TaxTMI 
TaxTMI 
2021 (7) TMI 90
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.... Pr. CIT has ignored the 'True and fair approach, the 'Principles of the natural justice' and the 'Tax neutrality. 4. That under the facts and circumstances, the assessee has rightly assessed the value of the WIP and has rightly assessed the Agriculture income." 2. At the outset, the ld AR submitted that there has been a delay in filing the present appeal. It was submitted that the due date of filing of the present appeal was 25/04/2020, however, due to 'Covid-19' pandemic, a national lockdown was declared by the Government w.e.f. 22/03/2020 as a result of which the appeal could not be filed within due date. It was submitted that the lockdown may be treated as sufficient cause as no postal services, offices and transport were allowed to operate by the Government and even the courts have held that the period of lockdown may be excluded for determining the limitation period and the delay in filing the appeal may be condoned and the appeal be heard on merits. The DR was heard who didn't raise any specific objection. After hearing both the parties and considering the facts of the case, we find that the assessee was prevented by sufficient cause in fi....
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....f Income. 6. It was submitted that the issues under consideration were considered by the A.O vide the notice u/s 142(1) dated 08/06/2017 on point no. 6,7 and 8 of the notice and was duly replied by the assessee. The A.O. also provided AIR and CIB data during the course of hearing in order to let assessee know reasons of mismatch in AIR and CIB data. All the issues were relating to value of sale deeds executed and their mismatch with regard to the ITR, Audit report, CIB and AIR data. On perusal of all the sale deeds, the A.O. noticed certain wrong calculation of LTCG and made an addition of 3,83,990/-. As it was the case of the 'Limited Scrutiny' and all the reasons for the scrutiny were dealt by the A.O., the order passed by the A.O. is neither erroneous nor prejudicial to the revenue and hence notice u/s 263 of the Act cannot be issued and order so passed is bad in law. 7. Referring to CBDT instructions no. 7/2014 dated 26.09.2014 and subsequent instructions issued thereafter, it was submitted that point 3 and 4 of said instructions clearly states that A.O. jurisdiction is only confined to reasons mentioned in the AST. During the course of assessment proceedings i.e. expa....
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....O., the order passed u/s 143(3) is not erroneous and revision u/s 263(1) is totally uncalled for. 10. It was further submitted that the reasons that the valuation of the Closing WIP and ascertainment of Taxable income is part of the reasons listed for limited scrutiny as alleged by the ld PCIT is not correct. The 'Sales Turnover' in the case of real estate business is determined through the executed Sale Deeds and has nothing to do with the Closing Stock of WIP. In his order, the ld PCIT has not made any conclusive findings that how the ascertainment of correct taxable income and Closing stock of the WIP is one of the reasons mentioned in the CASS and hence, the order so passed is a non-speaking order and must be quashed. 11. It was further submitted that during the year under consideration, the cost incurred till date was debited in the Books of Accounts. The Project was completed till 15th September,2015. The assessee has adopted 'Percentage of Completion method'. As per the method, the Probable cost of the project is accounted while arriving at the profit. However, as the project was complete before finalizing the audit, the actual cost figures were available and such a....
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....3 lakhs. The assessee along with his brother receive a part of agriculture income from the HUF of her mother, which is exempt from tax as her mother has no other income and receives only agriculture income. So, the agricultural income is taken in the capital account and not in the computation of Income. 15. Per contra, the ld. CIT/DR submitted that in view of para 4 of the instruction issued by the CBDT, if there is potential escapement of income above Rs. 5 Lac, the AO is required to convert the limited scrutiny case into a comprehensive scrutiny case after taking the prior approval of ld. PCIT and if the AO does not get the limited scrutiny case converted to comprehensive scrutiny case, the assessment order becomes erroneous as it is prejudicial to the interest of Revenue and provisions of section 263 of the Act are applicable. In support, reliance was placed on order dated 08.11.2019 of Cochin Benches of the Tribunal in the case of M/s Baby Memorial Hospital Ltd vs ACIT (in ITA No.420/Coch/2019). Further, ld CIT/DR relied on the finding of the ld PCIT and our reference was drawn to the findings of the ld. PCIT which are contained at para 5 to 8 of the impugned order which rea....
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....s crucial issue which is the basic issue for examination at the time of scrutiny assessment was not examined by the assessee. Books of accounts are produced for the verification by the AO. However, no examination of books of accounts was carried out during the assessment proceedings. One of the reasons of limited scrutiny was mismatch in sales turnover reported in audit report and 1TR. Sales turnover is the only factor which determine the closing stock of WIP. This issue of closing stock of WIP was not examined and order was passed without application of mind. Since the issues of limited scrutiny were not examined during the assessment proceedings and order has been passed mechanically, the issues raised by the AR are not correct and hence not accepted. 6. While holding so, AO failed to take note of various facts which were available on record. Some of the relevant facts relating to the issue in hand are summarized as below. 1. The assessee sold 14 units comprising therein area of 19965.9 sq. ft. 2. Total salable area as per audit report is 90358.05 sq. ft. 3. Cost of construction and WIP as debited in Trading account is 9,77,74....
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....he case of the assessee was selected for limited scrutiny under CASS on account of mismatch of sales turnover as reported in audit report, ITR, AIR and CIB data. The A.O. issued notice u/s 143(2) of the Act and enquired about the issues under consideration and in response, the assessee submitted copies of the sale deeds executed during the year under consideration and also submitted reconciliation of sales turnover with financials, ITR, AIR and CIB data which is also placed on record before us. Being satisfied, the AO completed the assessment u/s 143(3) without any adverse finding regarding the issues for which the matter was selected for limited scrutiny. 17. There is no dispute that scope of enquiry in case of limited scrutiny is only to the extent of the issues for which case was selected for scrutiny under CASS. The CBDT has issued instructions from time to time in this respect and has specifically instructed the taxing authorities that scope of enquiry should be limited to verification of all the particulars for which limited scrutiny was taken up under CASS. However, in case during the assessment proceeding if the AO is of the view that substantial verification of other....
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....lowing said procedure and necessary approval of the competent authority conducting an enquiry on the issue which is outside the limited scrutiny would be beyond the jurisdiction of the AO. As a necessary corollary, the Pr. CIT u/s 263 cannot be permitted to traverse beyond the jurisdiction that was vested with the A.O while framing the assessment as what cannot be done directly cannot be done indirectly. Therefore, where the matter was selected for limited scrutiny, revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was originally vested with the A.O while framing the assessment as also held consistently by various Benches of the Tribunal as referred supra. 19. A contention which has been raised by the ld CIT/DR is that where there is a potential escapement of income, the AO is required to convert the limited scrutiny case into a comprehensive scrutiny case after taking the prior approval of ld. PCIT and if the AO does not get the limited scrutiny case converted to comprehensive scrutiny case even though there are material on record, the assessment order becomes erroneous as it is prejudicial to the interest of Revenue and provisions of sec....
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....d. PCIT invoking jurisdiction u/s 263 of the Act. As we have discussed earlier, the revisional jurisdiction u/s 263 cannot be exercised for broadening the scope of jurisdiction that was originally vested with the A.O for limited scrutiny while framing the assessment and enlarging his scope of limited enquiry. 20. The decision in case of Baby Memorial Hospital (supra) is distinguishable as in that case, the assessee itself had agreed that PCIT is justified in giving direction to work MAT income after adding back the provision for doubtful debts and basis such concession on part of the assessee, the Tribunal has held that the argument of the assessee that in case of limited scrutiny, the PCIT could not exercise jurisdiction u/s 263 is devoid of merit. Therefore, the said decision doesn't support the case of the Revenue. 21. Now, coming back to reasoning adopted by the ld PCIT to invoke his jurisdiction u/s 263 in the instant case. As per ld PCIT, the reason for which the matter was selected for limited scrutiny i.e, mis-match of the sales turnover vis-à-vis ITR, CIB & AIR has a direct bearing on opening and closing stock of cost of construction and W.I.P and in turn, on ....