Dr. Keyur H Parikh,, Ahmedabad v. The Pr. CIT-4, Ahmedabad

ITA 188/AHD/2020 | 2015-2016
Pronouncement Date: 17-03-2021 | Result: Allowed

Appeal Details

RSA Number 18820514 RSA 2020
Assessee PAN AFSPP5662G
Bench Ahmedabad
Appeal Number ITA 188/AHD/2020
Duration Of Justice 1 year(s) 26 day(s)
Appellant Dr. Keyur H Parikh,, Ahmedabad
Respondent The Pr. CIT-4, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 17-03-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 17-03-2021
Assessment Year 2015-2016
Appeal Filed On 21-02-2020
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI MAHAVIR PRASAD JUDICIAL MEMBER AND SHRI WASEEM AHMED ACCOUNTANT MEMBER ./ ITA NO. 188/AHD/2020 / ASSTT. YEAR: 2015 - 2016 DR.KEYUR H. PARIKH 381 SATYAGRAH CHHAVNI JODHPUR TEKRA SATELLITE AHMEDABAD . PAN : AFSPP5662G VS. P .C.I.T. RANGE - 4 AHMEDABAD . (APPLICANT) ( RESPON D ENT ) ASSESSEE BY : SHRI S.N. SOPARKAR SR.ADVOCATE WITH SHRI PARIN SHAH A.R REVENUE BY : SHRI MOHD. USMAN CIT .D. R / DATE OF HEARING : 03 / 03 / 2021 / DATE OF PRONOUNCEMENT: 17 / 03 /2021 / O R D E R PER WASEEM AHMED ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE A GAINST THE ORDER OF THE PRINCIPAL COMM ISSIONER OF INCOME TAX AHMEDABAD - 4 DATED 07/02/2020 ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') RELEVANT TO THE ASSESSMENT YEAR 2015 - 20 16 . ITA NO.188/AHD/2020 ASSTT. YEAR 2015 - 16 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: (1 ) THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX RANGE 4 AHMEDABAD FAILED TO UNDERSTAND THE FACTS AND CIRCUMSTANCES OF THE CASE AND PROVISION OF THE LAW. (2) THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX RANGE 4 AHMEDABAD ERRED IN HOLDING THAT THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT 1961 PURSUANT TO SELECTION OF THE CASE FOR SCRUTINY UNDER LIMITED SCRUTINY IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BY INVOKING PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT - 1 961. THE ASSESSING OFFICER HAS MADE INQUIRIES ON THE ISSUES FOR WHICH THE CASE WAS SELECTED FOR LIMITED SCRUTINY. (3) THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX RANGE 4 AHMEDABAD ERRED IN DIRECTING THE ASSESSING OFFICER TO CARRY OUT THOROUGH INQUIRIES ON THE ISSUE OF FEES PAID TO HARVARD SCHOOL OF BUSINESS USA AND THE MARRIAGE EXPENSES OF THE SON OF THE ASSESSEE ALONG WITH THE OTHER ISSUES AS DEEMED FIT AND WHICH MAY BE NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN PURSUANT TO THIS ORDER U/S 263 OF THE ACT. (4) YOUR APPELLANT PREYS FOR APPROPRIATE RELIEF ON ABOVE GROUNDS OF APPEAL. (5) YOUR APPELLANT CRAVES LEAVE TO ADD ALTER AMEND SUBSTITUTE OR WITHDRAW ANY OF THE GROUNDS OF APPEAL STATED HEREINABOVE. 3. THE INTERCONNECTED ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED PR. CIT ERRED IN HOLDING THE ASSESSMENT ORDER FRAMED UNDER SECTION 143(3) OF THE ACT AS ERRONEOUS INSOFAR PREJUDICIAL TO THE INTEREST OF REVENUE. 4. THE FACTS IN BRIEF ARE THAT THE ASSES SEE IN THE PRESENT CASE IS AN INDIVIDUAL AND A MEDICAL PRACTITIONER BY PROFESSION. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1 34 73 500/ - WHICH WAS ACCEPTED IN THE ASSESSMENT FRAMED UNDER SECTIO N 143(3) OF THE ACT BY THE AO VIDE ORDER DATED 04 - 12 - 2017. 4.1 SUBSEQUENTLY THE PR. CIT UNDER SECTION 263 OF THE ACT ON VERIFICATION OF THE ASSESSMENT RECORDS FOUND THAT THE ASSESSEE HAS CLAIMED EXPENDITURE UNDER THE HEAD PROFESSIONAL DEVELOPMENT EXPEN DITURE AMOUNTING TO RS. 85 38 295. 00 ONLY. THE SAID EXPENSE WAS INCLUSIVE OF THE FOLLOWING EXPENSES : I. RS. 23 64 618/ - PAID TO HARVARD BUSINESS SCHOOL PAID AS STUDY FEE FOR P RESIDENT M ANAGEMENT PRO FORM . II. RS. 53 97 904/ - INCURRE D ON THE OCCASION OF SON S MARRIAGE RECEPTION . ITA NO.188/AHD/2020 ASSTT. YEAR 2015 - 16 3 4.2 AS PER THE LEARNED PR. CIT THE FEES PAID TO THE UNIVERSITY WAS CAPITAL IN NATURE AND THEREFORE THE SAME CANNOT BE ALLOWED AS DEDUCTION IN ITS ENTIRETY. AS SUCH THE LEARNED P R . CIT WAS OF THE VIEW THAT THE SAME SHOULD BE TREATED AS INTANGIBLE ASSETS AND ACCORDINGLY THE DEPRECIATION AT THE RATE OF 25% SHOULD HAVE BEEN ALLOWED. LIKEWISE THE LEARNED PR. CIT WAS OF THE VIEW THAT THE MARRIAGE EXPENSES ARE OF PERSONAL NATURE AND THER EFORE THE SAME CANNOT BE ALLOWED AS DEDUCTION WHILE COMPUTING THE BUSINESS INCOME. AS PER THE LD. PR. CIT THE AO HAS NOT CARRIED OUT THE VERIFICATION OF THE ABOVE FACTS DURING THE ASSESSMENT PROCEEDINGS. 4.3 THE LEARNED PR. CIT FURTHER OBSERVED THAT TH OUGH THE SCRUTINY ASSESSMENT WAS SELECTED FOR THE LIMITED PURPOSE WHICH WAS NOT COVERING THE ABOVE EXPENSES. HOWEVER THE INFORMATION REGARDING THE IMPUGNED EXPENDITURE CL AIMED WAS VERY MUCH WITH THE AO AS EVIDENT FROM THE ASSESSEE S LETTER VIDE DATED 30 - 08 - 2017. AS PER THIS LETTER THE ASSESSEE HAS SUBMITTED THE DETAIL OF PAYMENT MADE TO HARVARD BUSINESS SCHOOL SUCH AS BILLS VOUCHER FOREIGN REMITTANCE CERTIFICATES ETC. ACCORDINGLY T HE LEARNED PR. CIT WAS OF THE VIEW THAT IN SUCH FACT S AND CIRCUMSTANCES T HE AO COULD HAVE PROCEEDED FOR THE CONVERSION OF LIMITED SCRUTINY INTO COMPLETE SCRUTINY AFTER FORMING HIS OPINION BUT THE AO HAS NOT DONE SO. THUS THE AO VIOLATED THE CBDT INSTRUCTION NO . 20 OF 2015 DATED 29 - 12 - 2015 R.W. INSTRUCTION NO . 05 OF 2016 DATED 1 4 - 07 - 2016 WHICH WA S MANDATORY FOR AUTHORITIES BELOW UNDER THE ACT TO FOLLOW. 4.4 IN VIEW OF THE ABOVE THE LEARNED PR. CIT HELD THAT THE ORDER OF THE AO FRAMED UNDER SECTION 143(3) OF THE ACT DATED 04 - 12 - 2017 IS ERRONEOUS INSOFAR PREJUDICIAL TO THE INTER EST OF REVENUE ON ACCOUNT OF NON - VERIFICATION OF THE FACTS AS DISCUSSED ABOVE. 5. BEING AGGRIEVED BY THE ORDER OF THE LEARNED PR. CIT THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.188/AHD/2020 ASSTT. YEAR 2015 - 16 4 6. THE LEARNED AR BEFORE US CONTENDED THAT THE FEES PAID TO THE UNIVERSITY WAS DULY VERIFIED BY THE AO DURING THE ASSESSMENT PROCEEDINGS. THE LEARNED AR TO THIS EFFECT HAS DRAWN OUR ATTENTION ON PAGES 72 - 86 OF THE PAPER BOOK WHERE THE DETAILS OF ENQUIRIES CONDUCTED BY THE AO DURING THE ASSESSMENT PROCEEDINGS WERE PLACED . 6.1 THE LE ARNED AR FURTHER CONTENDED THAT THE CASE OF THE ASSESSEE WAS SELECTED UNDER LIMITED SCRUTINY TO VERIFY THE FOLLOWING DETAILS: (I) CONTRACT RECEIPTS/ FEES MISMATCH (II) UNSECURED LOANS (III) TAX CREDIT MISMATCH 7. IT IS ALSO A FACT ON RECORD THAT THE L IMITED SCRUTINY WA S NOT CONVERTED INTO A NORMAL/DETAILED SCRUTINY BY THE AO. AS SUCH THE AO HAD NO JURISDICTION TO CARRY OUT ANY VERIFICATION WITH RESPECT TO THE ITEMS AS HIGHLIGHTED BY THE LEARNED P R . CIT. IT WAS ALSO CONTENDED BY THE LEARNED AR THAT THOUGH THE AO DID NOT HAD THE JURISDICTION TO VERIFY THE PROFESSIONAL DEVELOPMENT EXPENSES AS IT WAS BEYOND HIS SCOPE OF THE SCRUTINY ASSESSMENT H OWEVER HE HAS EXCEEDED HIS JURISDICTION AND VERIFIED THE PART OF THE PROFESSIONAL EXPENSES PAID TO THE UNIVERSITY. 8. ON THE OT HER HAND THE LEARNED DR SUBMITTED THAT THE INSTRUCTION ISSUED BY THE BOARD WAS MANDATORY TO FOLLOW FOR THE SUB - ORDINATES OFFICER BUT THE AO HAS NOT DONE SO FOR CONVERTING THE LIMITED SCRUTINY TO COMPLETE SCRUTINY. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILA BLE ON RECORD. ADMITTEDLY THE CASE OF THE ASSESSEE WAS SELECTED FOR THE LIMITED SCRUTINY WHICH CAN BE VERIFIED FROM THE ASSESSMENT ORDE R. THE RELEVANT EXTRACT OF NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT IS REPRODUCED AS UNDER: ITA NO.188/AHD/2020 ASSTT. YEAR 2015 - 16 5 THIS IS FOR YOUR KIND INFORMATION THAT THE RETURN OF INCOME FOR ASSESSMENT YEAR 2015 - 16 FILED VIDE ACK. N O.832582431290915 ON 29/09/2015 HAS BEEN SELECTED FO R SCRUTINY. FOLLOWING ISSUES HAVE BEEN IDENTIFIED FOR EXAMINATION: I. CONTRACTUAL RECEIPTS/FEES MISMATCH II. UNSECURED LOANS III. TAX CREDIT MISMATCH 9.1 ON PERUSAL OF THE ABOVE DETAILS WE FIND THAT THERE WAS NO MENTION ED ABOUT THE PROFESSIONAL DEVELOPMENT EXPENSES AND ACCORDINGLY IT CAN BE INFERRED THAT THE AO HAD NO JURISDICTION TO VERIFY SUCH EXPENSES. HOWEVER THE LEARNED PR. CIT HELD THAT WHEN THE AO D URING THE ASSESSMENT PROCEEDING CAME TO KNOW ABOUT SUCH EXPENSES THEN HE ( AO ) SHOULD HAVE PROCEEDED FOR CONVERSION OF LIMITED SCRUTINY INTO THE COMPLETE SCRUTINY AS PER THE PROCEDURE LAID DOWN BY THE C BDT IN INSTRUCTION NO. 20 OF 2015 DATED 29 - 12 - 2015 R.W. INSTRUCTION NO . 05 OF 2016 DATED 14 - 07 - 2016. NOW THE QUESTION A RISES WHETHER THE LEARNED PR. CIT CAN HOLD THE ORDER OF THE AO AS ERRONEOUS INSOFAR PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF NOT PROCEEDING WITH THE CONVERSION OF LIMITED SCRUTINY INTO COMPLETE SCRUTINY FOR VERIFICATION OF THE PROFESSIONAL DEV ELOPMENT EXPENSES. AT THIS STAGE IT IS PERTINENT TO TAKE NO TE OF THE CBDT INSTRUCTION NO. 2 0 OF 2015 DATED 29 - 12 - 2015 R.W. INSTRUCTION NO . 05 OF 2016 DATED 14 - 07 - 2016 WHICH READS AS UNDER: 2. IN ORDER TO ENSURE THAT MAXIMUM OBJECTIVITY IS MAINTAINED IN CONVERTING A CASE FALLING UNDER LIMITED SCRUTINY INTO A COMPLETE SCRUTINY CASE THE MATTER HAS BEEN FURTHER EXAMINED AND IN PARTIAL MODIFICATION TO PARA 3(D) OF THE EARLIER ORDER DATED 29.12.2015 BOARD HEREBY LAYS DOWN THAT WHILE PROPOSING TO TAKE UP COMPLETE SCRUTINY IN A CASE WHICH WAS ORIGINALLY EARMARKED FOR L IMITED SCRUTINY THE ASSESSING OFFICER ( AO ) SHALL BE REQUIRED TO FORM A REASONABLE VIEW THAT THERE IS POSSIBILITY OF UNDER ASSESSMENT OF INCOME IF THE CASE IS NOT EXAMINED UNDER COMPLETE SCRUTINY . IN THIS REGARD THE MONETARY LIMITS AND REQUIREMENT O F ADMINISTRATIVE APPROVAL FROM PR. CIT/CIT/PR. DIT/DIT AS PRESCRIBED IN PARA 3(D) OF EARLIER INSTRUCTION DATED 29.12.2015 SHALL CONTINUE TO RE MAIN APPLICABLE. 3. FURTHER WHILE FORMING THE REASONABLE VIEW THE ASSESSING OFFICER WOULD ENSURE THAT: A. THERE EXISTS CREDIBLE MATERIAL OR INFORMATION AVAILABLE ON RECORD FOR FORMING SUCH VIEW; B. THIS REASONABLE VIEW SHOULD NOT BE BASED ON MERE SUSPICI ON CONJECTURE OR UNRELIABLE SOURCE; AND C. THERE MUST BE A DIRECT NEXUS BETWEEN THE AVAILABLE MATERIAL AND FORMATION OF SUCH VIEW. 9.2 ON PERUSAL OF ABOVE INSTRUCTION IT IS TRANSPIRED THAT THE AO BEFORE PROPOSING FOR CONVERSION OF LIMITED SCRUTINY IS REQ UIRED TO FORM A REASONABLE VIEW BASED ON ITA NO.188/AHD/2020 ASSTT. YEAR 2015 - 16 6 CREDIBLE MATERIAL S . IN THE CASE ON HAND THE AO CALLED FOR THE DETAILS ABOUT THE PROFESSIONAL DEVELOPMENT EXPENDITURE PAID TO HARVARD BUSINESS SCHOOL DESPITE THE SAME WAS NOT COVERED UNDER LIMITED SCRUTINY . HOWEVER THE NECESSARY DETAILS WERE DULY SUPPLIED BY THE ASSESSEE ABOUT THE PROFESSIONAL DEVELOPMENT EXPENDITURE . AFTER VERIFICATION OF THE SAME THE AO ACCEPTED THE CLAIM OF THE ASSESSEE. FROM THE ABOVE FACT WHAT IS TRANSPIRED IS THIS THAT THE AO FORM ED HIS VIEW AFTER EXAMINING THE FACT THAT THERE WAS NO REQUIREMENT FOR CONVERSION OF LIMITED SCRUTINY. IN OUR CONSIDERED VIEW THE LEARNED PR. CIT CANNOT DIRECT OR IMPOSE ITS OWN VIEW ON THE AO THAT HOW TO CONDUCT CERTAIN EXAMINATION OR VERIFICATION OR TO WHIC H EXTENT. AS SUCH THE AO HAS AN OPTION TO PROCEED FOR CONVERSION OF SCRUTINY BUT DECIDED NOT TO DO SO. THUS THE AO HAS TAKEN ONE OF THE POSSIBLE VIEW AVAILABLE. THEREFORE THE ACTION OF THE AO CANNOT BE TERMED AS ERRONEOUS INSOFAR PREJUDICIAL TO THE INTERE ST OF REVENUE FOR TAKING ONE OF THE POSSIBLE VIEW. IN THIS REGARD WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HON BLE SUPREME COURT IN CASE OF MALABAR INDUSTRIAL CO. LTD. WHERE THE HON BLE COURT HELD AS UNDER; THE PHRASE 'PREJUDICIAL TO THE INTERES TS OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE FOR EXAM PLE WHEN AN ITO ADOPTS ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJ UDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. IT HAS BEEN HELD BY THE SUPREME 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 A SSESSING OFFICER ACCEPTING THE SAME AS SUCH WILL BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 9.3 IN VIEW OF THE ABOVE T HE ANSWER STANDS IN NEGATIVE FOR THE SIMPLE REASON THAT THE AO HAD NO JURISDICTION TO VERIFY THE PROFESSIONAL EXPE NSES IN THE GIVEN FACTS OF CIRCUMSTANCES. THUS IN OUR CONSIDERED VIEW THE LEARNED PR. CIT CANNOT GO ON TO HOLD THAT THE ORDER OF THE AO IS ERRONEOUS INSOFAR PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ACCOUNT OF NON - VERIFICATION OF THE ITEMS WHICH WERE BEYOND THE JURISDICTION OF THE AO. IN HOLDING SO WE DRAW SUPPORT AND GUIDANCE FROM THE ORDER OF THE HON BLE TRIBUNAL MUMBAI IN THE CASE OF SU - RAJ DIAMOND DEALERS PVT. VS. PR. ITA NO.188/AHD/2020 ASSTT. YEAR 2015 - 16 7 CIT BEARING ITA NO. 3098/MUM/2019 FOR THE AY 2014 - 15 VIDE ORDER DATED 27 - 11 - 2019 WHEREIN IT WAS HELD AS UNDER: 6. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOT H THE PARTIES PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD AS WELL AS THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THEM. ADMITTEDLY THE CASE OF THE ASSESSEE WAS SELECTED FOR LIMITED SCRUTINY THROUGH CASS FOR TWO REASONS VIZ. (I). LARGE OTHER EXPENSES CLAIMED IN THE P&L A/C.; AND (II). LOW INCOME IN COMPARISON TO HIGH LOANS/ADVANCE /INVESTMENT IN SHARES. INSOFAR THE FACT THAT THE CASE OF THE ASSESSEE WAS SELECTED FOR LIMITED SCRUTINY FOR THE AFORESAID REASONS IS CONCERNED THE SAME AS OBSERVED BY US HEREINABOVE IS NOT DISPUTED AND IS CLEARLY DISCERNIBLE FROM THE ORDER PASSED BY THE PR. CIT UNDER SEC. 263 OF THE ACT. IN FACT WE FIND THAT THE PR. CIT IN HIS ORDER HAD CATEGORICALLY OBSERVED THAT THE CASE OF THE ASSESSEE WAS NOT SELECTED FOR EXAMINATION ON THE ISSUE RELATING TO CLOSING STOCK BUT WAS SELECTED FOR LIMITED SCRUTINY FOR THE AFORESAID TWO REASONS VIZ. (I). LARGE OTHER EXPENSES CLAIMED IN THE P&L A/C.;AND (II). LOW INCOME IN COMPARISON TO HIGH LOANS/ADVANCE /INV ESTMENT IN SHARES. WE FIND THAT AS PER THE CBDT INSTRUCTION NO. 20/2015 DATED 29.12.2015 SCRUTINY IN CASES SELECTED THROUGH COMPUTER AIDED SCRUTINY SELECTION (CASS) IS TO BE CONFINED ONLY TO THE SPECIFIC REASONS/ISSUES FOR WHICH THE CASE HAS BEEN PICKED UP FOR SCRUTINY. IN ORDER TO APPRECIATE THE ISSUE UNDER CONSIDERATION WE DEEM IT FIT TO CULL OUT THE CBDT INSTRUCTION NO. 20/2015 DATED 29.12.2015. WHICH READS AS UNDER: ' INSTRUCTION NO. 20/2015 DATED: 29 - 12 - 2015 29/12/2015 SUBJECT : SCRUTINY ASSESSME NTS - SOME IMPORTANT ISSUES AND SCOPE OF SCRUTINY IN CASES SELECTED THROUGH COMPUTER AIDED SCRUTINY SELECTION ('CASS') - REG. - THE CENTRAL BOARD OF DIRECT TAXES ('CBDT') VIDE INSTRUCTION NO. 7/2014 DATED 26.09.2014 HAD CLARIFIED THE EXTENT OF ENQUIRY IN CER TAIN CATEGORY OF CASES SPECIFIED THEREIN WHICH ARE SELECTED FOR SCRUTINY THROUGH CASS FURTHER CLARIFICATIONS HAVE BEEN SOUGHT REGARDING THE SCOPE AND APPLICABILITY OF THE AFORESAID INSTRUCTION TO CASES BEING SCRUTINIZED 2. IN ORDER TO FACILITATE THE CONDU CT OF SCRUTINY ASSESSMENTS AND TO BRING FURTHER CLARITY ON SOME OF THE ISSUES EMERGING FROM THE AFORESAID INSTRUCTION FOLLOWING CLARIFICATIONS ARE BEING MADE: I. YEAR OF APPLICABILITY: AS STATED IN THE INSTRUCTION NO. 7/2014 THE SAID INSTRUCTION IS APPLI CABLE ONLY IN RESPECT OF THE CASES SELECTED FOR SCRUTINY THROUGH CASS - 2014. II. WHETHER THE SAID INSTRUCTION IS APPLICABLE TO ALL CASES SELECTED UNDER CASS: THE SAID INSTRUCTION IS APPLICABLE WHERE THE CASE IS SELECTED FOR SCRUTINY UNDER CASS ONLY ON THE PARAMETERS) OF AIR/CIB/26AS DATA. IF A CASE HAS BEEN SELECTED UNDER CASS FOR ANY OTHER REASON(S)/PARAMETER(S) BESIDES THE AIR/CIB/26AS DATA THEN THE SAID INSTRUCTION WOULD NOT APPLY. III. SCOPE OF ENQUIRY: SPECIFIC ISSUE BASED ENQUIRY IS TO BE CONDUCTED O NLY IN THOSE SCRUTINY CASES WHICH HAVE BEEN SELECTED ON THE PARAMETER(S) OF AIR/CIB/26AS DATA. IN SUCH CASES THE ASSESSING OFFICER SHALL ALSO CONFINE THE QUESTIONNAIRE ONLY TO THE SPECIFIC ISSUES PERTAINING TO AIR/CIB/26AS DATA. WIDER SCRUTINY IN THESE C ASES CAN ONLY BE CONDUCTED AS PER THE GUIDELINES AND PROCEDURES STATED IN INSTRUCTION NO 7/2014 IV REASON FOR SELECTION: IN CASES UNDER SCRUTINY FOR VERIFICATION OF AIR/CIB/26AS DATA THE ASSESSING OFFICER HAS TO INTIMATE THE REASON FOR SELECTION OF CASE F OR SCRUTINY TO THE ASSESSEE CONCERNED 3. AS FAR AS THE RETURNS SELECTED FOR SCRUTINY THROUGH CASS - 2015 ARE CONCERNED TWO TYPE OF CASES HAVE BEEN SELECTED FOR SCRUTINY IN THE CURRENT FINANCIAL YEAR -- ONE IS 'LIMITED SCRUTINY' AND OTHER IS 'COMPLETE SCRUTIN Y'. THE ASSESSEES CONCERNED HAVE DULY BEEN INTIMATED ABOUT THEIR CASES FALLING EITHER IN LIMITED SCRUTINY' OR 'COMPLETE SCRUTINY' THROUGH NOTICES ISSUED ITA NO.188/AHD/2020 ASSTT. YEAR 2015 - 16 8 UNDER SECTION 143(2) OF THE INCOME - TAX ACT 1961 ('ACT'). THE PROCEDURE FOR HANDLING 'LIMITED SCRUTINY' CASES SHALL BE AS UNDER: A. IN 'LIMITED SCRUTINY' CASES THE REASONS/ISSUES SHALL BE FORTHWITH COMMUNICATED TO THE ASSESSEE CONCERNED. B. THE QUESTIONNAIRE UNDER SECTION 142(1) OF THE ACT IN 'LIMITED SCRUTINY' CASES SHALL REMAIN CONFINED ONLY TO THE SPECIFIC REASONS/ISSUES FOR WHICH CASE HAS BEEN PICKED UP FOR SCRUTINY FURTHER THE SCOPE OF ENQUIRY SHALL BE RESTRICTED TO THE LIMITED SCRUTINY' ISSUES . C. THESE CASES SHALL BE COMPLETED EXPEDITIOUSLY IN A LIMITED NUMBER OF HEARINGS. D. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN 'LIMITED SCRUTINY' CASES IF IT COMES TO THE NOTICE OF THE ASSESSING OFFICER THAT THERE IS POTENTIAL ESCAPEMENT OF INCOME EXCEEDING RS FIVE LAKHS (FOR METRO CHARGES THE MONETARY LIMIT SHALL BE RS. TEN LAKH S) REQUIRING SUBSTANTIAL VERIFICATION ON ANY OTHER ISSUE(S) THEN THE CASE MAY BE TAKEN UP FOR 'COMPLETE SCRUTINY' WITH THE APPROVAL OF THE PR CIT/CIT CONCERNED. HOWEVER SUCH AN APPROVAL SHALL BE ACCORDED BY THE BY THE PR. CIT/CIT IN WRITING AFTER BEING SATISFIED ABOUT MERITS OF THE ISSUE(S) NECESSITATING COMPLETE SCRUTINY' IN THAT PARTICULAR CASE SUCH CASES SHALT BE MONITORED BY THE RANGE HEAD CONCERNED THE PROCEDURE INDICATED AT POINTS (A) (B) AND (C) ABOVE SHALL NO LONGER REMAIN BINDING IN SUCH CASES (FOR THE PRESENT PURPOSE 'METRO CHARGES' WOULD MEAN DELHI MUMBAI CHENNAI KOLKATA. BENGALURU HYDERABAD AND AHMEDABAD} 4. THE BOARD FURTHER DESIRES THAT IN ALL CASES UNDER SCRUTINY WHERE THE ASSESSING OFFICER PROPOSES TO MAKE ADDITIONS OR DISALLOWANC ES THE ASSESSEE WOULD BE GIVEN A FAIR OPPORTUNITY TO EXPLAIN HIS POSITION ON THE PROPOSED ADDITIONS/DISALLOWANCES IN ACCORDANCE WITH THE PRINCIPLE OF NATURAL JUSTICE. IN THIS REGARD THE ASSESSING OFFICER SHALL ISSUE AN APPROPRIATE SHOW - CAUSE NOTICE DULY INDICATING THE REASONS FOR THE PROPOSED ADDITIONS/DISALLOWANCES ALONG WITH NECESSARY EVIDENCES/REASONS FORMING THE BASIS OF THE SAME. BEFORE PASSING THE FINAL ORDER AGAINST THE PROPOSED ADDITIONS/DISALLOWANCES DUE CONSIDERATION SHALL BE GIVEN TO THE SUBMI SSIONS MADE BY THE ASSESSEE IN RESPONSE TO THE SHOW - CAUSE NOTICE. 5. THE CONTENTS OF THIS INSTRUCTION SHOULD BE IMMEDIATELY BROUGHT TO THE NOTICE OF ALL CONCERNED FOR STRICT COMPLIANCE. 6. HINDI VERSION TO FOLLOW (F.NO 225/269/2015 - ITA.II) (ANKITA PANDEY) UNDER SECRETARY TO THE GOVERNMENT OF INDIA' NOW THE CASE OF THE ASSESSEE BEFORE US WAS SELECTED FOR LIMITED SCRUTINY THROUGH CASS FOR THE REASONS THAT THERE WERE VIZ. (I). LARGE OTHER EXPENSES CLAIMED IN THE P&L A/C.; AND (II). LOW INCOME IN COMPARISON TO HIGH LOANS/ADVANCE /INVESTMENT IN SHARES.. ACCORDINGLY IT CAN SAFELY BE CONCLUDED THAT THE ASSESSMENT FRAMED BY THE A.O FELL WITHIN THE REALM OF THE LIMITED PURPOSE FOR WHICH ITS CASE WAS SELECTED FOR SCRUTINY ASSESSMENT VIZ. VIZ. (I). LARGE OTHER EXP ENSES CLAIMED IN THE P&L A/C.; AND (II). LOW INCOME IN COMPARISON TO HIGH LOANS/ADVANCE /INVESTMENT IN SHARES. 7. AS OBSERVED BY US HEREINABOVE AS PER THE CBDT INSTRUCTION NO. 20/2015 DATED 29.12.2015 IN A CASE WHICH HAD BEEN SELECTED FOR SCRUTINY ASSES SMENT ON THE BASIS OF COMPUTER AIDED SCRUTINY SELECTION ('CASS') THE SCRUTINISING OF SUCH CASE WOULD BE CONFINED ONLY TO THE SPECIFIC REASONS/ISSUES FOR WHICH THE CASE HAS BEEN PICKED UP FOR SCRUTINY. HOWEVER THE CASE MAY THEREAFTER BE TAKEN UP FOR COMPL ETE SCRUTINY WITH THE APPROVAL OF THE ADMINISTRATIVE PRINCIPAL COMMISSIONER OF INCOME - TAX/COMMISSIONER OF INCOME - TAX WHERE ITA NO.188/AHD/2020 ASSTT. YEAR 2015 - 16 9 IT IS FELT THAT APART FROM THE CASS INFORMATION THERE IS POTENTIAL ESCAPEMENT OF INCOME OF MORE THAN RS.10 00 000/ - . ACCORDINGLY TH E CBDT HAD IN CLEAR AND UNEQUIVOCAL TERMS CLARIFIED THAT FOR BROADENING THE SCOPE OF A CASE SELECTED FOR LIMITED SCRUTINY AS PER CASS INFORMATION THE APPROVAL OF THE ADMINISTRATIVE PRINCIPAL COMMISSIONER OF INCOME - TAX/COMMISSIONER OF INCOME - TAX WOULD BE RE QUIRED. IN THE CASE BEFORE US IT IS AN ADMITTED FACT THAT THE CASE OF THE ASSESSEE WAS SELECTED FOR 'LIMITED SCRUTINY' UNDER CASS FOR THE REASONS VIZ. (I). LARGE OTHER EXPENSES CLAIMED IN THE P&L A/C.; AND (II). LOW INCOME IN COMPARISON TO HIGH LOANS/ADV ANCE /INVESTMENT IN SHARES. IN FACT IT IS NEITHER A FACT NOR THE CASE OF THE REVENUE THAT THE SAID CASE WAS THEREAFTER TAKEN UP FOR COMPLETE SCRUTINY WITH THE APPROVAL OF THE ADMINISTRATIVE COMMISSIONER. IN THE BACKDROP OF THE AFORESAID FACTS WE ARE OF T HE CONSIDERED VIEW THAT AS THE SCOPE OF THE ASSESSMENT FRAMED BY THE A.O UNDER SEC. 143(3) DATED 08.12.2016 WAS CIRCUMSCRIBED BY THE LIMITED REASONS FOR WHICH THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT THEREFORE HE WAS ABSOLUTELY DIVE STED OF HIS POWERS FROM TRAVERSING ON ISSUES WHICH DID NOT FALL WITHIN THE REALM OF THE SAID LIMITED PURPOSE FOR WHICH THE SAID CASE WAS SELECTED FOR BEING SCRUTINISED. 8. WE SHALL NOW IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS DELIBERATE ON THE VALIDIT Y OF THE ORDER PASSED BY THE PR. CIT UNDER SEC. 263. AS OBSERVED BY US HEREINABOVE THE PR. CIT HAD HELD THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) DATED 08.12.2016 AS ERRONEOUS IN SO FAR IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE REAS ON THAT HE HAD FAILED TO CARRY OUT PROPER INVESTIGATION AS REGARDS THE ISSUE OF VALUATION OF THE CLOSING STOCK AS REFLECTED IN THE AUDITED ACCOUNTS OF THE ASSESSEE. WE ARE OF A STRONG CONVICTION THAT NOW WHEN THE CASE OF THE ASSESSEE WAS SELECTED FOR LI MITED SCRUTINY FOR THE REASONS VIZ. (I). LARGE OTHER EXPENSES CLAIMED IN THE P&L A/C.; AND (II). LOW INCOME IN COMPARISON TO HIGH LOANS/ADVANCE /INVESTMENT IN SHARES THEREFORE NO INFIRMITY COULD BE ATTRIBUTED TO THE ASSESSMENT FRAMED BY THE A.O ON THE GR OUND THAT HE HAD FAILED TO DEAL WITH OTHER ISSUES WHICH THOUGH DID NOT FALL WITHIN THE REALM OF THE LIMITED REASONS FOR WHICH THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT. IN OTHER WORDS THE PR. CIT IN THE GARB OF HIS REVISIONAL JURISDICTION U/S 263 CANN OT BE PERMITTED TO TRAVERSE BEYOND THE JURISDICTION THAT WAS VESTED WITH THE A.O WHILE FRAMING THE ASSESSMENT. IN SUM AND SUBSTANCE REVISIONAL JURISDICTION CANNOT BE EXERCISED FOR BROADENING THE SCOPE OF JURISDICTION THAT WAS VESTED WITH THE A.O WHILE FRA MING THE ASSESSMENT. AS A MATTER OF FACT WHAT CANNOT BE DONE DIRECTLY CANNOT BE DONE INDIRECTLY. ACCORDINGLY IN TERMS OF OUR AFORESAID OBSERVATIONS WE ARE OF THE CONSIDERED VIEW THAT AS THE A.O HAD APTLY CONFINED HIMSELF TO THE ISSUES FOR WHICH THE CASE OF THE ASSESSEE WAS SELECTED FOR LIMITED SCRUTINY THEREFORE NO INFIRMITY CAN BE ATTRIBUTED TO HIS ORDER FOR THE REASON THAT HE HAD FAILED TO DWELL UPON CERTAIN OTHER ISSUES WHICH DID NOT FORM PART OF THE REASONS FOR WHICH THE CASE WAS SELECTED FOR LIM ITED SCRUTINY UNDER CASS. WE THUS NOT BEING ABLE TO CONCUR WITH THE VIEW TAKEN BY THE PR. CIT THAT THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) DATED 08.12.2016 IS ERRONEOUS THEREFORE SET ASIDE HIS ORDER AND RESTORE THE ORDER PASSED BY THE A.O. AS WE HAVE QUASHED THE ORDER PASSED BY THE PR. CIT UNDER SEC. 263 ON THE GROUND OF INVALID ASSUMPTION OF JURISDICTION BY HIM THEREFORE WE REFRAIN FROM ADVERTING TO AND THEREIN ADJUDICATING THE CONTENTIONS ADVANCED BY THE LD. A.R ON THE MERITS OF THE CASE WHI CH THUS ARE LEFT OPEN. 9. THE APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 9.4 IN VIEW OF THE ABOVE WE HOLD THAT THERE IS NO INFIRMITY IN THE ORDER OF THE AO WHICH COULD BE REVISED IN THE RE VISIONARY PROCEEDINGS UNDER SEC TION 263 OF THE ACT. ACCORDINGLY IN OUR CONSIDERED VIEW THE REVISIONARY ORDER PASSED BY THE LEARNED PR. ITA NO.188/AHD/2020 ASSTT. YEAR 2015 - 16 10 CIT UNDER SECTION 263 OF THE ACT IS NOT SUSTAINABLE AND CONSEQUENTLY WE QUASH THE SAME. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE COURT ON 17 /03 / 2021 AT AHMEDABAD. SD/ - SD/ - (MAHAVIR PRASAD ) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY ) A HMEDABAD; DATED 17 / 03 /2021 MANISH