TaxTMI 
TaxTMI 
2021 (10) TMI 649
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.... Rs. 1,50,000/- which was not an issue for limited scrutiny and otherwise verifiable from the material available on record and the reason for large increase in sundry creditors and direct/ indirect expenses which otherwise was examined by the AO and explained before the Ld. PCIT on which no adverse finding is given. 4. The ld. PCIT has erred on facts and in law in enlarging the scope of limited scrutiny for which the case of assessee was selected by directing the AO not only to consider the issues mentioned by him in the order but also the issues which may subsequently come to his notice during the assessment proceedings u/s 143(3)/ 263 of the Act. 5. The appellant craves to alter, amend and modify any ground of appeal. 6. Necessary cost be awarded to the assessee." 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. The brief facts of the case are that the assessee is engaged in the business of civil contractor. Return of income was filed on 30.09.2015 declaring total income of Rs. 81,53,490/- which was revised at total income of Rs. 1,02,03,490/- on 16.10.2015. The case of assessee was selected f....
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....atch of turnover and TDS credit Ld. CIT has not raised any issue but in respect of sundry creditors he has raised the issue in sec.263 order ignoring that this issue has been thoroughly examined by the AO during the course of assessment proceedings. Thus, on this issue the order of AO cannot be held to be erroneous or prejudicial to the interest of revenue. The PCIT has observed that assessee has not replied on the issues raised in show cause notice u/s 263 dt. 05.02.2020. This is incorrect in as much as all the three issues raised in the show cause notice has been replied by assessee vide letter dt. 02.03.2020 (PB 9-10). It may be noted that in respect of claim of deduction under Chapter VI-A, when this issue is not a subject matter of limited scrutiny, the AO is to confine himself to those issues only as per the CBDT Instruction No.20/2015 dt. 29.12.2015 (PB 13) where it is specifically mentioned that in case of limited scrutiny questionnaire u/s 142(1) 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....
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.... filed declaring total income of Rs. 81,53,490/- thereafter the same was revised at a total income of Rs. 1,02,03,490/- which was accepted by the A.O. Thereafter, the ld. PCIT issued notice u/s 263 of the Act dated 05.02.2020 stating that (i) assessee has claimed deduction under chapter VI-A of Rs. 1,50,000/- but no supporting documents/ evidence is placed on record (ii) assessee has shown large amount of sundry creditors amounting to Rs. 4,59,61,765/- but confirmation and verification was not made during the assessment proceedings (iii) assessee has debited direct expenses of Rs. 13,69,88,804/- and indirect expenses of Rs. 58,41,645/- against total receipt of Rs. 15,31,83,951/- and shown net profit of Rs. 1,03,53,493/- which is not justified/ verified (iv) as per CBDT Instruction No.20/2015 dated 29.12.2015, if the AO notice that there is potential escapement of income exceeding Rs. 5 lacs requiring substantial verification on any other issue, the case may be taken up for complete scrutiny with the approval of PCIT/CIT. However, the AO has not made proper enquiry/investigation on the above issues and therefore, order passed by AO is erroneous and prejudicial to the interest of rev....
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....ues. Accordingly, the order passed by AO is set side with the direction to properly examine all the issues. 9. From perusal of the records, we observed that the case of the assessee was picked up for limited scrutiny to verify the mismatch between contract receipt, sales turnover, tax credit mismatch and increase in sundry creditors. All these four issues were examined by the AO in detail by issuing notice u/s 142(1) of the Act dated 04.01.2017 by raising six queries, which is available at page No. 4 of the assessee's paper book. The assessee explained all these queries and the mismatch between Form 26AS vis-à-vis audited P&L A/c with reference to the turnover/ gross receipt, TDS credit and the turnover reported in audit report as compared with ITR was explained. So far as verification of sundry creditors is concerned the same was explained by filing confirmation of M/s Krishna Infrastructure which is the main sundry creditor of Rs. 4.10 crores out of total sundry creditors of Rs. 4,59,61,765/. The sundry creditors were mainly in respect of outstanding sub-contractor payment and the explanation for increase in sundry creditors vis-à-vis last year was also furnished b....
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.... as compared to the preceding year, therefore, in our view, the order passed by the 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. We draw strength from the decision as relied by the ld AR, in the case of Torrent Pharmaceuticals Ltd. Vs. DCIT (2018) 173 ITD 130 (Ahd.) (Trib.) wherein the Coordinate Bench has observed as under: Even after the insertion of Explanation 2, the Revisional Commissioner is expected to show that the view taken by the AO is wholly unsustainable in law before embarking upon exercise of revisionary powers. The revisional powers cannot be exercised for directing a fuller inquiry to merely find out if the earlier view taken is erroneous particularly when a view was already ....