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TMI Blog2023 (9) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Year 2018-19. 2. The assessee has taken the following grounds of appeal:- "1. The Learned Principal Commissioner of Income Tax, Range 1 Ahmedabad erred in holding that the assessment order passed u/s 143(3) of the Income Tax Act, 1961 pursuant to selection of the case for scrutiny under Limited Scrutiny is erroneous and prejudicial to the interest of the revenue by invoking provisions of section 263 of the Income Tax Act, - 1961. The Assessing Officer has made inquiries on the issues for which the case was selected for Limited Scrutiny. 2. The Appellant prays for appropriate relief on above grounds of appeal. 3. The Learned Principal Commissioner of Income Tax, Range-1 Ahmedabad erred in directing the Assessing Officer, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the case of the assessee had been open under "limited scrutiny assessment scheme" to verify the expenses incurred by the assessee for earning "exempt income", and therefore in light of various judicial precedents, the aforesaid issues on the basis of which 263 proceedings have been initiated against the assessee, are unsustainable. However, the PCIT held that in the instant case, there was option available with the Assessing Officer to widen the scope of limited scrutiny with the approval of the competent authority. However, no action was taken by the Assessing Officer in this regard. Therefore, this amounts to an erroneous action on the part of the Assessing Officer, which resulted in loss of revenue, hence the order which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment was opened and no addition was made on this issue. Accordingly, the AO being satisfied with the reply/clarification filed by the assessee, accepted the returned income of the assessee and no additions were made in the assessment order. In the recent case of Sahita Construction Company Vs. Pr. CIT (ITAT Indore) in ITA No. 119/Ind/2021, the Tribunal held that when the assessment is taken up for limited scrutiny, Ld. Pr. CIT cannot hold the assessment order as erroneous and prejudicial to the interest of revenue in respect of issue which was not a reason for selection of the case for limited scrutiny. The ITAT observed that perusal of records shows that assessee's case was selected for limited scrutiny through CASS for verification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee made purchases in cash in contravention to Section 40A(3), since assessee's case was selected for limited scrutiny for verification of cash deposited in bank account, AO was not required to make enquiry on issue with respect to cash purchase and thus, order of AO could not be said to erroneous. In the case of Naga Dhunseri Group Ltd. 146 taxmann.com 424 (Calcutta), the High Court held that where Principal Commissioner invoked revisionary proceedings on grounds that disallowance under Section 14A in respect of exempt income was not considered by AO even when assessee's case was selected for limited scrutiny to verify introduction of capital in NBFC/investment companies which was linked to such disallowance, since issue of dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed by the Assessing Officer, the Commissioner has erred in holding the order of the Assessing Officer to be erroneous and prejudicial to the interest of revenue in this regard. Accordingly, we reverse the findings of the Commissioner. Accordingly, we hold that the order passed by the Commissioner under Section 263 of the Act is invalid and the same is quashed for both the assessment years." 7. In the case of R&H Property Developer (P.) Ltd. v. Pr. CIT [IT Appeal No. 1906 (Mum.) of 2019, dated 30.07.2019, the Mumbai ITAT made the following observations in this regard: "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 considered view that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r.CIT [1361/Kol/2016 - order dated 02.06.2017] ITAT Kolkata Benches. 9. In view of the above judicial precedents cited above, which are of the considered view that Ld. Pr. CIT has erred in assuming revisionary powers under Section 263 of the Act in the instant facts. The impugned order of Ld. Pr. CIT is accordingly quashed. 10. Since, we have decided the case on the issue of jurisdiction to initiate proceedings under Section 263 of the Act, we are not separately discussing the merits of the case. Thus, in our considered view assessment order dated 20.01.2021 under Section 143(3) of the Act is neither erroneous nor prejudicial to the interest of revenue and the same is restored. 11. In the result, the appeal of the assessee is allowed. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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