TaxTMI 
TaxTMI 
2019 (12) TMI 973
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....740. Subsequently, however, the Pd. Commissioner required the assessee to show cause as to why the said assessment not be subjected to revision proceedings under section 263 for the following reasons: " .It was found that assessee has shown profit @ 3.24% on total turnover, which is too low. The AO asked the assessee to produce the documentary evidence related to the business of the assessee like bills & voucher and details & documents of sale of flats etc., but the assessee failed to submit the same before the AO during the scrutiny proceedings. As the reason for CASS is real estate business with high closing stock', the information about estimated cost of construction of the project, estimated sale value of the project, selling price of individual flats, period of construction etc. should have been examined before completion of scrutiny assessment. But, due to non-submission of the required details by the assessee, the AO estimated the profit @ 4.24% instead of 3.24% as shown by the assessee and completed the scrutiny assessment. But, the reason for the selection of scrutiny was '(a) Real estate business with high closing stock (verify whether assessee has adopte....
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....e assessee has shown to have received advance of Rs. 2,58,08,000/- from customers but the AO has not verified in detail about the genuineness and creditworthiness of the parties and there is mismatch in sales turnover reported in audit report and return of income filed by the assessee, which leads to difference of Rs. 18,00,000/-. Hence, the Pr. CIT observed that these aspects should have been examined by the AO before completion of the assessment by calling relevant details/documents. The Pr. CIT accordingly exercised his powers u/s.263 of the Act and set aside the assessment order dated 21.3.2017 to the file AO with the following directions: "(i) The AO is required to verify the net sales of flats shown at Rs. 2,49,60,000/- in the P&L account by calling for the details of the parties / persons from whom the assessee claims to have received sale proceeds of flats during the previous year relevant to the assessment year 2015-16. (ii) The AO is also required to verify the genuineness and correctness of the amount of Rs. 2,58,08,000/- claimed to have been shown in the Balance Sheet as advance received from customers. (iii) The AO is further required to veri....
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....ngoing project and to calculate the profit on percentage basis every year on turnover. Ld counsel also submitted that from the copy of said letter available at page 51 of paper book, it is discernible that the assessee has clearly stated that it has estimated profit @ 3.24% of the total turnover. As most of the inventory has not been sold during the relevant financial period, it is lying at close stock. Therefore, the work-inprogress as on 31.3.2015 was on little higher side. 8. Ld counsel for the assessee further pointed out that from order sheet dated 14.1.2019 of the Assessing Officer i.e. ACIT, Sambalpur, it is clear that the Assessing officer sent a proposal for initiation of proceedings u/s.263 of the Act alonwtih draft notice u/s.263 of the Act and ld PCIT has never applied his mind to the assessment records and notice u/s.263 of the Act dated 14.1.2019 on which proceedings were initiated and notice was issued by the AO who is not competent to do such exercise. Ld A.R. submitted that Pr. CIT has simply approved the proposal and draft notice putfoward by the AO prior to initiation of proceedings u/s.263 of the Act. Thus, there is no application of mind by the Pr. CIT befor....
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....tial escapement of income above a prescribed money limit, then he has to take permission of Pr. CIT/CIT/Pr. DIT/DIT to convert the ' limited scrutiny' case into ' complete scrutiny' case and to assume valid jurisdiction to prepare the limited scrutiny as complete scrutiny, otherwise, the AO cannot travel beyond the points for which the case has been selected for complete scrutiny. Ld counsel reiterated that the case was selected for limited scrutiny on two points only for which the AO has issued notice u/s.143(2) and 142(1) of the Act, which has been placed at paper book pages 46 & 47 and the AO also issued notice u/s.143(2), copy of which has been placed at page 45 of PB. Ld counsel also drew our attention towards earlier Board Instruction No.20/2015 dated 29.12.2015 and submitted that the questionnaire u/s.142(1) of the Act for the limited scrutiny case shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Ld A.R. drew our attention towards order of ITAT Chandigarh Bench in the case of Shri Vijay Kumar vs ITO in ITA No.434/Chd/2019 A.Y. 2014-15 order dated 12.9.2019 and another order of Delhi Bench of the Tribunal in the case of....
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....with questionnaire has made detailed enquiry which were complied by the assessee during the assessment proceedings. Ld counsel also drew our attention towards the impugned assessment order dated 21.3.2017 passed u/s./143(3) of the Act and submitted that the AO after issuing notice and taking on record the assessee's reply has dealt the issues in the assessment order regardding mismatch in sales turnover reported in audit report and ITR has been discussed and verified and the plea of the assessee has been accepted that the assessee is following percentage completion method resulting into higher closing stock. Ld counsel submitted that both the points have been properly enquired , examined, verified and thereafter the AO has passed the limited scrutiny assessment order and, therefore, such assessment order cannot be tagged as erroneous and prejudicial to the interest of the revenue and in this situation, ld Pr. CIT is not allowed to invoke revisional proceedings u/s.263 of the Act for tinkering the limited scrutiny assessment order. 12. Ld counsel for the assessee also drew our attention towards operating paras 10 & 11 of the impugned order and submitted that the issue of mismatch....
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....the assessment year 2015-16 was selected for limited scrutiny on two points i.e. (i) real estimate business with high closing stock (verify whether assessee has adopted percentage completion method) and (ii) mismatch in sales turnover reported in audit report and ITR. 16. It is also not in dispute that during the course of assessment proceedings, the AO issued notice u/s.143(2) and 142(1) of the Act alongwith questionnaire to the assessee both on 1.8.2016, which were duly served and complied by the assessee by way of filing replies on 19.8.2016, 30.11.2016, 19.1.2017 and 20.3.2017. From the replies of the assessee placed at assessee's paper book at pages 50-51, it is clearly discernible that the assessee explained that in its profit and loss account, the total turnover has been shown at Rs. 2,31,60,000/- and the same figure has been reflected in the tax audit report in Cl.40 of Form 3CD under the head P&L, the total turnover has been shown as same figure and, therefore, there is no mismatch in the sale turnover shown in the tax audit report and profit and loss account filed alongwith the return of income. From the reply dated 19.1.2017, we clearly note that the assessee submitte....
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....ver which is too low. Ld ACIT further noted that the AO asked the assessee to produce the documentary evidences related to the business of the assessee like bills & vouchers and details & documents of sale of flats etc but the assessee failed to submit the same before the AO during the scrutiny assessment. The ACIT further stated that as the reason for CASS is real estate business with high closing stock, the information about estimated cost of construction of the project, estimated sale value of the project, selling price of individual flats, period of construction etc should have been examined before completion of scrutiny assessment. But due to non-submission of the required details by the assessee, the AO estimated net profit @ 4.24% instead of 3.24% as declared by the assessee and completed the scrutiny assessment. In para 3.4 of the said note sheet, ld ACIT noted that in the interest of revenue, as proposed by the ld JCIT, Range-2, Sambalpur, revision u/s.263 may be initiated before 31.3.2019. With these observations, the ld ACIT sent draft notice u/s.263 of the Act to Pr. CIT, Sambalpur. The ld. Pr. CIT has approved the proposal given by ld ACIT on the same date i.e. 14.1....
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....oposal to Ld. PCIT alongwith draft notice u/s.263 which was approved by ld PCIT in a manner in which administrative actions are proved. Hence, we are compelled to hold that the initiation of revisional proceedings, issue of notice has been done on the proposal of JCIT, Range-2, Sambalpur through ACIT, Sambalpur and mandate of procedure as provided in section 263 of the Act has not been followed and on this count, the impugned order u/s.263 of the Act also become unsustainable. While taking this view, we respectfully follow the order of ITAT Kolkata in the case of Manish Chirania order of Pune Bench of ITAT in the case of Span Overseas Ltd and order ITAT Mumbai 'F' Bench in the case of Vinay Pratap Thacker (supra). 21. On the above foregoing discussion, we reach to a logical conclusion that the ld JCIT Range-2, Sambalpur prepared a proposal for revisional proceedings u/s.263 and ld ACIT, Sambalpur in the order sheet dated 14.1.2019 created an explanation from the AO that the AO should have asked the assessee produce documentary evidence related to its business like bills and vouchers, details of documents of sale of flats but the assessee failed to submit the same before the AO d....