Harun Ali Vs PCIT (ITAT Delhi)
Section 263 Cannot Travel Beyond Limited Scrutiny: ITAT Quashes Revision on Labour Payments and 40(a)(ia)x
The Delhi Bench “E” of the ITAT, in Harun Ali v. Pr. CIT (AY 2015-16), allowed the assessee’s appeal and quashed the revisionary order passed under section 263, holding that the PCIT exceeded jurisdiction by venturing beyond the scope of limited scrutiny.
The assessment was originally completed under section 143(3) pursuant to limited scrutiny on specific CASS reasons—(i) mismatch of TDS credit vis-à-vis Form 26AS, (ii) mismatch in turnover between audit report and ITR, and (iii) increase in capital and sundry creditors. After completion, the PCIT invoked section 263 alleging inadequate enquiry into labour/material payments, contractual nature of payments, and possible disallowance under section 40(a)(ia).
The Tribunal noted that the issues raised by the PCIT were not part of the limited scrutiny mandate and that the AO had already examined the selected issues and taken a possible view on the material before him. It reiterated the settled law that section 263 cannot be used to substitute the PCIT’s opinion for that of the AO, and that revision lies only in cases of lack of enquiry—not inadequate enquiry, especially when the AO acts within the confines of limited scrutiny.
Accordingly, the ITAT held that the twin conditions of “error” and “prejudice” were not satisfied, and since the PCIT travelled beyond the permitted scrutiny scope, the revision was unsustainable in law. The 263 order was set aside, and the assessee’s appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The assessee has filed appeal against the order of the Learned Pr.Commissioner of Income Tax, Dehradun [“Ld. PCIT”, for short] dated 27.03.2025 for the Assessment Year 2015-16.
