TaxTMI 
TaxTMI 
2021 (2) TMI 643
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....eturn was filed on 30.09.2015 at total income of Rs. 84,91,160/-. The case of assessee was selected for limited scrutiny for 2 reasons, i.e. (i) large other expenses claimed in the P&L A/c (ii) mismatch of sales turnover reported in the audit report and ITR. In course of assessment proceedings AO verified the various expenses debited to P&L A/c particularly the expenditure claimed under the head discount on CT and MRI test to BPL& others (PBM). Assessee explained the same as per the letter placed at PB 42-43. The AO after considering the same and examining the other expenses made addition of Rs. 20,74,797/- U/s 40A(3) and Rs. 1 lacs out of the various expenses debited to P&L A/c and thus completed the assessment at income of Rs. 1,06,65,957/-. 3. Against the assessment order assessee filed appeal before the Ld. CIT(A) who vide order dated 31.01.2019 in Appeal No.354/18-19 deleted both the additions/ disallowances made by the AO. The Ld. CIT on the basis of audit objection issued notice U/s 263 of the Act as reproduced in his order wherein he observed that AO has (i) not verified the receipt as reflected in Form 26AS (ii) not verified the discount claimed on account of free service....
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....s the same denovo after making necessary examination and verification. 6. In the aforesaid background, it was submitted by the ld. AR that the case of the assessee was picked up for limited scrutiny to verify the large other expenses claimed in the P&L A/c and mismatch of sales turnover reported in audit report and ITR. Both these issues were examined by the AO with reference to books of accounts and bills and vouchers produced before him. It may be noted that the case of assessee was selected for limited scrutiny and as per CBDT Instruction No.20/2015 dated 29.12.2015 it is specifically mentioned that in case of limited scrutiny, questionnaire U/s 142(1) of the Act shall remain confined to specific reasons/ issues for which case has been picked up for scrutiny. Only when the AO notices that there is potential escapement of income exceeding Rs. 5 lacs then the case may be taken for complete scrutiny. However, on verification of the issues taken up for limited scrutiny, AO has not found anything incorrect and therefore, there was no reason for him to ask for complete scrutiny though on verification of the expenditure claimed in the P&L A/c he has made disallowance. Thus, the order ....
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....clared. The reconciliation of such receipt with reference to ledger account of PBM Hospital and CT/ MRI scan receipt was filed. Nothing adverse was found by the PCIT in the same. Hence, on this account the order passed by AO cannot be held to be erroneous or prejudicial to the interest of revenue. The Ld. PCIT has directed the AO to pass the assessment order afresh ignoring that when the case is selected for limited scrutiny the jurisdiction of CIT for holding the order erroneous or prejudicial to the interest of revenue is confined only to the issue of limited scrutiny and not to direct the AO to pass a denovo assessment afresh by raising issues beyond what is permitted in the limited scrutiny. Hence, the direction given by Ld. CIT is also bad in law. 9. It was submitted that the case of assessee was selected for limited scrutiny for the reason of large other expenses claimed in the P&L A/c. The AO has examined the expenses claimed in P&L A/c and made certain disallowances. These disallowances were subject matter of appeal. Thus, the Ld. CIT(A) has power U/s 251 of the Act to enhance the assessment not only on the issues for which disallowance was made by AO but to all expenses d....
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....e and also examined the case records along with written submission filed by the assessee before me. Here it is also mentioned that U/s 263 of the Income Tax act the Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, may, after giving the assessee and opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment for cancelling the assessment and directing as fresh assessment. Accordingly, the records of the assessee were called for an examined with all material available therein for forming an informed opinion in the case. At the outset the AR of the assessee has mentioned in brief the show cause notice as issued by this office and submitted that the AO examined all the issues while completing the assessment order. However, this submission of the AR of the assessee is not acceptable. The AR of the assessee also submitted that the ap....
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....marized as below. 1. The AO has not verified the receipts as reflecting in Form 26AS for the year under consideration as perusal of records show that what the assessee has produced during the hearing of proceedings u/s 263 of the Act were not at all submitted before the AO and the AO has not called for the relevant details pertaining to this issue. 2. The AO has not verified the various discounts claimed as to whether Government of Rajasthan i.e. Rajasthan Mecicare Services. 3. The AO has not verified as to whom free services have been rendered related to MRI and CT scan test in F.Y. 2014-15. 4. The AO has not called for the required documents and has not scrutinized the final accounts presented before him/her. 7. This omission as made by the Assessing Officer resulting in an order which is erroneous as well as prejudicial to the interest of Revenue. It has necessitated the initiation of proceedings under section 263 of the Income Tax Act. This order has been done in a very mechanical way. This action of the AO has resulted in an erroneous passing of assessment order u/s 143(3) of Income Tax Act, 1961 which required high level of care while finalzing assessment order. The....
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....med separately by the assessee in its profit and loss account. Thereafter, we refer to the findings of the ld. Pr.CIT which are contained at para 6 of his order which are again talking about non verification of receipts as reflecting in Form 26AS and non verification of discount claimed by the assessee as well as the connected issue relating to free services related to MRI and CT Scan test. Thereafter at para 8 of his order, the ld. Pr. CIT has held that "the order dated 29.09.2017 is set aside on the issue with the direction to the Assessing Officer to pass the same denovo in the case of the assessee in accordance with law after making the necessary examination and verification regarding the issues under discussion." We therefore, find that the directions by the ld. Pr. CIT to carry out the fresh assessment is limited to the issue mentioned at Para 6 of his order relating to non-verification of receipts, discount claimed by the assessee and related free services provided by the assessee. These issues are clearly subject matter of limited scrutiny and therefore, the contention so advanced by the ld. AR cannot be accepted. 14. The second contention which has been raised by the ld.....
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.... on the part of the Assessing Officer to carry out detail verification and seek details from the assessee regarding such mismatch and only where the Assessing Officer was satisfied with the reconciliation of receipt figures, he should have accepted what has been declared by the assessee in terms of his receipts. Further, merely because the reported receipts are more than what has been reflected in Form 26AS, it cannot be presumed that what has been reflected in Form 26AS has been included in the receipts as the question is not about the sum total of receipts rather the question is about the particular receipts pertaining to the financial year which are reflected in the Form 26AS are reported to tax or not. We find that it is only during the course of revisionary proceedings that such reconciliation has been submitted by the assessee for the first time and given the fact that the Assessing Officer has not examined the same, the ld. Pr. CIT has remitted the matter to the Assessing Officer for necessary verification. It is therefore, a case of complete lack of enquiry on the part of the Assessing Officer of the issue in respect of which the case has been selected for limited scrutiny ....
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...., the ld. Pr. CIT has remitted the matter to the Assessing Officer for necessary verification. It is again a case of no enquiry to our mind and not just lack of enquiry, therefore, there is no infirmity in the findings of the ld. Pr. CIT that the AO has not verified the various discounts claimed as to whether discounts of the claimed as per contract with Rajasthan Medicare Relief Society and to whom free service has been rendered relating to MRI and CT scan and how the same has been accounted for in the profit and loss account. In this regard, useful reference can be drawn to observations of the Coordinate Bench in case of Subhlakshmi Vanijya (P.) Ltd. vs Commissioner of Income-tax-I, Kolkata, reported in 60 taxmann.com 60 (Kolkata - Trib.) wherein it was held under: "It is imperative for the Assessing Officer to conduct enquiry to satisfy himself about the genuineness of transactions. Scope of the term 'enquiry' can be diverse in different circumstances. There cannot be straight jacket formula to positively conclude as to conducting or non-conducting of 'enquiry' by the Assessing Officer. It depends on the facts and circumstances of each case. Where the facts....