By Jagdish T. Punjabi | Prachi Parekh
Chartered Accountants | Devendra Jain
Advocate
17 Spotlight Vanijya Ltd. vs. PCITTS-310-ITAT-2021 (Kol) A.Y.: 2015-16; Date of order: 9th April, 2021 Sections 143(3), 263
Limited Scrutiny – Revision – Order passed in a limited scrutiny cannot be revised on an issue which was not to be taken up in limited scrutiny – Action of A.O. in not examining an issue which was not to be taken up in limited scrutiny cannot be termed as erroneous
FACTS
In the present case, for the assessment year under consideration the assessee’s case was taken up for limited scrutiny under CASS and a notice u/s 143(2) was issued. Limited scrutiny was taken up for the following three reasons, viz.,
i) income from heads other than business / profession mismatch;
ii) sales turnover mismatch;
iii) investments in unlisted equities.
The A.O., after going through the submissions of the assessee, completed the assessment u/s 143(3), assessing the total income of the assessee to be Rs. 91,95,770 under normal provisions and Rs. 94,94,533 u/s 115JB.
Upon completion of the assessment, the PCIT issued a show cause notice (SCN) u/s 263 wherein he expressed his desire to interfere and revise the assessment order passed by the A.O. on the ground that a deduction of Rs. 10,02,198 has been claimed in respect of flats in Mumbai for which rental income of only Rs. 4,20,000 is offered under the head ‘Income from House Property’ and a standard deduction of Rs. 1,80,000 has been claimed.
The assessee, in response to the SCN, objected to the invocation of revisional jurisdiction on the ground that insurance premium was not one of the three items on which the case was selected for limited scrutiny. It was further stated that the insurance premium for flats is only Rs. 2,198 which has been added back while computing income under the head ‘Profits & Gains of Business or Profession’. The balance amount of Rs. 10,00,000 was premium for Keyman Insurance policy which is allowable as a deduction u/s 37. Consequently, the assessment order was not erroneous or prejudicial to the interest of the Revenue.
Aggrieved, the assessee preferred an appeal to the Tribunal.
HELD
The A.O.’s action of not looking into the issue of insurance premium (Keyman policy) cannot be termed as erroneous as such omission is in consonance with the dictum of CBDT on the subject, viz., CBDT Instruction No. 2/2014 dated 26th September, 2014, which directs the field officers to confine their inquiries strictly to CASS reasons and they were not permitted to make inquiries in respect of issues for which a case was not selected for limited scrutiny. Therefore, the order passed by the A.O. cannot be termed as erroneous and prejudicial to the interest of the Revenue and consequently the PCIT could not have invoked revisional jurisdiction.
The Tribunal held that the impugned action of the PCIT is akin to doing indirectly what the A.O. could not have done directly. It said the very initiation of jurisdiction by issuing an SCN itself is bad in law and, therefore, quashed the SCN issued by the PCIT. For this, the Tribunal relied upon the decisions in
i) Sanjib Kumar Khemka [ITA No. 1361/Kol/2016, A.Y. 2011-12, order dated 2nd June, 2017]; and
ii) Chengmari Tea Co. Ltd. [ITA No. 812/Kol/2019, A.Y. 2014-15, order dated 31st January, 2020].
Consequently, all further actions / proceedings, including the impugned order of the PCIT, were held to be non est in the eyes of the law.
