Arabinda Paul Vs PCIT (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT) Kolkata has set aside the Principal Commissioner of Income Tax’s (PCIT) revisionary order under Section 263 of the Income Tax Act in the case of Arabinda Paul vs. PCIT. The assessee’s return for AY 2017-18, declaring ₹4.87 lakh in income, was selected for limited scrutiny to verify cash deposits. The Assessing Officer (AO) accepted the explanation and finalized the assessment under Section 143(3). However, the PCIT later observed unexplained loans and advances amounting to ₹78 lakh and issued a revision order under Section 263, asserting that the AO’s failure to examine these transactions rendered the assessment erroneous and prejudicial to the Revenue. The assessee challenged the revision, arguing that Section 263 could not be invoked for matters beyond the scope of limited scrutiny.
The ITAT ruled that the AO had followed due process and confined the assessment to verifying cash deposits, as required under limited scrutiny. Since the PCIT’s revision targeted issues unrelated to the initial scrutiny selection, the Tribunal held that the revision lacked jurisdiction and violated principles established by the Supreme Court in Malabar Industrial Co. Ltd. v. CIT. The ITAT emphasized that an order must be both erroneous and prejudicial to the Revenue to justify revision under Section 263. As these conditions were not met, the Tribunal quashed the revision order, reaffirming that limited scrutiny assessments cannot be expanded arbitrarily.
