 26AS cannot be treated as income of the assessee as Form 26AS does not form part of books of account. The onus of collecting independent evidence to treat the total amount as reflected in 26AS will be on the Assessing Officer. It was submitted that the assessee being a company is following mercantile system of accounting and only the income which has accrued in the relevant year was accounted in the books of account. Referring to provisions of section 199, it was submitted that once the TDS was deducted, a credit to the same has to be given to the assessee irrespective of the year to which it relates. Relying on various decisions, it was argued that the initiation of 263 proceedings is not called for and the same should be dropped. 4. However, the learned PCIT/CIT was not satisfied with the arguments advanced by the assessee. He observed that the assessee has declared interest income of Rs.10,33,764/- as ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the test of appeal. 5. On the facts and in the circumstances of the case the Ld. Pr. CIT has erred in passing the revisionary order by taking a different stand on an issue from that of considered view already taken by AO in the course of original scrutiny assessment and directing the AO to re-examine an issue which was already examined and determined. 6. The Ld. Pr.CIT ought to have appreciated that there is no lapse on the part of AO to examine the issues raised by Pr.CIT but AO has no necessity to record all the issues examined and satisfied by tie AO. 7. On the facts and circumstances of the case, the Pr. CIT ought to have appreciated/noticed that the income by way of interest from Axis Bank found in For No.26AS relates to interest recognized in different financial years 8. The Ld. Pr.CIT ought to have appreciated the fact that AO has examined the issues during the course of assessment proceedings, when the T assessment order is passed by a quasi-judicial authority; the same is to be considered as final when there is neither wrong application law nor omission. 9. The learned Pr.CIT erred in passing the order on a non-existent entity. 10. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept for those on the basis of which the case had been selected for scrutiny. Thus, it was forbidden for the Assessing Officer to verify interest income offered and income as per Form 26AS as the same fell beyond the reason for which the case of the assessee was taken up for limited scrutiny. He submitted that the learned PCIT in the garb of power vested under him u/s 263 could not have stretched the scope of jurisdiction vested with the Assessing Officer. For the above proposition, he relied on the decisions of the Delhi Bench of the Tribunal in the cases of (i) Balvinderkumar Vs. PCIT (125 Taxmann.com 83), (ii) and Pawansut Media Services P Ltd vs. PCIT in ITA No.534/Del/2021 and (iii) Mumbai Bench in the case of R H Property Developers (P) Ltd vs. PCIT in ITA No.1906/Mum/2019. 8.1 Referring to various pages of the Paper Book, he submitted that the company Unique Rail Road Consultants Pvt. Ltd (PAN: AAACU8136E) has amalgamated with United Rail Road Consultants (P) Ltd (PAN: AACU 2794A) as per the Hon'ble High Court order dated 13.07.2015 and company master data is from ROC. He submitted that the Assessing Officer had passed the order u/s 143(3) of the Act on 29.12.2017 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the rival arguments made by both the sides, perused the orders of the AO and the learned Pr.CIT/CIT and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. A perusal of the assessment order passed u/s 143(3) shows that the case was selected for limited scrutiny to verify the Large Other Expense claimed in the Profit Loss Account and mismatch in sales turnover reported in audit report and ITR . To be specific, para 1 of the assessment order reads as under: The assessee company deriving income from Business, Capital Gains and other sources. The assessee company has filed its return of income on 29.09.2015 by admitting an income of Rs.2,29,74,860/-. This case was selected for scrutiny through CASS in the Limited Scrutiny to verify the Large Other Expense claimed in the Profit Loss Account and mismatch in sales turnover reported in audit report and ITR . Accordingly, notice u/s 143(2) and notice u/s 142(1) were issued to the assessee . 12. Thus, it is seen that the case was selected for limited scrutiny to verify the large expenses claimed in the profit loss account and mismatch in the sales tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information received through AIR. However, a case may be taken up for wider scrutiny with the approval of the administrative Commissioner, where it is felt that apart from the AIR information there is a potential escapement of income more than Rs. 10 Lacs. 3. It has also been decided that in all the cases which are picked for scrutiny only on the basis of AIR information, the notice u/s 143(2) of Income Tax Act 1961 should clearly be stamped with AIR Case . This should be immediately brought to the notice of all the officers working in your region. Yours faithfully, (AjayGoyal) Director (ITA.II) Now, the case of the assessee before us was selected for limited scrutiny, for the reason, that there was viz. large investment in property (AIR) as compared to total income . A perusal of the queries raised by the A.O in the course of the assessment proceedings reveals, that though he had queried the assessee as regards justifiability of certain expenses etc., which though did not form part of the reason for which the case was selected for limited scrutiny, but then, no addition/disallowance on those issues was made by him while framing the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d purpose for which the case of the assessee was selected for scrutiny assessment, we are afraid that the said contention does not find favour with us. In our considered view making of an Investment and incurring of expenses are two different aspect sand the same are not found to be either overlapping or interchangeable .We are of a strong conviction that the A.O in the garb of scrutinising the investment made by the assessee in property, or which limited purpose its case was selected for scrutiny assessment, could not have traversed beyond that and adverted to issues pertaining to incurring of the expenses in respect of the said property ,for the reason, that the same could also be construed as a part of the investment made by the assessee in the aforesaid property. 8.We shall now in the backdrop of our aforesaid observations deliberate on the validity of the order passed by the Pr. CIT under Sec. 263. As observed by us hereinabove, the Pr. CIT had held the order passed by the A.O under Sec. 143(3),dated 10.10.2016 as erroneous, insofar it was prejudicial to the interest of the revenue, for the reason, that he had failed to carry out proper investigation as regards the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations of the Tribunal from Para 8 onwards read as under: 8. We have gone through the record in the light of the submissions made on either side. There is no dispute that the case of the assessee was picked up for scrutiny under the category of limited scrutiny. This fact is established from the assessment order and also the notice issued under section 143(2) of the Act. It is also not in dispute that the CBDT issued the instructions relied upon by the assessee and for the sake of convenience we extract the relevant portions thereof hereunder: - CBDT Instruction No. 7/2014 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 AIR/CIB/26AS cases. This functionality is expected to be operationalized by 15th October, 2014. Further, the Assessing Officer while issuing notice under section 142(1) of the Act which is enclosed with the first questionnaire would proceed to v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of several irregularities. Amongst other irregularities, it was found that no reasons had been recorded for expanding the scope of limited scrutiny, no approval was taken from the PCIT for the conversion of the limited scrutiny case to a complete scrutiny case and the order sheet was maintained very perfunctorily. This gave rise to a very strong suspicion of mala fide intentions. 9. The above CBDT instructions and the letter clearly establish that it's not open for the learned Assessing Officer to travellers beyond the reason for selection of the matter for limited scrutiny and on that aspect the assessment order in this case is in accordance with the instructions governing the field. In such circumstances it has to be seen whether the Ld. PCIT is justified in holding the assessment order to be erroneous insofar as it is prejudicial to the interest of the Revenue for the learned Assessing Officer not considering the aspects which are beyond the purview of limited scrutiny. 10. In the Deccan Paper Mills Co. Ltd. vs. CIT in ITA 1013 AND 1635/PUN/2015, Pune Bench of the Tribunal held, that, 40. Now, coming to the aspect of book profits which was considered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the consistent view taken in similar matters we are of the considered opinion that when the assessing officer is bound to follow the CBDT instructions and while following such instructions and after verification of the material furnished by the assessee on the aspect covered by the limited scrutiny, is not open for the Ld. PCIT to say that not adverting to the other aspects of the competition would render the assessment order erroneous and prejudicial to the interest of the Revenue. With this view of the matter we find that the impugned order cannot be sustained and, therefore, the same is liable to be quashed. We accordingly quash the same. 15. Since the case of the assessee in the instant case was selected for limited scrutiny to verify Large Other Expense claimed in the Profit Loss Account and mismatch in sales turnover reported in audit report and ITR therefore, the Assessing Officer could not have travelled beyond the reasons for which the case was selected for limited scrutiny. Therefore, the order cannot be said to be erroneous. It is the settled proposition of law that for invoking the jurisdiction u/s 263, the twin conditions namely the order is erro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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