TMI Blog2023 (10) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of verification of Share capital/other capital . Therefore, AO need not to examine the issue relating to sale of shops and computation of long term capital gain, which was raised by the PCIT. Since in the limited scrutiny case, AO has to examine only those issues which are mentioned in the notice of limited scrutiny. If the AO wants to examine other items, which are not mentioned in the limited scrutiny notice, then in that circumstances, he has to convert the limited scrutiny into unlimited scrutiny by taking permission from the higher authorities, which the AO has not done in the assessee`s case under consideration. Therefore, the issue relating to sale of shops and capital gain thereon and other few issues raised by PCIT, which were raised by the PCIT in his order u/s 263 is outside the scope of the examination conducted by the AO hence order passed by PCIT in his revision order is not tenable and therefore, order of PCIT may be quashed. AO had rightly raised query regarding sources of substantial increase in capital, vide notice u/s 142(1) of the Act and the assessee had also submitted her detailed reply and explanation with supporting evidences, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2018-19. The assessee filed her return of income on 12.03.2019, declaring total income at Rs. 1,39,88,280/-. The case was selected for limited scrutiny assessment, on the issue that assessee has introduced capital during the year, which is very high as compared to the profit after tax of the assessee. The assessment was completed u/s 143(3) on 13.01.2021 accepting the returned income as such. 3. Later on, Ld PCIT has exercised his jurisdiction u/s 263 of the Act. On perusal of assessment records, it was noticed by ld PCIT that assessee has introduced capital in M/s Sai Nath Petroleum from various sources after claiming capital gains and business income on sale of land and a number of shops. The computation of such transaction which led to build of capital in Sai Nath Petroleum was also perused and it was noted by ld PCIT that there is huge discrepancy which needs to be explained by the assessee, considering these facts a notice was issued to the assessee on 10.03.2023 stating that why assessment framed for assessment year (A.Y) 2018-19 should not be revised u/s 263. The copy of notice issued to the assessee is reproduced below: In this case assessment u/s 143(3) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys 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. 4. In response to notice issued by Ld.PCIT, the assessee submitted her reply, which is reproduced below: Vide above mentioned notice your honour stated that on verification of submission made by the assessee it is observed that the assessee has sold shop no 21 to 210 at Zanda Chowk, Silvassa for Rs. 2.11,00,000/- to Shri Jayant Gopinath. No other property sold during the year. As pe sale deed, the assessee was the only owner of shops, however, while computing the long-term capital gain, the assessee has shown sale consideration of Rs. 63,58,500/- only as against total sale consideration of Rs. 2,11,00,000. From reading of your honour s above said notice, it seems that the objection of your honour is that sales consideration of Rs. 2,11,00,00/- for sales of shops (numbering from 201 to 210 sold to Gopinath) was not shown in capital gain head. In this regard, we submit as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Rs. ) Consolidated turnover shown in P L in ITR- 3 in Income Tax Return (Amount in Rs) Sale of shops from 201 to 210 (shown in profit loss a/c of M/s Preetiben Chauhan) 2,11,00,000 25,32,22,622 Sales of diesel petrol (shown in P L a/c of M/s Sainath Petroleum) 23,21,22,622 Total 25,32,22,622 25,32,22,622 Copy of audited balance sheet, profit loss a/c along with ITR-3 of the assessee of A.Y 2018-19 is enclosed herewith for your honour s perusal. Copy of Income Tax return with computation of income of the assessee for A.Y 2018-19 is enclosed herewith. Further, we submit that the assessee had already disclosed said sale transaction of shops in her auditee books of account as well as in her income tax return as business income under business head and accordingly she had discharged her tax liability for A.Y 2018-19. Further, during the year under consideration the assessee had also sold the non-agriculture land s no.383/1/1,383/2 to other person for Rs. 63,58,500/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the assessee was holding from 1997. Thus, ld PCIT observed that these vital facts have neither been examined by the Assessing Officer nor any remark have been made by the auditor and capital formation has been accepted as such without making any addition or rejection of the books of accounts. In fact, the audit report in the case of the assessee, is a highly qualified one and it would have alerted the assessing officer, however the Assessing Officer failed to examine the issue. Therefore, ld PCIT held that Assessing Officer has passed the assessment order without making inquiries or verification on the issue which ought to have been made in the assessee`s case therefore the assessment order u/s 143(3) of the Act in the case of Preetiben Chhatrasingh Chauhan for A.Y 2018-19 passed on 13.01.2021 by the Assessing Officer is erroneous in so far it is prejudicial to the interest of revenue. Therefore, ld PCIT directed the Assessing Officer to frame the assessment de- novo after making proper enquiries. 6. Aggrieved by the order of the Ld. PCIT, the assessee is in appeal before us. 7. At the outset, Shri Hardik Vora, Learned Counsel for the assessee, begins by pointing out that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the subject matter of limited scrutiny . Therefore, the issue raised by the L PCIT is outside the scope of limited scrutiny. 10. We note that assessee s case was selected for limited scrutiny purpose for the purpose of verification of Share capital/other capital . Therefore, Assessing Officer need not to examine the issue relating to sale of shops and computation of long term capital gain, which was raised by the Ld. PCIT. Since in the limited scrutiny case, the Assessing Officer has to examine only those issues which are mentioned in the notice of limited scrutiny. If the Assessing Officer wants to examine other items, which are not mentioned in the limited scrutiny notice, then in that circumstances, he has to convert the limited scrutiny into unlimited scrutiny by taking permission from the higher authorities, which the Assessing Officer has not done in the assessee`s case under consideration. Therefore, the issue relating to sale of shops and capital gain thereon and other few issues raised by ld PCIT, which were raised by the Ld. PCIT in his order u/s 263 of the Act, is outside the scope of the examination conducted by the Assessing Officer, hence order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requisite for the exercise of jurisdiction by the Commissioner suo-motu is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1) of the Act. It can be exercised only when an order is erroneous, the section 263 will be attracted. In view of aforesaid factual and legal discussions, in our considered view, the twin condition as required to revise the assessment order is not meet out in the present case, therefore, the order passed by the ld. Pr.CIT is set aside and the grounds of appeal raised by the assessee are allowed. 15. In the result, this appeal of assessee is allowed. 12. Based on the above facts and circumstances, we note that as the case of assessee was selected for limited scrutiny purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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