2022 (4) TMI 458 - AT - Income Tax

Appeal Allowed: Exceeded Jurisdiction in Fresh Assessment Beyond Limited Scrutiny

Sri Venu Gopala Primary Agricultural Co-operative Credit Society Ltd. Versus Income Tax Officer, Ward-1, Tadepalligudem

The Tribunal allowed the appeal, holding that the Principal Commissioner of Income Tax exceeded jurisdiction by directing a fresh assessment on issues ... Revision u/s 263 - CIT disallowing the deduction u/s 80P - case of the assessee was selected for limited scrutiny under CASS for the reason to verify whether the cash deposit has been made from disclosed sources - HELD THAT:- We find merit in the arguments of the Ld. AR that where the case was selected for a limited scrutiny, the Instruction of the CBDT No. 20/2015, dated 29/12/2015 (supra) has been rightly following by the Ld. Assessing Officer by limiting the assessment proceedings to the limited issue as generated by the CASS. The Coordinate Bench of the Mumbai Tribunal in the case of M/s. Su-Raj Diamond Dealers Pvt Ltd vs. CIT [2019 (12) TMI 26 - ITAT MUMBAI] has quashed the order passed U/s. 263 of the Act in the case of limited scrutiny assessment, holding that the Ld. Pr. CIT under the garb of section 263 of the Act, cannot exceed his jurisdiction. Admittedly, the case of the assessee was selected for limited scrutiny under CASS for the reason to verify whether the cash deposit has been made from disclosed sources. However, the Ld. Pr. CIT by exercising his jurisdiction u/s. 263 of the Act, directed the Ld. AO to make a fresh assessment on the issues which were not the subject matter of the limited scrutiny. Considering all since the issue raised by the assessee in the present case has already been decided in favour of the assessee by various Benches of the Tribunal as discussed above, we find merit in the arguments of the Ld. AR that the Ld. Pr. CIT has exceeded his jurisdiction U/s. 263 of the Act by directing the Ld. AO to make a fresh assessment on the issues which were not the subject matter of the assessment framed on the basis of the limited scrutiny. However, no contrary decision was brought to our notice by the Ld. DR. Hence, respectfully following the decisions of the Tribunal in the foregoing paragraphs, we allow the appeal of the assessee and set-aside the order of the Ld. Pr. CIT passed U/s. 263 - Appeal of assessee allowed. Issues:Challenge to order u/s 263 disallowing deduction claimed U/s 80P of the Act.Analysis:The appeal was filed against the order u/s 263 of the Income Tax Act, 1961. The assessee, a Primary Agricultural Cooperative Credit Society, engaged in various activities, including selling fertilizers, diesel, and granting loans. The case was selected for limited scrutiny to examine cash deposits from disclosed sources. The Ld. AO finalized the assessment, accepting the income returned by the assessee. However, the Ld. Pr. CIT disallowed the deduction claimed U/s. 80P of the Act, stating that certain activities were not core to the assessee's business. The Ld. Pr. CIT directed a fresh assessment. The assessee raised several grounds of appeal challenging the jurisdiction and decision of the Ld. Pr. CIT.The Ld. AR argued that the Ld. Pr. CIT exceeded his powers by disallowing the deduction u/s 80P, which was not part of the limited scrutiny. The Ld. AR contended that the Ld. AO followed CBDT Instruction No. 20/2015 in limiting the assessment to the issues under scrutiny. The Ld. DR supported the Ld. Pr. CIT's order, stating that the Ld. AO did not address the issues highlighted by the Ld. Pr. CIT.The Tribunal analyzed previous judgments and held that in cases of limited scrutiny assessments, the jurisdiction of the Ld. Pr. CIT under section 263 cannot exceed the scope of the assessment. Citing precedents, the Tribunal found that the Ld. Pr. CIT had wrongly assumed jurisdiction u/s 263 in this case. The Tribunal noted that the Ld. Pr. CIT directed a fresh assessment on issues beyond the limited scrutiny, contrary to the purpose of the initial assessment. As no contrary decision was presented, the Tribunal allowed the appeal, setting aside the order of the Ld. Pr. CIT u/s 263.In conclusion, the Tribunal allowed the appeal, finding that the Ld. Pr. CIT had exceeded his jurisdiction by directing a fresh assessment on issues not part of the limited scrutiny. The Tribunal's decision was based on established legal principles and precedents, ultimately setting aside the order u/s 263 of the Act.