2023 (1) TMI 683 - AT - Income Tax

Tribunal quashes tax revision exceeding scrutiny scope, cites need for credible material. Decision favors appellant.

Subbunadar Chandra Sekar Versus ITO Corporate Ward-6 (3), Chennai.

Subbunadar Chandra Sekar Versus ITO Corporate Ward-6 (3), Chennai. - TMI Issues:Challenge to validity of revisional jurisdiction u/s 263 by Principal Commissioner of Income Tax against assessment framed by Assessing Officer under section 143(3) for AY 2016-17.Detailed Analysis:1. Validity of Revisional Jurisdiction: The appellant challenged the revisional jurisdiction exercised by the Principal Commissioner of Income Tax (Pr.CIT) under section 263. The appellant contended that the order of the Pr.CIT was without jurisdiction, contrary to law, and opposed to principles of equity and natural justice. The appellant argued that there was no error or prejudice to warrant the invocation of powers under section 263. Additionally, the appellant asserted that the case was taken up for limited scrutiny to examine Capital Gain/Loss, and the Assessing Officer (AO) could only examine specific issues under limited scrutiny. The Pr.CIT directed the AO to examine issues beyond the scope of limited scrutiny, such as cash deposits and agricultural income, which the AO could not have examined under limited scrutiny.2. Delay Condonation and Admittance of Appeal: The Registry noted a delay of 212 days in the appeal, which was condoned due to the lockdown situation caused by the Covid-19 pandemic. The appeal was admitted for adjudication on merits.3. Arguments and Submissions: The appellant's representative argued that the case was selected for limited scrutiny to examine capital gains/losses. The AO had made additions based on this examination. The appellant cited CBDT Instruction to support the contention that issues beyond limited scrutiny required credible material or information from external agencies. The CIT-DR, however, argued that the revision was justified as cash deposits were linked to capital gains. The Tribunal considered these submissions for adjudication.4. Examination of Limited Scrutiny Issues: The AO conducted limited scrutiny to verify the genuineness of capital gains/losses, as per the CASS cycle. The issues under limited scrutiny were examined, and additions were made accordingly. However, the Pr.CIT found the order erroneous due to unverified cash deposits and agricultural income. The Pr.CIT directed the AO to consider these issues, leading to the appeal.5. Legal Framework and Tribunal Decision: The Tribunal referred to CBDT Instructions for limited scrutiny cases under CASS cycles 2017 and 2018. It highlighted that expanding the scope of limited scrutiny required credible material or information from external agencies. In the absence of such material, the Pr.CIT could not term the assessment order as erroneous or prejudicial to revenue. The Tribunal cited a recent decision where it was held that the Pr.CIT exceeded jurisdiction by revising issues beyond the scope of limited scrutiny. The Tribunal quashed the revision order, citing similar decisions from other Tribunals.6. Conclusion: Based on the legal framework and precedents, the Tribunal found that the revision of the order could not be upheld. The appeal of the assessee was allowed by quashing the revision order, as it exceeded the scope of limited scrutiny. The decision was in favor of the appellant, and the appeal was allowed accordingly.This detailed analysis covers the various aspects of the legal judgment, including challenges to revisional jurisdiction, examination of limited scrutiny issues, legal framework, and the Tribunal's decision based on precedents and relevant instructions.