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2021 (9) TMI 461
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.... c] Mismatch in amount paid to related person u/s 40A(2)(b) reported in audit report & ITR. 3. During the assessment proceedings, the AO had raised the queries in respect of issues for which the case of assessee was selected for scrutiny. The assessee had furnished the explanation and documentary evidences as required by the AO and the AO after due verification of issues from the documentary evidences and supporting judgments and CBDT circulars had passed the assessment order in a judicial manner. 4. It was submitted that the ld PCIT thereafter had issued a notice u/s 263 of the Act on two issues namely, deduction claim u/s 80IA and excess claim of depreciation on construction of road (As per BOT agreement). During the revision proceedings, the assessee had explained that its case was selected for limited scrutiny on the issues as mentioned above. Therefore the issue of deduction claimed u/s 80IA of the Act is beyond the jurisdiction of PCIT u/s 263 of the Act. Further the depreciation (amortization) claimed on road construction as per the CBDT circular No. 9/2014 dated 23/04/2014 and these facts were duly verified by the ld AO during the assessment proceedings. The ld ....
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....nciliation statement of the claim of amortization on construction of roads under BOT agreements in the audit report and in the reply filed before ld AO is as follows: As per reply dated 27/11/2017 before ld. AO 4,01,84,929 As per Audit report: 1. Laxmangarh- Salasar Road 1,39,79,176 2. Sriganganagar- Padampur Road 2,62,05,753 4,01,84,929 8. It was submitted that the assessee in response to the notice issued by ld AO u/s 142(1) had brought on record that the assessee company was incorporated on 12/06/2013 i.e. in AY 2014-15 and the assessee has claimed amortization in AY 2014-15 & AY 2015-16 as per the CBDT circular No. 9/2014 dated 23/04/2014. It was submitted that the claim made by the assessee was duly certified by C.A. and was in accordance with the circular and decisions of Honorable Court. It was accordingly submitted that the observations of ld PCIT that "As per CBDT circular No. 09/2014 dated 23.04.2014, depreciation is to be allowed to the assessee engaged in developing of road and highways in BOT agreements on the basis of provisions of section 32(1)(ii) of the Act." is clearly arb....
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....r its entire business. Apart from this, in column No. 13 of the Form l0CCB, the assessee has claimed to have attached agreement as required under Rule 18BBB, but no such agreement was filed during the course of assessment proceedings or called for by the AO. The AO has failed to verify the claim of the assessee viz-a-viz the conditions laid down in Income-ax Act and in Income-tax Rules as mentioned above. The AO was therefore rightly directed by ld PCIT to examine the claim of the assessee as per the conditions laid down u/s 80IA read with Rule 18BBB and Rule 18BBE of the Income-tax Rules. 13. It was submitted that as per depreciation and amortization chart of the audit report, the assessee has claimed the value of Padampur Toll road at Rs. 15,32,47,295/- as on 05.09.2012, written down value of which was shown at Rs. 15,20,30,334/- on 31.03.2014. The assessee has claimed depreciation and amortization at the rate of 9.12% on this Toll Road which comes to Rs. 1,39,79,176/- in the P & L account,. Similarly, the assessee has shown the value of Salasar Toll Road at Rs. 10,68,69,665/- as on 09.08.2012, WDV of which as on 31.03.2014 was shown at Rs. 8,58,54,355/-. In the year under ref....
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..... We had an occasion to examine the jurisdiction of the ld PCIT u/s 263 in case of matters initially selected for limited scrutiny in case of M/s Mahendra Singh Dhankhar, HUF vs. ACIT (supra) and it would be relevant to reproduce our findings therein as the same are equally relevant in the context of the contentions advanced by the ld AR in the present case. In the said case, we have held as under: "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 issue is also required then the case may be taken up for comprehensive scrutiny with the approval of the Pr.CIT/DIT concerned. It is also instructed that such an approval shall be accorded by the Pr.CIT/DIT in writing after being satisfied about the merits o....
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.... 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 section 263 of the Act are applicable. For the purposes of converting limited scrutiny to complete scrutiny, what is relevant is that there must be some credible material or information on face of the record and basis review thereof during t....
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....aforesaid decision, we have held that the 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 and the AO is duty bound to follow the said instructions. It was further held in the said case that 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. Further, we have held in the said case that where there is material on record pointing towards potential escapement of income and which has escaped the attention of the AO during limited scrutiny asse....
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....e instant case, the assessee has claimed depreciation and amortization at higher rate. In respect of such claim, no detail/explanation was offered by the assessee during the course of the assessment proceedings and the AO also did not verify the claim of depreciation as per the provisions of Section 32(1)(ii) and allowed the same as claimed by the assessee. Per contra, the contention advanced by the assessee is that it has claimed amortization of the cost incurred in construction/development of these two stretches of the highways evenly over the period of concessionaire agreement in accordance with the CBDT circular no. 9/2014 dated 23.04.2014 and the matter was enquired and duly examined by the Assessing officer. 19. We therefore find that contentions advanced by both the parties as to the claim of amortization is guided by CBDT circular no. 9/2014 dated 23.04.2014 and it would therefore be appropriate to refer to the contents of the said circular as under: "It has come to the notice of the Board that disputes have arisen as to whether the expenditure incurred on development and construction of infrastructural facilities like roads/highways on Build-Operate-Transfer (`....
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....cannot therefore be treated as an owner of the property, either wholly or partly, for purposes of allowability of depreciation under section 32(1)(ii) of the Act. Thus present provisions of the Act do not allow claim of depreciation on Toll ways due to non fulfillment of ownership criteria in such cases. 4. There is no doubt that where the assessee incurs expenditure on a project for development of roads/highways, he is entitled to recover cost incurred by him towards development of such facility (comprising of construction cost and other pre-operative expenses) during the construction period. Further, expenditure incurred by the assessee on such BOT projects brings to it an enduring benefit in the form of right to collect the toll during the period of the agreement. Hon'ble Supreme Court in the case of Madras Industrial Investment Corp Ltd 225 ITR 802 (SC) allowed spreading over of liability over a number of years on the ground that there was continuing benefit to the company over a period. Therefore, analogously, expenditure incurred on an infrastructure project for development of roads/highways under BOT agreement may be treated as having been made/incurred for the ....