Limited scrutiny on issue in notice--CIT in
section 263 proceedings examined the issue other than one considered by
AO--Whether Permissible
TaxPub Creative Cell
Facts: The assessee's
case was selected for limited scrutiny under CASS to be restricted to verification
of cash deposits in the savings account of the assessee. The AO conducted
scrutiny proceedings and passed assessment order under section 143(3)
accordingly. Subsequently, Pr. CIT, on consultation of records, observed that
the AO, in course of scrutiny proceedings, omitted to examine the issue of
rental income and agricultural income of the assessee and on that note, set
aside the impugned assessment order with the direction to pass assessment order
afresh. Vide the impugned petition, the assessee challenged this order under
section 263 on the ground that under limited scrutiny, the AO did not have
scope to examine issues beyond the designated one(s).
Held: In limited
scrutiny assessments, scope of verification is limited to the issues mentioned
in the notice issued under CASS system. The AO cannot travel beyond the issues
on which assessment has been taken up for scrutiny. Therefore, once the AO does
not have power to go beyond the issues on which he has taken up case for
scrutiny, then obviously, the Pr. CIT cannot term the assessment order passed
by the AO as erroneous, in so far as it is prejudicial to the interests of
revenue on issues other than the issue taken up by the AO in scrutiny
assessment proceedings. In this case, Pr. CIT had revised assessment order on
the issues other than the issue considered by the AO in assessment proceedings.
Therefore, it was held that Pr. CIT had exceeded her jurisdiction in examining
issues other than the issues which was subject matter of limited scrutiny assessment
proceedings. In view of this, the order under section 263 was quashed.
Case: Yuvaraj v. ITO 2022 TaxPub(DT) 2433 (Coch-Trib)