The Income Tax Appellate Tribunal (ITAT) has recently held that assessing officer could not travel beyond reason for selection of scrutiny for limited scrutiny as per Central Board of Direct Tax circular.
Assessee Duckwoo Autoind Pvt. Ltd. is a company, After filing their return of income the Assessing Officer(AO) carry out the scrutiny assessment through CASS for limited scrutiny assessment by issuance of notice under section 143(2) of the Act 1961.But the principle commissioner of income tax (PCIT) issue notice under section 263 of the Income Tax 1961 noted that expenses incurred by the assessee are to be disallowed and AO without verification or any inquiry accepted the claim of the assessee and hence, he treated the assessment order framed by AO as erroneous and prejudicial to the interest of the Revenue. Then PCIT set aside the assessment order and directed the AO to re-frame the assessment. Against this order the assessee filed an appeal before ITAT.
M.Abishek counsel for assessees submitted that AO had examined two issues in detail after issuing questionnaires and enquiries on the issues and framed assessment. PCIT now had raised a new issue altogether that is pre-operative expenses, depreciation, expenses relatable to employee benefits, administrative expenses, which was amount to one crore rupees and that was required to disallowed.
Mr.S.Maruthu Pandian, contended that even in limited scrutiny assessment,there is no bar on the PCIT to revise the assessment order even on any other issue.
After considering the contentions of the both parties the division bench of ITAT comprising Mahavir Singh, (Vice President) and Manjunatha (Accountant Member) allow the appeal filed by the assessee and observed that “AO cannot examine any other issue except the issue as selected for limited scrutiny assessment, the PCIT can examine the only issue which was before the AO during the course of scrutiny assessment and not any other issue, which has not been subject matter of the AO for the assessment in a limited scrutiny assessment.”
Further the bench observes that clear intention of the CBDT was to limit the power in limited scrutiny cases and which confines only to the specific reasons/issues for which case has been picked up for scrutiny and further, the scope of enquiry shall be restricted to limited scrutiny issues only. This is the clear intention of the CBDT
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