TaxTMI 
TaxTMI 
2026 (7) TMI 508
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Ld. Tribunal was justified in quashing the order passed u/s. 263 of the Act, despite survey having been conducted in the case which was of compulsory scrutiny? (ii) Whether the Ld. Tribunal was justified in allowing the appeal of the assessee setting off of losses out of undisclosed income detected during Survey in violation of CBDT Circular No. 11/2019? (iii) Whether the Ld. Tribunal was justified in allowing the appeal of the assessee even when the income was not taxed at the rate of 60% contrary to Section 155BBE of the Act?" 3. Brief facts of the appeal are as under: 3.1 The respondent - assessee is a builder and developer, who filed its Return of Income for the Assessment Year 2017-18 on 04.11.2017 declaring income of Rs.16,95,700/-. The case of the assessee was selected for scrutiny through Computer Aided Select Scrutiny (for short "CASS") for limited scrutiny for verification of cash deposits during the year. 3.2 The Assessing Officer issued the notice dated 07.11.2019 calling upon the respondent - assessee to furnish various details and the same was furnished by the assessee and after accepting the detailed reply of the assessee, no variation in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ariation. The Id Pr. CIT in its show cause notice, identified the issue which was not the subject matter of limited scrutiny. In the show cause notice, the Id. Pr. CIT raised the issue that survey action was conducted on the assessee firm in relevant financial year and that the assessee made declaration of Rs 1.24 crore on account of undisclosed expenses. We find that such issue was not the subject matter of scrutiny, hence, the Assessing Officer was not entitled to raise such question. However, we find that the assessee in his reply dated 09/09/2019 submitted before Assessing Officer submitted that they have duly offered the disclosed income in their return of income 13. We find that the Coordinate Bench of Delhi High Court in Balvinder Kumar Vs Pr. CIT (supra) has held that "in case of limited scrutiny, Assessing Officer could not go beyond reason for which matter was selected for limited scrutiny thus, 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 h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....149 taxmann.com 202 (Kerala), wherein, in similar facts of limited scrutiny, the Hon'ble Kerala High Court has held that the PCIT has jurisdiction to revise the assessment order and jurisdiction cannot be restricted viz-a-viz limited scrutiny under CASS as the Commissioner has supervisory jurisdiction to find out omission in the assessment order and as the issue was not examined by the Assessing Officer in the limited scrutiny, the order would amount to erroneous order if the same is found to be prejudicial to the interest of revenue, and therefore, the PCIT can exercise its jurisdiction under Section 263 of the Act. 4.2 Learned Senior Standing Counsel Mr. Patel has referred to and relied upon the following observations of the Hon'ble Kerala High Court in the aforesaid decision in support of his submissions: "8.1 On a reading of the Circular, it is discernible that the Circular is applicable during the scrutiny assessment taken up by the Assessing Officer under CASS. As explained to this Court by the learned Senior Counsel appearing for the parties, the CASS is a system-driven identification of returns for limited scrutiny The picking up of a return under CASS for scrut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, or error in selecting a principle which would not govern the fact situation, arbitrary exercise of quasi-judicial power certainly would fall within the scope of section 263 By resorting to a different method, a larger tax can be levied and collected cannot be the sole consideration to attract section 263, as prejudicial to the interest of the Revenue, unless the said method is the only mode legally applicable [SS. Muddanna v. State of Karnataka [1993] 89 STC 90, 95 (Kar)]. 8.4 For the limited purpose of examining whether the assessment order has looked at the computation obligated under section 56(2)(vib), it is more than clear that the effect of these entries is not at the first instance captured in CASS and prevented by Circulars while taking up scrutiny assessment. It is an error going by the literal meaning excerpted above. 9. The supervisory power, which is axiomatic given the precedents on the point, would take within its reach even the orders wherein the proceedings are dropped, or the proceedings are filed. In Hill Top Holdings India Ltd. v. CIT [2005] 147 Taxman 404/278 ITR 501 (Cal) it has been held as follows: "Power under section 263 can be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the case, the order is erroneous insofar as it is prejudicial to the interest of the revenue. 11. Mr Joseph Markos invites our attention to the consideration of these grounds by the Tribunal He argues that the Tribunal has not examined the reasons recorded by the Commissioner on the order of assessment being erroneous and prejudicial to the interest of Revenue but has supplemented additional reasons for sustaining an order made under section 263 of the Act. Our attention is specifically drawn to the following passage in paragraph 8 9 of the Tribunal's order "As mentioned earlier, in this case the assessment order was passed without making inquiry/verification as regards the potential escapement of income mentioned in the Board Instructions for the relevant period. Therefore, even in case of limited scrutiny assessment, the A.O is duty bound to make a prima facie inquiry as to whether there is any other items which requires examination and in the event, the potential escapement of income would have exceeded Rs. 10 lakh and he ought to have sought the permission of the CIT DIT to convert a limited scrutiny assessment to a complete scrutiny assessment Having fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... letter dated 09.08.2019, the respondent - assessee has also disclosed the fact about survey being conducted and declaration of Rs. 12,48,900/- by the respondent - assessee which was recorded in the books of account duly offered for taxation by the respondent - assessee. 5.3 It was therefore submitted that the Assessing Officer has, after considering the submissions and the details and documents submitted by the assessee including the disclosure of the income made during the course of survey, duly accounted for and offered to tax, has accepted his return of income and has made no addition to the income of the assessee. It was, therefore, submitted that in addition to the submissions made before the Tribunal that in case of limited scrutiny under the CASS, the Assessing Officer is not required to verify any other aspect, but in the facts of the present case, the Tribunal has found that the Assessing Officer has called for the details, which was submitted by the assessee, and therefore, it cannot be said that the Assessment Order is erroneous because the PCIT was of the opinion that the disclosure made by the assessee during the survey ought to have been taxed at a higher rate und....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC)." 6.2 Applying the above decision of the Hon'ble Apex Court, this Court also in the case of Commissioner of Income Tax Vs. Arvind Jewellers., reported in [2003] 259 ITR 502., has observed as under: " From the above observations made by the Supreme Court, it is clear that the provisions of section 263 cannot be invoked to correct each and every....