TaxTMI 
TaxTMI 
TaxTMI 
2023 (6) TMI 400
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....ea sales is not speculative transaction and therefore there can be no disallowance of loss arising therefrom against the non speculative business income. 3. The Principal Commissioner of Income Tax-1, Amritsar has erred in law and facts and circumstances of the case without controverting/negating any of the grounds of detailed reply submitted in response to show cause notice u/s 263. 4. The Principal Commissioner of Income Tax-1, Amritsar has erred in law and facts and circumstances of the case by passing an order based on whims and fancies and without laying down what is "uncanny adjustment of loss from High sea trading results" 3. Briefly the facts as per the records are that the Pr. CIT has raised quarries vide show cause notice issued to the assessee that the assessment in your case was completed by the AO at an assessed income of Rs. 10,08,830/- after making an addition of Rs. 3,70,000/- on account of disallowance and low GP/NP. The Pr. CIT observed that the appellant was involved in the transaction of high sea sales wherein the transactions of purchases and sales were being carried out without taking actual delivery or handling of actual delivery. The gross loss of such ....
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....had filed its Return of Income on 25.09.2015 at an income of Rs. 6,38,830/-. 3. The case was selected for LIMITED SCRUTINY under CASS on the following issues: a) Unsecured loans from persons who have not filed their return of income b) Large increase in unsecured loans during the year c) Large squared up loans during the year (Notice attached at Pg 19 of PB). 4. Thereafter, order u/s 143(3) of the Act was passed on 29.09.2017and an ad-hoc basis addition of Rs. 3,70,000/- for low GP/NP was made on to the returned income of the assessee. 5. Thereafter, the assessee received a notice u/s 263 of the Act dated 23.03.2020 wherein, the assessment framed by the AO has been treated as erroneous and prejudicial to the revenue on the issue that the loss of speculative business has been adjusted out of the interest income from money lending business and other expenses related to speculation business have also been adjusted out of interest income, (notice attached at Pg 29-30 of PB) 6. It is submitted that the case of the assessee has been selected for limited scrutiny only and the issue raised vide notice u/s 263 of the Act was never the part of scrutiny assessment, however, as p....
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....f the order passed u/s 263 of the Act, the Ld. PCIT has mentioned that the scope of limited scrutiny has been expanded to complete scrutiny. In this respect, it is submitted that during the course of assessment proceedings, the assessee was never informed about the fact that the scope of limited scrutiny has been expanded. However, during the course of 263 proceedings, vide reply dated 24.03.2021, the assessee specifically stated before the Ld. Pr. CIT to provide administrative approval obtained by the AO from PR. CIT/CIT/Pr. DIT to expand the scope of limited scrutiny to complete scrutiny which has not been provided to the assessee. In the absence of such approval, it can never be assumed and proved that the scope of the limited scrutiny was ever expanded by the AO. The copy of such reply is forming part of paper book at Pg 31 to Pg 41. v. In view of the above stated facts, it is conclusive that the notice issued and order passed by the CIT u/s 263 of the Act is void-ab-initio and bad in law since the case of the Assessee was selected for limited scrutiny and the queries raised by the CIT vide the above mentioned show cause notice are not within the scope/reason of limited scrut....
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....refore, the assessing officer did not have to convert or make a request for a limited scrutiny case to full-fledged scrutiny. 21. Since the assessing officer was only required to decide the issues specifically selected under Limited scrutiny and was not required to examine or sufficiently enquire the matters which are not referred to him as alleged by the PCIT. Once the assessing officer was required to apply his mind to the specific issues, which were duly dealt by the assessing officer in the order passed by him, it cannot be said that the order passed by the assessing officer was erroneous or prejudicial to the interest of the revenue. The revenue in its wisdom has directed the assessing Officer to decide the specific issues and laid down the condition of deviation from the specific issues after fulfilling the requirement of the circular issued by the Board in this regard. Once the AO had scrupulously discharged the duty assigned to him, it cannot be said by PCIT that the order passed by the assessing officer was erroneous and prejudicial to the interests of the revenue. In light of the above, we fully agree with the submission made by the assessee before us. We respectfully r....
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....e case for scrutiny under CASS. The case laws relied upon by the Id. 'PCIT are distinguishable on the peculiar facts of the case." 5. Per contra, the Ld DR supported the impugned order, however, he has not filed any rebuttal to the arguments/contention of the counsel before us. 6. We have heard rival contentions, perused the material on record, impugned order, written submission and case law cited before us. Admittedly, the present case was selected for Limited scrutiny on the points reproduced hereunder: 1. Unsecured loans from persons who have not filed their return of income. 2. Large increase in unsecured loans during the year. 3. Large squared up loans during the year 7. From the above, it is evident that the issue for which the PCIT issued the show cause notice was entirely different than the issues of selection of the case under limited scrutiny by the assessing officer. The Board in its circular mentioned the procedure for converting the limited scrutiny case into full-fledged scrutiny. From the perusal of the above said circular, it is abundantly clear that the conditions, which are sine qua non were non - existence, the assessing officer did not have to make ....