The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has quashed the assessment order after finding that the Assessing Officer ( AO ) failed to verify the adequacy of agricultural expenditure under Section 143(3), of the Income Tax Act, 1961 stating that it is not sustainable in the interest of revenue.
The brief facts leading to the case is this that the appellant assessee, an individual and derived his income from business and profession and income from other sources too filed its return of income on 20.0.2018 declaring total income at Rs. 1,11,44,840/-.
Upon selection of the case under the limited scrutiny assessment under the e-assessment scheme, 2019 the issue of deduction of interest under Section 57 of the Act has been finalized under Section 143(3) of the Act on 01.02.2020 upon determining total income at Rs. 1,64,05,002/- after making addition of Rs.52, 60,162/- on account of disallowance under Section 57(iii) of the Income Tax Act.
The Principal Commissioner of Income Tax (PCIT) after examination of the case records found that the assessee has claimed exempt agricultural income of Rs. 20, 98,238/- and shown to have earned gross agricultural receipts of Rs.23, 76,267/- in the return of income filed for the year under consideration. Further formed an opinion that the assessee has not been able to establish the genuineness of the agricultural receipts as well as the adequacy of claim of agricultural expenses.
Pratik Gattani, representing the assessee particularly on this ground that the PCIT can at all travel beyond the jurisdiction envisaged under Section 263 of the Income Tax Act in considering the issues which were not finalised and / or raised in the limited scrutiny.
The Assessing Officer has exercised its jurisdiction within the boundary of the CBDT circular, verified the issues raised in a limited scrutiny and only upon due application of mind finalised the issue upon making disallowance under Section 57 of the Income Tax Act, the PCIT cannot exercise the revisional jurisdiction conferred upon him under Section 263 of the Act beyond the issues which were raised and finalised under such limited scrutiny.
A two member bench of the tribunal comprising Wassem Ahemed (Accountant member) and M.s Madumita Roy (Judicial member) observed that the agricultural receipts and the issue of adequacy of agricultural expenditure were not verified by the assessing officer, the order dated 01.02.2021 passed under Section 143(3) of the Income Tax Act was erroneous insofar as prejudicial to the interest of Revenue is palpably bad, not sustainable in the eye of law and therefore quashed. Accordingly, the appeal of the assessee was allowed.
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