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TMI Blog2023 (10) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... y assessing officer is neither erroneous nor prejudicial to the interest of revenue. 3. It is prayed that order passed by Learned Principal Commissioner may please be quashed. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal." 3. The facts necessary for disposal of the appeal are stated in brief. The assessee before us is an Individual and filed return of income for assessment year (A.Y.) 2018-19, declaring total income at Rs. 1,40,74,210/-. The assessee`s case was selected for limited scrutiny and assessment was completed u/s 143(3) of the Act on 24.02.2021, determining total at Rs. 1,42,58,400/-. The assessee`s case was subjected to audit and the audit party observed that the assessee has debited the loan processing fee amounting Rs. 59,236/- to the profit and loss account. Prima facie, this amount appeared to be a capital expenditure and should have been added back in computation of income. The ACIT and the Range Head both have accepted the audit objection and recommended the case for action u/s 263 of the Act. 4. Therefore, ld PCIT issued show cause notice vide DIN No. ITBA/COIWS/91/2022-23/1050602706( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts nor for purchase of any properties of business. Since said overdraft facility was to manage day to day business of the assessee, the loan processing charges paid of Rs. 59326/- is a revenue nature, and it is not a capital nature and accordingly, the assessee had debited said processing charges to his profit and loss a/c. We further submit that; We submit that Assessee's return was selected for limited scrutiny through CASS (in faceless mode) on issue of substantial increase in capital. Copy of Notice u/s 143(2) is enclosed herewith for your honour's perusal. Kindly Refer to Encl (2) Later, to verify the sources of substantial increase in capital, the LD AO had issued detailed questionnaire u/s 142(1) of the IT Act and asked explanation and justification of sources of substantial increase in capital with evidences. Copy of notice u/s 142(1) of the IT Act is enclosed herewith for your honour's perusal. Kindly Refer to Encl (3) Against the said notice u/s 142(1) of the IT Act, the assessee had submitted his detailed reply and explanation along with all required relevant evidences (including audited Balance sheets, profit and loss a/c etc. Bank statements, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on No.7/14 dated 26th September, 2014 and Instruction No.20/15 dated 19th December, 2015. As per the CBDT instruction No.20/2015 dated 29/12/2015 and instruction no 05/2016 dated 14-07-2016 the Assessing Officer in case of "Limited Scrutiny" can only examine those issues for which, the case has been selected or the issue mentioned therein. If the AO of the view that there is a potential escapement of income, he may convert, the "Limited Scrutiny" into "Complete Scrutiny" but such view should be reasonable view based on credible information or material available on record. Furthermore, there should be direct nexus between such, view and information/material." 6. However, the ld. PCIT has rejected the contentions of the assessee and directed the assessing officer to examine other issue which was not the subject matter of notice under section 263 of the Act. The ld. PCIT observed that from the perusal of balance sheet from "addition to the asset" it was noted that assessee has purchased fixed assets amounting Rs. 19,61,254/- and for which neither any details have been given nor the sources of acquisition have been established. In these circumstances and especially when AO has not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. Issues i. Share Capital/Other capital 2. After perusal of the return of income, material available on record and the reply filed to the notice u/s 142(1) of the Income Tax Act, 1961, the explanation of the assessee on the above issue is accepted and no addition is made. 3. The assessment of income is done as per computation sheet and the sum payable is determined as per the demand notice." 10. Therefore, Ld. Counsel contended that the assessee's case was selected for 'limited scrutiny' to verify the share capital or other capital. However, the ld. PCIT has exercised the jurisdiction on the issue which was not subject matter of 'limited scrutiny'. In the case of 'limited scrutiny', the Assessing Officer does not have power to examine the entire items of the return of income and, the Assessing Officer restricted only to the extent of issues for which the 'limited scrutiny, has been initiated. Therefore, ld Counsel contended that the jurisdiction exercised by the ld PCIT is beyond the scope of 'limited scrutiny' for that, Ld. Counsel relied on the following judgments: (i) PCIT v. Shark Mines and Minerals (P.) Ltd. (2023) 151 taxmann.com 71 (Orissa) (ii) Chaitanya Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice to administrative proceedings. The rules of natural justice are rooted in all legal systems and are not any new theology. They are manifested in the twin principles of nemo judex in parte sua (no person shall be a judge in his own case) and audi alterem partem (the right to be heard). It has been pointed out that the aim of natural justice is to secure justice. 13. We note that Hon`ble Supreme Court in the case of Amitabh Bachchan 384 ITR 0200 (SC), held that opportunity of hearing should be provided by Principal Commissioner of Income Tax (PCIT) to the assessee during revision proceedings. The findings of the Hon`ble Supreme Court is reproduced below ( to the extent useful for our analysis): "9. Under the Act different shades of power have been conferred on different authorities to deal with orders of assessment passed by the primary authority. While Section 147 confers power on the Assessing Authority itself to proceed against income escaping assessment, Section 154 of the Act empowers such authority to correct a mistake apparent on the face of the record. The power of appeal and revision is contained in Chapter XX of the Act which includes Section 263 that confer suo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice. Reference in this regard may be illustratively made to the decisions of this Court in Gita Devi Aggarwal vs. Commissioner of Income Tax, West Bengal and others (1970) 76 ITR 496 and in The C.I.T., West Bengal, II, Calcutta vs. M/s Electro House (1971) 82 ITR 824. Paragraph 4 of the decision in The C.I.T., West Bengal, II, Calcutta vs. M/s Electro House (supra) being illumination of the issue indicated above may be usefully reproduced hereunder..........:" 14. From the above judgment of Hon`ble Supreme Court in the case of Amitabh Bachchan (supra), it is vivid that what is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice. Now coming to the assessee`s facts, we note that ld PCIT has issued the no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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