TMI Blog2023 (10) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... ming to the assessee`s facts, we note that ld PCIT has issued the notice under section 263 of the Act about the issue of Loan Processing fee , whereas at the end of revision order, the Learned Principal Commissioner of Income Tax, has directed the assessing officer to examine the other issue, namely, the issue of addition of fixed assets , which is without giving an opportunity of hearing to the assessee, hence order passed by ld PCIT is not in accordance with the mandatory provisions of section 263 of the Act, therefore we quash the order of ld PCIT. Decided in favour of assessee. - Shri Pawan Singh, JM And Dr. A. L. Saini, AM For the Appellant : Shri Hardik Vora, Advocate For the Respondent : Shri Ashok B. Koli, CIT(DR) ORDER PER DR. A. L. SAINI, AM: By way of this appeal, the assessee has challenged the correctness of the order passed by the Learned Principal Commissioner of Income Tax, Valsad [in short the Ld. PCIT ], dated 30.03.2023, under section 263 of the Income Tax Act, 1961 [hereinafter referred to as the Act ]. 2. The grounds of appeal raised by the assessee are as follows: 1. On the facts and circumstances of the case as well a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to revise the assessment under section 263 of the Income Tax Act, 1961. You are hereby required to furnish an explanation within [10] days from the receipt of this notice, as to why your assessment for assessment year 2018-19 should not be revised. If no response is received within the specified time, it will be presumed that you have no explanation to offer and the assessment will be revised based on the available information. 5. In response to the show cause notice of the ld. PCIT, the assessee has submitted its written submission before ld. PCIT, which is reproduced below: Vide above mentioned notice your honour stated that it is noticed that the assessee under head indirect Expenses has debited an amount of Rs. 59,236/-as loan processing charges, which is in nature of capital expenditure. The AO should have, disallowed the same. from the reading of your honour's notice, it seems that your honors is having the objection that loan processing charges of Rs. 59,236 , debited to profit loss a/c of the assessee should have been disallowed by the AO being capital expenditure. In this regard, we submit as under; During the year under consideration th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act before LD AO, and after proper examining and verifying the details and submission along with evidences of the assessee and after satisfying with sources of substantial increase in capital of assessee, the LD AO completed the assessment and passed the order u/s 143(3) of the IT Act. We further submit that an assessment or re-assessment could only be revised u/s 263 in case it satisfies the twin conditions of erroneous as well as causing prejudice to the interest of revenue, in case of assessee, order passed u/s 143(3) of the IT Act by the LD AO is neither erroneous nor prejudice to the revenue, as it was passed after detailed examination and proper verification of all documents of subjected matter of limited scrutiny. We submit that in case of Limited Scrutiny the assessing officer can only examine those issues for which the case has been selected or the issue mentioned therein. We further submit that after properly examined and verifying all the submitted documents of the assessee and after satisfying with sources of capital introduction of the assessee, the LD AO had completed the assessment and accordingly, passed the order u/s 143(3) of the IT Act. We furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order with the direction to the assessing officer to frame the assessment de novo after making proper enquiries. 7. Aggrieved by the order of ld. PCIT, the assessee is in appeal before us. 8. Shri Hardik Vora, Learned Counsel for the assessee begins by pointing out that ld PCIT has issued the notice under section 263 of the Act about the issue of Loan Processing fee wherein ld PCIT has stated that assessing officer has not examined the Loan Processing fee . However, at the end of his revision order, the Learned Principal Commissioner of Income Tax, has directed the assessing officer to examine the other issue, namely, the issue of addition of fixed assets . The addition of fixed assets was not the subject matter of revision under section 263 of the Act. However, ld PCIT has directed the assessing officer to examine other issue namely, addition of fixed assets without giving opportunities to the assessee of being heard, hence it is against the principle of natural justice. Therefore, Ld. Counsel contended that ld. PCIT, without giving show cause notice to initiate the proceedings on different issue, which was not the subject matter of limited scrutiny also, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hence order passed by the ld. PCIT is within the framework of the law. Therefore ld. DR for the Revenue contended that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. 12. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. PCIT and other material brought on record. We find merit in the submission of ld Counsel for the assessee, as he pointed out that ld PCIT has issued the notice under section 263 of the Act about the issue of Loan Processing fee wherein ld PCIT has stated that Assessing Officer has not examined the Loan Processing fee . However, at the end of his revision order, the Learned Principal Commissioner of Income Tax, has directed the assessing officer to examine the other issue, namely, the issue of addition of fixed assets . The addition of fixed assets was not the subject matter of revision under section 263 of the Act. If the ld PCIT wants to exercise his jurisdiction on other items then in that circumstances, the min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open the concluded assessment under Section 147 and/or to revise the assessment order under Section 263 of the Act. The scope of the power/jurisdiction under the different provisions of the Act would naturally be different. The power and jurisdiction of the Revenue to deal with a concluded assessment, therefore, must be understood in the context of the provisions of the relevant Sections noticed above. While doing so it must also be borne in mind that the legislature had not vested in the Revenue any specific power to question an order of assessment by means of an appeal. 10. Reverting to the specific provisions of Section 263 of the Act what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the Revenue is the basic pre- condition for exercise of jurisdiction under Section 263 of the Act. Both are twin conditions that have to be conjointly present. Once such satisfaction is reached, jurisdiction to exercise the power would be available subject to observance of the principles of natural justice which is implicit in the requirement cast by the Section to give the assessee an opportunity of be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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