2025 (8) TMI 1812

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....ing. 3. The reassessment proceedings were initiated for the limited scrutiny purpose of verifying the applicability of the provisions of Section 2(22)(e) of the Act, which deals with "Deemed Dividend". The Assessing Officer (AO), after considering the submissions and explanations provided by the assessee, made an addition of Rs. 3,50,000/- to the income of the assessee, treating it as deemed dividend under section 2(22)(e) of the Act. 4. Subsequently, the Ld. PCIT initiated revisionary proceedings under section 263 of the Act, alleging that the AO had not properly examined two issues: 1. Cash deposits amounting to Rs. 6.12 lakhs in the assessee's bank account, and 2. The purchase of two immovable properties valued at Rs. 40 lakhs and Rs. 26.92 lakhs. 5. Ld. PCIT, passed order u/s 263 and set aside the order of AO passed on 27-03-2022 u/s 147 r.w.s. 144 read with section 144B of the Act. 6. Aggrieved by the order of PCIT, the assessee is before us with following grounds of appeal: 1. The order passed by the Ld. Principal Commissioner of Income Tax, Ahmedabad under section 263 of the Income Tax Act dated 23.01.2024 is bad in law as well as o....

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....ad in law as well as on facts as the ld. PCIT has not considered fact that when the very basis of scrutiny of the case was on account of limited issues, then it is not justified to hold that the AO has failed to make the inquiry, where the scope of inquiry is limited only to the extent of that issues. The CBDT instructions clearly establish that it is not open for the Assessing Officer to travel beyond the reasons for selection of the matter for limited scrutiny and on this aspect the assessment order in this case is in accordance with the instructions governing the field. 6. The order passed by the Ld. Principal Commissioner of Income Tax, Ahmedabad under section 263 of the Income Tax Act dated 23.01.2024 is bad in law as well as on facts as the Ld. PCIT has nowhere vide the Order mentioned how the order is erroneous and pre-judicial to the revenue. It was incumbent upon the Pr. CIT to have shown as to how the order was prejudicial to the interest of the Revenue, without which the whole revisionary proceedings are not sustainable in the law. 7. The order passed by the Ld. Principal Commissioner of Income Tax, Ahmedabad under section263 of the Income Tax Act dated....

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.... was not part of the assessment records, the learned PCIT is precluded to initiate the proceedings under section 263 of the Act. In holding so, we draw support and guidance from the judgement of Hon'ble Calcutta High Court in the case of Reliance Jute and Industries Ltd. In view of the above, we hold that the basis to initiate the proceedings under section 263 of the Act by the learned PCIT is misplaced as it was based on the document which was not forming part of any proceedings. Therefore, we hold that the order passed by the learned PCIT is not sustainable. Accordingly, we quash the same. Hence, the ground of appeal of the assessee is hereby allowed." 11. The order passed by the Ld. Principal Commissioner of Income Tax, Ahmedabad under section263 of the Income Tax Act dated 23.01.2024 is bad in law as well as on facts as the revisionary order passed is without following the judicial consistency in the order passed by the following authorities in the cases mentioned below: i. Jaipur Bench of the Tribunal in the case of Mahendra Singh Dhankhar HUF vs. ACIT ITA No. 265/JP/2020 dated June 30, 2021 (2021) 62 CCH 0271 (Jaipur Trib) ii. Honorable ITAT Sur....

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....rs vested upon to verify the said matters and there was no compulsion upon him to verify the same. Thus, the allegation is made without considering the above facts and provisions of the law. ii. Based on the facts and circumstances of the case, Ld. PCIT has erred in law as well as on facts as the second condition u/s 263(2) i.e. The order is passed allowing any relief without inquiring into the claim is vague and baseless. The Assessment Order passed is thereby making an addition of Rs. 3,50,000/- as deemed dividend as per Section 2(22)(e). It was beyond his powers vested as well as not binded to verify the genuineness of the cash deposits and the purchase of the immovable property. Novague or abrupt decisions have been passed by the Ld. AO and hence the revisionary proceedings can't be merely allowed as this information was never known to the Ld.AO at the time of assessment. iii. Based on the facts and circumstances of the case, Ld. PCIT has erred in law as well as on facts as the third condition u/s 263(2) of the Act i.e. The order has not been made in accordance with any order, direction or instruction issued by the Board under section 119 is not fulfilled The ....

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....ve return of income evidencing the agricultural income in previous and subsequent years to substantiate the claim of agriculture income and the subsequent cash deposits made in the Bank of Baroda Account for the year under consideration merely because the invoices for the agriculture income were not made available, the revisionary proceedings were initiated which is bad in law. 15. The order passed by the Ld. Principal Commissioner of Income Tax, Ahmedabad under section263 of the Income Tax Act dated 23.01.2024 is bad in law as well as on facts as the Ld. PCIT has not properly verified the explanations along with supporting documentary evidences placed on records such as copies of purchase deeds, home loan documents and sanction letter, Bank Statements evidencing payment, etc. to substantiate the claim of purchase of the two immovable properties amounting to Rs. 40lacs and 26.92lacs during the year under consideration. 16. The order passed by the Ld. Principal Commissioner of Income Tax, Ahmedabad under section263 of the Income Tax Act dated 23.01.2024 is bad in law as well as on facts as the Ld. PCIT has not taken any pain to verify the documents placed on record....

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....e to his notice during reassessment, even if they were not originally included in the reasons for reopening. However, this power must be exercised within the framework of the law and cannot be used as a carte blanche to reopen or expand the scope of scrutiny beyond the original purpose for which the assessment was reopened. In the present case, the reassessment was initiated specifically to examine the applicability of Section 2(22)(e) regarding deemed dividend. The AO appropriately limited his investigation to this issue and made an addition based on the findings. In our opinion while Explanation 3 permits the AO to assess new issues that come to light during reassessment, but the scope of such reopening of assessment cannot be expanded by the Ld. PCIT to review issues beyond what was originally contemplated during the reassessment, especially when such issues were not part of the reasons for the selection of the case for limited scrutiny. 11. The jurisdiction under section 263 can only be invoked if the order passed by the AO is erroneous and prejudicial to the interests of the revenue. However, for an order to be erroneous, there must be a clear demonstration of error in the ....