TMI Blog2023 (8) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... P.N. Dave, CA For the Respondent : Shri M.K.Gautam, Pr. CIT (OSD) ORDER Per Bench This is an appeal filed by the assessee against the order passed u/s 263 of the Act of the ld Pr. CIT, Bhubaneswar-1 dated 10.3.2021 in Appeal No. ITBA/Rev/F/Rev5/2020-21/1031385941(1) for the assessment year 2016-17. 2. Shri P.N.Dave, ld AR appeared for the assessee and Shri M.K. Gautam, ld Pr. CIT(OSD) appeared for the revenue. 3. The appeal is time barred by 296 days. The assessee has filed condonation petition 21.2.2022 stating that the appeal could not be filed before the Tribunal due to COVID 19 pandemics. It is submitted that the Hon ble Supreme Court under Article 142 read with Article 141 of the Constitution of India in M.A. No.21 of 2022 in M.A. No.665 of 20231 in SMW(c) No.3 of 2020 has directed to exclude the period from 15 th March, 2020 till 28.2.2022 considering the appeal file belatedly. Ld AR at the time of hearing reiterated the submissions made in the petition and requested to condone the delay. Ld Pr. CIT(OSD) did not have any objection to the request of ld AR. In view of above, we condone the delay of 296 days in filing the appeal by the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aneswar has passed revision order on the issue which was part of limited scrutiny (difference in contract receipts) and other issue i.e. labour charges of Rs. 22,52,944/- which was not the part of limited scrutiny. i.) It was held by the Hon'ble Cochin Tribunal in the case of Baby Memorial Hospital Ltd. vs. ACIT (111 taxmann.com 189) that 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 assessment, potential escapement of income thereof exceeded Rs. 10 lakhs. In the cited case, the AR of the assessee had argued that this was a limited scrutiny assessment and the reasons for which the case was selected for scutiny for furnishing of details specific to the CASS reasons. It was submitted that the details were furnished in response to notice issued under section 142(1), dated 27-6- 2016 and after verification the Asstt. Commissioner had accepted the explanation given by the assessee, so proper enquiry was made in the limited scrutiny case and, therefore, the Assessing Officer had applied his mind to the facts of the case and, therefore, his or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made before accepting the genuineness of the claim which resulted in loss of revenue. 7.1 In the present case, the first issue for our consideration is whether the Assessing Officer having failed to convert limited scrutiny into a complete scrutiny, the assessment order would be rendered erroneous and prejudicial to the interests of the Revenue. 7.2 The Pr. CIT invoked the provisions of section 263 of the Act for considering the following two issues: The assessee had claimed an amount of Rs. 2,08,09,140/- being foreign exchange loss was allowed in assessment The foreign exchange loss on account of foreign currency loan taken for the construction of new and additional equipment. The loss was recognized translating the liabilities at exchange rate in effect at the balance sheet date. The loss on devaluation of rupees on account of loan utilized for fixed capital not deductible u/s. 37(1) of the Act, since the expenditure is capital in nature. Assessee debited an amount of Rs. 15,83,130/- in its P L account towards provision for doubtful debts. This being provision for diminution in value of trade receivables in the balance sheet, had to be added to profit for comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues which has not been done by the AO while completing the limited scrutiny assessment the AO could have obtained the permission from the ld. Pr.CIT if he finds that there is a potentiality of the income. The case law relied on by the ld. DR is for the assessment year 2014-2015 and the assessee's case is also for the assessment year 2014-2015, therefore, the case is squarely covered by decision of the of coordinate bench of the Tribunal in case of Baby Memorial Hospital Ltd. (supra). 14. From the reading of all the above cited decisions, it is evident that the view taken in above decisions are unanimous that the Income-tax Officer is not only an adjudicator but also an investigator. It is his duty to ascertain the truth of the facts stated in the return. When the circumstances of the case are such so as to provoke an enquiry, it is his duty to make proper enquiry. First he should investigate the matters on the basis of which the assessee has prepared income tax return thereafter he should reach to a logical conclusion that the income shown is as per the Income Tax Act. Failure to make enquiry in such circumstances would make the assessment order erroneous and prejudicial t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. On careful consideration of the rival submissions, we are of the view that admittedly and undisputedly, from the copy of the notice by the AO u/s. 142(1) of the Act dated 13.1.2015, it is ample clear that the case of the assessee for assessment year 2014-15 was selected for Limited Scrutiny only on two issues i.e. higher turnover report in service tax return compared to 1TR and mismatch in amount paid to related persons u/s. 40A(2)(b) reported in audit report and ITR. 28. So far as sufficiency and adequacy of enquiry on the issues of Limited Scrutiny' are concerned, we observe that the AO issued notice u/s. 143(2) and u/s. l42(l) of the Act which were replied by the assessee and copies of these notices and replies have been placed on record at APB pages 42 to 113, which shows that the AO makes some inquiry on the issues picked up by him by way of issuing notices and taking on record replies, explanation and relevant documents submitted by the assessee in compliance to the said notice. However, we are unable to find any deliberation in the assessment order regarding these issues which could show and satisfy us that the AO not only made sufficient and adequate enquiri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to mining of minerals, oil or gas) as is revealed from service tax return. However, the assessee had not accounted for the receipt of Rs. 8,45,95,617/- in its income. Moreover, this amount of Rs. 8,45,95,617/- had been grouped in note 19 under the head cost of materials consumed . Thus, the income credited to P L account was understated to the tune of Rs. 16,91,91,234/- which were not enquired by the AO. 32. We also observe that the issue of brought forward unabsorbed depreciation of Rs. 1,34,85,465/- and MAT credit of Rs. 26,33,135/- was not under Limited Scrutiny, hence, the AO has not enquired into the matter while passing the assessment order. Although both the issues were not under limited scrutiny but from the spirit and mandate of section 263 of the Act, which provides revisional powers to Pr. CIT/CIT in the cases where the assessment order or any other proceedings under this Act, passed by the AO is erroneous and prejudicial to the interests of the revenue. This section is itself a mini code wherein proceedings for revision has also been provided and as per this provision, the first and foremost requirement for invoking the revisional proceedings is that the Id. Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. The Bench should not come to a conclusion contrary to the conclusion reached in the earlier order of the Tribunal. In this case, the Bench being the same, definitely contrary view should not have been taken. In this view of the matter, I totally concur with the view of the Learned Judicial Member in respect of two issues viz. , accrual of retention money and bills receivable work-in-progress. Thus, I decide the legal issue that the Bench should follow its earlier order, concurring with the learned Judicial Member , v.) The CBDT Instruction relevant for the period as regards the limited scrutiny assessment is Instruction No.7/2014 dated 26.09.2014. Instruction No.7/2014 reads as follow: 'Subject:- Scope of enquiry in cases selected for scrutiny during the Financial Year 2014- 2015 on basis of mismatch-regarding It has come to the notice of the Board that during the scrutiny assessment proceedings some of the AOs are routinely calling for information which is not relevant, for enquiry into the issues to be considered. This has been causing undue harassment to the taxpayers and has also drawn adverse criticism from several quarters. Further, feedback and analysis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase may be taken up for comprehensive scrutiny with the approval of the Pr.CIT/DIT concerned. However, such an approval shall be accorded by the Pr. CIT/DIT in writing after being satisfied about merits of the issue(s) necessitating wider and detailed scrutiny in the case. Cases so taken up for detailed scrutiny shall be monitored by the Jt. CIT/Addl. CIT concerned. 5. The contents of this Instruction should be immediately brought to the notice of all concerned for strict compliance.' The above Instructions have been modified subsequently vide Instruction No.20/2015 dated 29.12.2015 and Instruction No.5/2016 dated 14.07.2016. From para 4 of the above Instruction, it is clear that when potential escapement of income exceeds Rs.10 lakh on issues other than selected under CASS, the Assessing Officer has the power to take up the assessment for comprehensive scrutiny with the approval of the Pr.CIT/DIT concerned. In the present case, the potential escapement of income is far exceeding Rs.10 lakh prescribed under the above mentioned CBDT Instructions. Therefore, the Assessing Officer should have converted the limited scrutiny assessment in this case to a complete scrutiny a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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