PCIT exercising suo motu revisional power cannot travel beyond scope of limited scrutiny in original order

PCIT Vs Shark Mines and Minerals Pvt. Ltd. (Orissa High Court)

Orissa High Court held that while exercising suo motu revisional power u/s. 263 of the Act, the CIT cannot travel beyond the scope of the issues which form part of the ‘limited scrutiny’ in the original Assessment Order.

Facts- The original assessment in the case of the Assessee came to be completed u/s. 143(3) by the AO by the Assessment Order dated 23rd November, 2016 in the ‘limited scrutiny’ category where the issue was “excess liability shown and disallowance u/s. 40A(3) of the Act.”

When the Pr. CIT decided to invoke the revisional jurisdiction u/s. 263 of the Act, he issued a Show Cause Notice (SCN) to the Assessee seeking to revisit the Assessment Order on the question of “under valuation of closing stock”, which was beyond the scope of the ‘limited scrutiny’ undertaken by the AO.

By the order dated 29th March 2019, the Pr. CIT while concluding that the Assessment Order was erroneous and prejudicial to the interest of Revenue, directed the AO “to modify his Assessment Order dated 23.11.2016 by making further addition of Rs.15,53,849/- under the head undervaluation to closing stock.”

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