TaxTMI 
TaxTMI 
2023 (1) TMI 121
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....der by setting aside the assessment without appreciation of the submission of the assessee, without appreciating the details furnished and also without stating why the submission is not acceptable. Therefore the order u/s 263 is an unreasoned order and liable to be quashed. 4. For that Ld. Pr. CIT erred passing an order u/s 263 of the IT Act without' rejecting the documents furnished or recording it to be irrelevant or lacking their probative worth. Therefore the order u/s 263 is not valid and liable to be set aside. 5. For that Ld. A.O erred in not appreciating the evidences available on record and evidence furnished in course of 263 proceeding. Therefore the present order passed without appreciating the materials evidences available on record is perverse and liable to be quashed. 6. For that Ld. A.O erred in setting aside the assessment order without stating the manner in which the order of A.O is erroneous and prejudicial to the interest of revenue and what is the basis of such conclusion. Therefore the order u/s 263 an unreasoned order and is not sustainable and liable to be quashed. 7. For that the order of CIT is contrary to CBDT instru....
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....her the ld. AR reiterated his submissions as were placed in the statement of facts filed along with the grounds of appeal before the Tribunal, which reads as under :- 1. That the Assessee is Trust and the main activities of the Trust are Running Hospital and Educational Institutions. The assessee trust is registered u/s 12AA of the Income tax Act. For the financial year 2016-17 relevant to the Assessment year 2017-18 the assessee filed its return of income and other statutory forms electronically and claimed deductions and exemptions allowable under IT Act. 2. That the Assessee case was selected for limited scrutiny under CASS. By issue of Notice u/s 143(2) the assessee was intimated about the issues identified for examination. The issues identified for examinations under limited scrutiny are as under. 1. Depreciation claim 11. Refund claim 111. Cash deposit during demonetization period. 3. That thereafter by issue of Notice u/s 142(1) Ld. Assessing officer called for evidences I information in connection with the issues identified for examination. In compliance to the said notice the assessee submitted relevant Books of account....
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....tails of Amount paid to specified persons vi. Copies of certificate of registrations vii. Copies of the trust deed & Bye-Iaw has verified all these issues in course of assessment. It is evident from the Notice issued u/s 142(1) of the IT Act as well as from the assessment order itself. Copies of the Notice u/s 142(1) and assessment order u/s143(2) furnished before Ld. CIT for verification. 7. That it is also the settled principles of law that jurisdiction u/s 263 can't be exercised on issues which are not subject matter of consideration while passing assessment order u/s 143(3) of the IT Act. Since the present issues were not subject matter of consideration and there is a stipulation on the A.O that he can't travel beyond the issues for which the case was selected for scrutiny, either by not verifying or after verification of these issues not mentioning in the assessment order no error is committed by the A.O to treat the assessment erroneous. Therefore under these facts and circumstances the present assessment can never be erroneous for exercising jurisdiction u/s 263 of the IT Act. 8. That there are two conditions precedent to ....
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....gencies and the turn over of the Assesse trust allowed the expenditure claimed under the head Puja expenses. Further in comparison to the turnover of the asses se the expenses in terms of puja expenses is only 0.03 percent of the turnover and it is very negligible. Ld. Assessing officer taking into consideration the nature of activities carried on by the assesse, exigencies of puja expenses for such activities and evidences furnished in support of the expenditure allowed the claim. While allowing the claim of the assesse in the opinion of Assessing officer it was just and proper. 11. That the assesse runs its hospital and educational institutions within the territorial jurisdiction of Bhubaneswar Municipal corporation. The Buildings in which all the activities are carried on spread over an area of 2050820 Sqft. and on the basis of the assessment of Bhubaneswar Municipal corporation, the assesse has paid the Holding tax. The holding tax is a statutory due and it has been paid on the basis of the assessment made by a statutory body. Further the payment has been made through Bank against valid receipts issued by Bhubaneswar Municipal corporation. The in support of such expend....
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.... issue involved in the present appeal of the assessee has already been settled by this Bench of the Tribunal in the case of M/s Shark Mines & Minerals Pvt. Ltd., passed in ITA No.128/CTK/2019, order dated 18.08.2022, wherein the Tribunal in para 10 has held that, once such fetters are placed on the AO in respect of limited scrutiny, the AO is barred from looking into any other issues other than those issues which are the subject matter in the limited scrutiny. Accordingly, ld. AR submitted that the order passed by the ld. Pr.CIT deserves to be quashed. 7. On the other hand, ld. CIT-DR relied on the order of the ld. Pr.CIT and submitted that the AO should have converted the limited assessment in this case to a complete scrutiny assessment by taking approval/permission from the Pr.CIT/DIT concerned. This inaction on the part of the AO has made the assessment order erroneous and prejudicial to the interest of revenue. Further the ld. CIT-DR has filed his written submissions which reads as under :- This is an assessee's appeal against the order of CIT(Exemptions), Hyderabad u/s.263 of the Act. The gist of the assessee's arguments is that the case was selected under ....
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....e wrong claims made by the assessee. The Assessing Officer cannot remain passive in the face of a claim, which calls for further enquiry to know the genuineness of it. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also those produced by the assessee before him. The Assessing Officer was statutorily required to make the assessment under Section 143(3) after scrutiny and not in a summary manner as contemplated by Sub-section (1) of Section 143. The Assessing Officer is therefore, required to act fairly while accepting or rejecting the claim of the assessee in cases of scrutiny assessments. The Assessing Officer should protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return. The order passed by the Assessing Officer becomes erroneous when an enquiry has not b....
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....he 'limited scrutiny assessment' into a 'complete scrutiny assessment'. If there is no escapement of income, which would have been more than Rs.I0 lakhs, the Pr. CIT could not exercise jurisdiction u/s, 263 of the LT. Act. In the present case, the assessee itself agreed that the Pr. CIT is justified in giving direction to rework MAT income after adding back the provision for doubtful debts. Now, the argument of the Ld. AR that in case of limited scrutiny assessment, the Pr. CIT could not exercise jurisdiction u/s, 263 of the Act, is devoid of merit. Accordingly, the ground relating to challenging of the exercise of jurisdiction by the Pr. CIT u/s, 263 is rejected". ii.) The Hon'ble Cuttack IT AT in the case of Sushant Kumar Chaudhry in ITA No.226/CTK/20I9 has decided the issue in favour of the Revenue by holding in para-I I as under: 11. In our opinion, the contention of Id. AR regarding revisionary power exercised by the Pr.CIT in case of limited scrutiny, is not accepted on the basis of recent decision of the coordinate bench of the Tribunal in case of Baby Memorial Hospital Ltd. (supra). If there is an escapement of income or potentiality of....
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.... provisions of Section 263 of the Act, it is clear that any order passed by the AO, the Pr.CIT/CIT can invoke his revisonary power, if he considers that the order passed by the AO is erroneous and prejudicial to the interest of Revenue within the Section 263 of the Act. The CBDT has issued circular regarding limited scrutiny in which there is no any whisper regarding revisonary powers that the Pr.CIT/CIT cannot exercise within the statutory limit as prescribed by the Income Tax Act, 1961. If the Pr.CIT/CIT cannot interfere with the limited scrutiny done by the AO, then there mus be any clarification in the CBDT Circular in this regard, which is not found in the Circular. Considering the above case laws and factual aspects, we are of the view that the Id. Pr.CIT has rightly exercised his powers and we do not find any reason to interfere with the same. Accordingly, we dismiss the appeal of the assessee". iii.) Reliance is also placed on the decision of Hon'ble Cuttack ITA T in the case of Maa Tarini Industries Ltd., ITA No.292/CTK/2019, dated 17.03.2020, wherein the issue of limited scrutiny was involved which is similar to the present case. The Hon'ble Cuttack ITAT ....
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....or financial year 2013-14 but as per statement in 26AS, the assessee had shown Rs.16,91,82,966/- from works contract bit it had disclosed its gross receipts in the profit and loss account only Rs.15,69,31,397/- resulting that the gross receipts is understated by Rs.1,22,51,569/- which should have been verified by the AO during scrutiny proceedings. The AO by way of notice u/s.142(1) initiated enquiry on this issue but after filing reply of the assessee in compliance to the said notice, the AO as an adjudicator and investigator did not bother to deliberate this issue in the assessment order and in our humble opinion, until and unless inquiry started by the AO is terminated to a logical and plausible end, such kind of enquiry has to be held as inadequate and insufficient inquiry on the issues, which makes the assessment order as erroneous and prejudicial to the interest of the revenue. 31. From the material placed before us, we also observe that from the service tax return of the assessee, the assessee had shown Rs. Rs.8,45,95,617/- as gross value of service provided under the head 00440262 (transport of goods by road) and a sum of Rs.15,69,31,397/- as gross value of service....
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.... of Hon'ble Third Member are as under in para-S of the order: "The Tribunal is to follow the decision of another Bench where facts are the same. This is a treaty law. The only other alternative is to refer the matter to the larger bench if the Members of this Bench are not willing to follow the earlier order. In this case, there is no dispute that the facts and circumstances are the same as appearing in the assessment year 2002-03 except change in figures and it is also true that the very same Members decided the issues for assessment year 2002-03 in favour of the assessee. In such circumstances, the only course left to the Bench was to follow the earlier decision in order to gain confidence of public in the judicial system. In case the learned Accountant Member wanted to deviate from the earlier order, the only course left was to refer the matter to the larger bench with the concurrence of the learned Judicial Member which, in this case had not happened. Hence, I am of the view that the learned Accountant Member should have restrained from dissenting or he should have persuaded the learned Judicial Member for referring the matter to the larger Bench. For the sake of u....
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....ic point(s) on the basis of which the particular return has been selected for scrutiny. 3. The reason(s) for selection of cases under CASS are displayed to the Assessing Officer in AST application and notice u/s 143(2), after generation from AST, is issued to the taxpayer with the remark '-"Selected under Computer Aided Scrutiny Selection (CASS)". The functionality in AST is being modified suitably to flag the reasons for scrutiny selection in cases. This functionality is expected to be operationalised by 15th October, 2014. Further, the Assessing Officer while issuing notice under section 142(1) of the Act which is enclosed with the first questionnaire would proceed to verify only the specific aspects requiring examination/verification. In such cases, all efforts would be made to ensure that assessment proceedings are completed expeditiously in minimum possible number of hearings without unnecessarily dragging the case till the time-barring date. 4. In case, during the course of assessment proceedings it is found that there is potential escapement of income exceeding Rs. 10 lakhs (for nonmetro charges, the monetary limit shall be Rs. 5 lakhs) on any ....
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.... in existence for invoking proceedings u/s.263 of the Act. 9. As per the submissions of the ld. CIT-DR the AO was duty bound in the limited scrutiny to ask for converting the same into full scrutiny when he came across the issues which required or it would have resulted in addition and consequently the assessment order was erroneous and prejudicial to the interest of revenue. He further submitted that the decision of the coordinate bench of the Cochin Tribunal in the case of Baby Memorial Hospital Ltd., 111 taxmann.com 189, which was followed by the coordinate bench of this Tribunal in the case of Sushant Kumar Chaudhury, in ITA No.226/CTK/2019, has decided the issue in favour of the revenue. Similar finding was given by this Tribunal in the case of Maa Tarini Industries Ltd., ITA No.292/CTK/2019, order dated 17.03.2020, wherein the issue of limited scrutiny was involved and the same was decided in favour of the revenue. It was also submitted that if this bench is unwilling to follow the decisions rendered in the case of Sushant Kumar Chaudhury (supra) and Maa Tarini Industries Ltd. (supra), the matter should be referred to the larger bench in view of the decision of the ITAT Co....
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....e powers of the AO is to expand and get the permission for the complete scrutiny. In no other cases, the AO can go beyond what is directed in the limited scrutiny. 11. In the present case, the limited scrutiny was in relation to excess liability shown in respect of trade payable and second issue was disallowance u/s.40A(3) of the Act. The show cause notice in respect of 263 shows that the issue was in respect of adoption of FIFO method of valuation of its closing stock. This issue is nowhere connected to the issue of excess liability shown or disallowance u/s.40A(3) of the Act. This is absolutely fresh unconnected issues, which the Pr.CIT has picked up. A revision u/s.263 is permissible when an assessment order is shown to be erroneous and prejudicial to the interest of the Revenue. Both the conditions are compulsorily to be there. In the present case, admittedly, the assessment order is a limited scrutiny assessment and no error in respect of the said assessment order passed in respect of limited scrutiny issues have been pointed out by the Pr. CIT for the purpose of invoking the powers u./s.263 of the Act. On this ground itself, the order passed by the Pr. CIT u/s.263 is....