TaxTMI 
TaxTMI 
2023 (3) TMI 147
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....CIT erred in assuming jurisdiction u/s.263 of the Act by examining issues not covered by the Limited Scrutiny and directing the Ld. AO to make a de novo assessment on issues not covered by the Limited Scrutiny and consequently the impugned order passed u/s.263 is bad in law and is liable to be set aside. 3. The Ld. Pr. CIT failed to appreciate that the Ld. AO had made detailed enquiries on the issue of "Large Increase in Investment in Unlisted Securities" and hence on the very same issue no action can be taken u/s.263 of the Act when the order u/s. 143(3) was pursuant to proper enquiry on the facts and circumstances of the case and in accordance with law and consequently the impugned order u/s.263 is bad in law and is liable to be set aside. 4. The Ld. Pr. CIT erred in law by expanding the scope of the Limited Scrutiny, which can be done only by the AO at the AO's discretion, on the issue of "Large Increase in Investment in Unlisted Securities" to extend to verification of applicability of S.56(2)(viia) of the Act which was not contemplated in the notice of Limited Scrutiny, thereby exceeding his jurisdiction u/s.263 resulting in the order u/s.263 being ultra vire....
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....re of the opinion that the order passed u/s 143 (3) of the Act to be erroneous as it is prejudicial to the interest of revenue. 8. The ld. PCIT issued a show-cause notice dated 03.02.2020 to show cause as to why the matter may not be set aside to the AO under revisionary powers granted u/s 263 of the Act. Pertinent to note that under the said notice, ld. PCIT Central 2, drew reference to the assessment order passed in the case of M/s Raj Sheela Growth Fund, a related party wherein an adjustment was made on account of deemed income u/s 56(2)(vii)(b) as it was observed that most companies in the said case were common with the companies in which the assessee had invested. Further, reference was drawn to the chart submitted in the case of Raj Sheela along with chart submitted by the assessee in relation to the purchase price and FMV of companies in which investments were made both by Raj Sheela and the assessee. 9. The asseesee vide submission dated 24.02.2020 stated that the entire premise of the ld. PCIT was based on a wrong factual premise as no share capital/share premium was received during the year from 19 companies that were stated in the said notice. As a natural collary,....
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.... unless the view taken by the AO is unsustainable in law and for the aforesaid proposition. Reliance is placed on the judgment of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT reported in (2000) 243 ITR 83 (SC). 16. It was argued that the present case was selected for limited scrutiny and was never converted into a full scrutiny. However, we find that scrutiny of share premium and investment in unlisted securities is one of the reasons for selection of the case for limited scrutiny. 17. It was argued that the ld. PCIT failed to appreciate that the AO has made due enquiries within the boundaries scrutiny before completing assessment and the ld. PCIT has not undertaken any inquiry on its own accord and the initiation of proceedings under Section 263. 18. The arguments of the ld. DR in rebuttal supporting the order of the ld. PCIT is as under: "Sub: Written Submission in the above case- reg. In this regard, it is humbly submitted that Explanation 2 has been inserted in Section 263 of I.T. Act by Finance Act 2015 w.e.f 01.06.2015 which is reproduced below: Explanation 2.-For the purposes of this section, it is hereby declar....
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.... that when Assessing Officer gave an opportunity to assessee to explain transaction, assessee did not produce any document but rather stated that 2 per cent of purported bogus purchase might be added to its income - Thus, it would mean that assessee had accepted allegations against it - Whether since it was established that expenditure was unexplained/bogus, entire amount of bogus expenditure was to be added to income of assessee - Held, yes - Whether, therefore, PCIT was fully justified in exercising revision jurisdiction under section 263 - Held, yes [Para 4| [In favour of revenue] 4. [2008] 169 Taxman 117 (Punjab & Haryana)- Mahavir Prasad vs. Income- tax Officer- Unexplained investments - Assessment year 1997-98 - Assessee had deposited a sum of Rs. 4 lakhs with a firm and source of such deposit was not verifiable from original return of assessee - In response to notice under section 148, assessee stated that he had received credits from four persons and produced evidence in that regard - Assessing Officer found that credit of Rs. 3.08 lakhs was received from two totally different persons 'S' and 'D' and said money was advanced by assessee to said firm....
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....sessment in the case of Rajsheela was immaterial. The ld. PCIT categorically records and accepts that the details in respect of FMV were duly furnished during the course of assessment proceedings. Pertinent to note that contrary to the amount of Rs. 106.78 crores stated in the earlier notice (supra), PCIT states an arbitrary income escapement to the tune of Rs. 136.62 crores in the said order. * That most importantly the ld. PCIT failed to appreciate that the AO had carried out a due inquiry within limited scrutiny parameters which reflected application of mind and hence the PCIT had no jurisdiction in passing a de novo assessment order as per settled law. 20. On the contrary to the above infirmities and lack of enquiry by the PCIT, a due enquiry was conducted by the AO during the course of assessment proceedings, reference is drawn to pages 3-4 of paper book wherein the AO vide notice dated 25.04.2017 issued u/s 142(1) of the Act put forward the following queries/examination during the assessment proceedings. The relevant excerpts reads as under: "The case has been selected under CASS for a limited scrutiny. The reasons of selection are: i) Large shar....
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....n the assessee had submitted details of FMV of the shares in question, showing that there was no income arising there from. The AO had examined and accepted the same, there was no error in the Assessment Order to that extant. 25. We find that the ld. PCIT has failed to consider that Section 263 of the Act vests revisionary power in a superior officer and, therefore by the very inherent nature of such power, it does not allow for substitution of the view taken by the AO. The appreciation of the material placed on record before the AO is exclusively within the four corners of its domain and it cannot overlap with exercising revisionary powers under Section 263 of the Act, on the ground that the AO should have arrived at a different conclusion basis the material on record. 26. Reliance is being placed on the judgment of Hon'ble Delhi High Court in PCIT vs. M/s. Brahma Centre Development Pvt. Ltd (ITA No.116 & 118/2021) dated 05.07.2021, wherein the High Court has laid down that the benchmark to be adopted whilst dealing with the issue as to whether or not an AO has carried out enquiry or verification, all that the Court is required to ascertain is whether AO applied his mind....
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.... because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open." 28. Further, we find that the case of the Assessee is squarely covered by the coordinate bench decision in the case of Pawansuit Media Services vs. PCIT (ITA No.534/Del/2021) wherein on near identical facts, the Tribunal quashed the revisionary order u/s 263 of the Act. 29. In that case, the ld. PCIT intervened and invoked Section 263 to hold that the issue of applicability of Section 56(2)(viia) was not examined by the AO. The Tribunal following the various jurisdictional Delhi High Court decisions held that the AO within the parameter of scrutiny had undertaken a due inquiry which reflected application of mind, and hence the ld. PCIT order setting aside the assessment order was quashed. 30. The instant case of the Assessee is also akin to the decision of the Delhi Tribunal in Pushp Steel and Mining Private Ltd. vs. PCIT (ITA No.811/Del/2021) dated 22.12.2021 has followed the decision of Delhi Tribunal to quash revisionary order u/s 263 of the Act. Relevant excerpts are as under: "14. .....It is an undisputed fact that during the....