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TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 1232
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....n passing order u/s 263 of the Act when order passed by assessing officer is neither erroneous nor prejudicial to the interest of revenue. 3. On the facts and circumstances of the case as well as law on the subject, the Principal Commissioner of Income Tax, Valsad erred in passing order u/s 263 of the act without considering the fact that the profit on sale of shop has already been shown as business income. 4. On the facts and circumstances of the case as well as law on the subject, the Principal Commissioner of Income Tax, Valsad erred in invoking power u/s 263 of the Act on the issues which were never part of the show cause notice given. 5. It is prayed that order passed by Learned Principal Commissioner may please be quashed. 6. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal." 2. Succinctly, the factual panorama of the case is that assessee before us is an Individual. The assessee has earned income from house property, business, agriculture income and income from other sources during the year for assessment year 2018-19. The assessee filed her return of income on 12.03.2019, declaring total income at ....
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....has been shown. The difference amount i.e. Rs. 1,79,00,000/- - Rs. 63,58,500/- = Rs. 1,15,41,500/ has not been explained by the assessee. Furthermore, if total sale consideration is taken at Rs. 2,11,00,000/- then capital gain comes to Rs. 1,84,17,345/-. #2 Total sale consideration Rs. 2,11,00,000/- Less indexed loss of acquisition Rs. 8,69,455/- Less indexed loss of improvement Rs. 18,13,200/- Long term capital gain Rs. 1,84,17,345/- From the above, it can be seen that instead of showing long term capital gain at Rs. 1,84,17,345/- the assessee has offered only Rs. 36,75,845/-. In view of the above, it is proposed to revise the assessment u/s 263 of the Act. You are hereby required to furnish an explanation within [10] days from the receipt of this notice, as to why your assessment for assessment year 2018-19 should not be revised. If no response is received within the specified time, it will be presumed that you have no explanation to offer and the assessment will be revised based on the available information." 4. In response to notice issued by Ld.PCIT, the assessee submitted her reply, which is reproduced below: "Vide above mentioned notice your honour stated ....
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....by the assessee under the project name of Shoppers Shop in Silvassa in year of 2003. Copy of sale deed of said shops along with ledger of said party with relevant banks statement extract is enclosed herewith giving the brief idea about construction history of this shops Further as said shops were held as stock of the business of the assessee, sale of said shops was shown by the assessee as business turnover in her audited profit & loss a/c as well as in her filed ITR-3. Relevant reconciliation of business turnover of the assessee disclosed in audited profit and loss a/c with disclosed in ITR-3 are under: Particulars As per audited profit & loss a/c (amount in Rs. ) Consolidated turnover shown in P & L in ITR- 3 in Income Tax Return (Amount in Rs) Sale of shops from 201 to 210 (shown in profit & loss a/c of M/s Preetiben Chauhan) 2,11,00,000 25,32,22,622 Sales of diesel & petrol (shown in P&L a/c of M/s Sainath Petroleum) 23,21,22,622 Total 25,32,22,622 25,32,22,622 Copy of audited balance sheet, profit & loss a/c along with ITR-3 of the assessee of A.Y 2018-19 is enclosed herewith for your honour's perusal. Copy of Income Tax return with computation of i....
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.... the closing stocks. On verification it was further noted by ld PCIT that the assessee was having a piece of land on which construction permission was given by the Silvassa Administration of Union Territory of Dadar and Nagar Haveli in 1997. On this piece of land, the assessee has constructed various shops and sold them and has shown business profits during the year under consideration. However, in the profit and loss account there is no opening value of land, which the assessee was holding from 1997. Thus, ld PCIT observed that these vital facts have neither been examined by the Assessing Officer nor any remark have been made by the auditor and capital formation has been accepted as such without making any addition or rejection of the books of accounts. In fact, the audit report in the case of the assessee, is a highly qualified one and it would have alerted the assessing officer, however the Assessing Officer failed to examine the issue. Therefore, ld PCIT held that Assessing Officer has passed the assessment order without making inquiries or verification on the issue which ought to have been made in the assessee`s case therefore the assessment order u/s 143(3) of the Act in the ....
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....he scrutiny assessment was for limited purpose to examine the issue of "share capital and other capital". The Assessing Officer has examined the 'share capital and other capital' in the scrutiny assessment and framed the assessment order u/s 143(3) of the Act, dated 13.01.2021. However, Ld. PCIT has raised the issue, stating that there were sale of shop numbers 201 to 210 at Zanda Chowk, Silvssa and computation of long-term capital gain, their on which was not the subject matter of 'limited scrutiny'. Therefore, the issue raised by the L PCIT is outside the scope of limited scrutiny. 10. We note that assessee's case was selected for "limited scrutiny purpose" for the purpose of verification of "Share capital/other capital". Therefore, Assessing Officer need not to examine the issue relating to sale of shops and computation of long term capital gain, which was raised by the Ld. PCIT. Since in the limited scrutiny case, the Assessing Officer has to examine only those issues which are mentioned in the notice of limited scrutiny. If the Assessing Officer wants to examine other items, which are not mentioned in the limited scrutiny notice, then in that circumstances, he has to convert ....
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....s, it would not be open to Principal Commissioner to pass revisionary order under section 263 on other aspects and remit matter to Assessing Officer for fresh assessment." We further find that similar view was taken by Coordinate bench of Tribunal in series of decisions as has been relied by ld AR for the assessee. 14. The Supreme Court in celebrated/ leading case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 832 (SC), held that the prerequisite for the exercise of jurisdiction by the Commissioner suo-motu is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1) of the Act. It can be exercised only when an order is erroneous, the section 263 will be attracted. In view of aforesaid factual and legal ....