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Tax Publishers 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)

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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)