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Tax Publishers Sushanta Kumar Choudhury v. Pr. CIT [ITA No. 226/Ctk/2019, dt. 5-10-2020] : 2020 TaxPub(DT) 4025 (Ctk-Trib) Invocation of section 263 revision powers of Commissioner in a case of limited scrutiny assessment under section 143(3) *Facts:* Assessees case was subject to a limited scrutiny on 3 points which were properly explained and the assessment got completed. Subsequently the PCIT invoked his revision powers under section 263 on alleged inadequate or lack of enquiry by the assessing officer on some other points other than those limited scrutiny points. This order of PCIT under section 263 was appealed by the assessee before the ITAT claiming that the PCIT simply could not invoke section 263 when the case was a limited scrutiny case. It was against the CBDT instructions and empowering a PCIT would give him unlimited powers to revise a return as well thus the PCIT's order deserved dismissal. Held against the assessee that the plenary powers of PCIT are vast to invoke section 263 even in cases of a limited scrutiny on points which were not in the scope of the limited scrutiny. The explanation 2 to section 263 empowers a PCIT as under in case the assessing officer has made inadequate enquiry or has failed to carry out an enquiry on the assessment on a topic having tax impact. To that extent the order of the assessing officer is deemed to be prejudicial to the interests of the revenue. Explanation 2 to section 263 for the purpose of this section, it is hereby declared that an order passed by the assessing officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner -- (a) The order is passed without making inquiries or verification which should have been made; (b) The order is passed allowing any relief without inquiring into the claim, (c) The order has not boon made in accordance with any order, direction 01 instruction issued by the Board under section 119; or (d) The order has not been passed in accordance with any decision which is prejudicial to the assessee rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. It was well within the powers of the assessing officer to convert the limited scrutiny into a full scrutiny with prior approval of the CIT in deserving cases. The absence of doing this is also an order prejudicial to the interests of the revenue. Baby Memorial Hospital Ltd. v. ACIT, (2019) 111 taxmann.com 189 (Cochin-Trib.) : 2019 TaxPub(DT) 7471 (Coch-Trib)--Upheld. *Editorial Note:* The failure of assessing officer to convert limited scrutiny into full scrutiny does not absolve the liability of the assessee under section 263 if invoked. If such was the case then why should an assessee suffer due to failure of the assessing officer to have enquired at the first instance is the governance aspect which needs to be built into Explanation 2 to section 263. To that extent the explanation is one sided or short drafted in the opinion of the author. The drafting also cannot be blamed here as there are a number of cases where what should have been enquired were not done so thus the order being erroneous and prejudicial to the interests of the revenue.

Tax Publishers

Sushanta Kumar Choudhury v. Pr. CIT [ITA No. 226/Ctk/2019, dt. 5-10-2020] : 2020 TaxPub(DT) 4025 (Ctk-Trib)

Invocation of section 263 revision powers of Commissioner in a case of limited scrutiny assessment under section 143(3)

Facts:

Assessees case was subject to a limited scrutiny on 3 points which were properly explained and the assessment got completed. Subsequently the PCIT invoked his revision powers under section 263 on alleged inadequate or lack of enquiry by the assessing officer on some other points other than those limited scrutiny points. This order of PCIT under section 263 was appealed by the assessee before the ITAT claiming that the PCIT simply could not invoke section 263 when the case was a limited scrutiny case. It was against the CBDT instructions and empowering a PCIT would give him unlimited powers to revise a return as well thus the PCIT's order deserved dismissal.

Held against the assessee that the plenary powers of PCIT are vast to invoke section 263 even in cases of a limited scrutiny on points which were not in the scope of the limited scrutiny.

The explanation 2 to section 263 empowers a PCIT as under in case the assessing officer has made inadequate enquiry or has failed to carry out an enquiry on the assessment on a topic having tax impact. To that extent the order of the assessing officer is deemed to be prejudicial to the interests of the revenue.

Explanation 2 to section 263 for the purpose of this section, it is hereby declared that an order passed by the assessing officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner --

(a) The order is passed without making inquiries or verification which should have been made;

(b) The order is passed allowing any relief without inquiring into the claim,

(c) The order has not boon made in accordance with any order, direction 01 instruction issued by the Board under section 119; or

(d) The order has not been passed in accordance with any decision which is prejudicial to the assessee rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.

It was well within the powers of the assessing officer to convert the limited scrutiny into a full scrutiny with prior approval of the CIT in deserving cases. The absence of doing this is also an order prejudicial to the interests of the revenue.

Baby Memorial Hospital Ltd. v. ACIT, (2019) 111 taxmann.com 189 (Cochin-Trib.) : 2019 TaxPub(DT) 7471 (Coch-Trib)--Upheld.

Editorial Note: The failure of assessing officer to convert limited scrutiny into full scrutiny does not absolve the liability of the assessee under section 263 if invoked. If such was the case then why should an assessee suffer due to failure of the assessing officer to have enquired at the first instance is the governance aspect which needs to be built into Explanation 2 to section 263. To that extent the explanation is one sided or short drafted in the opinion of the author. The drafting also cannot be blamed here as there are a number of cases where what should have been enquired were not done so thus the order being erroneous and prejudicial to the interests of the revenue.