Whether revisionary power can be exercised in case the assessment proceeding was undertaken only for the purpose of limited scrutiny?
In the recent judgment of Hasumatiben Jagdishbhai Patel vs. PCIT, the Hon. Surat bench ITAT centered on the issue of revision proceedings u/s 263 coupled with the scope of scrutiny.
The judgment concentrated on the issue that if the case was selected for “limited scrutiny” no further enquiry can be made by the Commissioner in the revisional proceedings that is no way directly or indirectly connected with any of the aforesaid “limited scrutiny” However, the Ld. PCIT not only conducted inquiry out of the limited scrutiny but also, exceeded his jurisdiction by examining the additional issue which was not subject matter of show cause notice issued by him during the revisional proceedings.
Ld. AR for the assessee submitted that without giving any opportunity on the issue which was not subject-matter of show cause, the order passed by Ld. PCIT under section 263 to that extent is absolutely illegal, invalid and ab initio. The Ld. AR for the assessee further contended that it was not open for the Commissioner to exercise his jurisdiction to find fault in the assessment order on the issue which was not covered in the “limited scrutiny”.
The Honorable Surat Bench ITAT held that:
“We find that to support such contention, the assessee furnished complete details of her financial statement in the form of audited accounts. We find that such reply was not considered by Ld. PCIT, which was coupled with evidence, however, while passing the order under section 263, he identified some other issues which was related with repayment loan and interest to NRI, which was not subject-matter of notice issued under section 263 of the Act. Admittedly, no notice under section 263 or opportunity on such new issue was given by Ld. PCIT. Thus, we are of the considered view that issues, which was not the subject-matter of the show cause notice or neither any opportunity of being heard was granted to assessee on such new issue, the same cannot be made basis for revising the assessment order
So far as primary issue identified in the show cause notice under section 263, we find that once the assessment was selected for “limited scrutiny” and the Assessing Officer examined such issue, it is not open for the ld PCIT to exercise his jurisdictional power under section 263 on the issues which were not covered in the “limited scrutiny”. Therefore, action initiated by Ld. PCIT for revising such issue was not justified in nature.
The copy of the order is as under:
