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Diganta Deka Vs PCIT (ITAT Guwahati)
The present article delves into the details of an income tax appeal directed against the order of the ld. Principal Commissioner of Income Tax, Guwahati-1, dated 31st March 2021, for the Assessment Year (A.Y.) 2015-16 under Section 263 of the Income Tax Act. The crux of the appeal revolves around the contention that the ld. Commissioner erred in assuming power under Section 263, leading to the setting aside of the assessment order dated 18th December 2017 under Section 143(3) of the Income Tax Act.
Background
The assessee, having filed the return of income electronically on 9th October 2015, declared a total income of Rs.1,04,68,750/-. The case underwent limited scrutiny based on the notice dated 21st September 2016 issued under Section 143(2). The issues flagged for scrutiny included discrepancies in income from various sources, contract receipts/fees, sales turnover, and tax credit.
The ld. Assessing Officer conducted the scrutiny assessment under Section 143(3) on 18th December 2017.
Commissioner’s Intervention
The ld. Principal Commissioner, upon perusal of the record, formed an opinion that the assessment order was both erroneous and prejudicial to the interest of revenue. A show-cause notice was issued, citing specific reasons, primarily focusing on two items: ‘Loss on shares’ and ‘Expenses on let out property’ and ‘Expenses against Rental Income.’ The Commissioner contended that these were allowed in contravention to the provisions of the Income Tax Act.
The assessee, failing to respond to the notice, led the Commissioner to set aside the assessment order, deeming it erroneous and prejudicial to the interest of revenue. The case was remitted back to the ld. Assessing Officer for fresh inquiry and the issuance of a new assessment order on the identified issues.
Grounds of Assessee’s Appeal
The appeal by the assessee centered on the argument that the case was selected for limited scrutiny, and the Commissioner could not convert it into a complete scrutiny. The key contention was that the Commissioner had overstepped the boundaries of limited scrutiny.
Reference was made to the CBDT Circular No. 20 of 2015 dated 29th December 2015, and reliance was placed on the ITAT, Indore order dated 7th February 2022, in the case of M/s. Sahita Construction Company vs. PCIT in ITA No. 119/Ind./2021.
Tribunal’s Analysis and Decision
Upon careful consideration of the record and arguments presented, the Tribunal dismissed the contention that the limited scrutiny was improperly expanded. It emphasized that the issues raised fell within the scope of limited scrutiny, notably under the category of ‘income from heads of income other than business/profession mismatch.’ The Tribunal rejected the applicability of the CBDT Circular and the ITAT, Indore order to the present case.
Notably, the assessee did not appear before the ld. Commissioner or provide any explanation regarding the identified errors, further weakening the case.
Conclusion
In the absence of substantive arguments and considering the merits of the ld. Commissioner’s order, the Tribunal found no error in the decision. Consequently, the appeal of the assessee was deemed devoid of merit and dismissed.
The order was pronounced in the open court on 9th October 2023, closing the chapter on this income tax appeal.
FULL TEXT OF THE ORDER OF ITAT GUWAHATI
The present appeal is directed at the instance of assessee against the order of ld. Principal Commissioner of Income Tax Guwahati- 1 dated 31st March, 2021 passed for A.Y. 2015-16 under section 263 of the Income Tax Act.
2. The assessee has taken three grounds of appeal, but the sole grievance of the assessee is that ld. CIT has erred in assuming power under section 263 and thereby setting aside the assessment order dated 18.12.2017 passed under section 143(3) of the Income Tax Act.
3. Brief facts of the case are that the assessee has filed his return of income electronically on 09.10.2015 declaring total income of Rs.1,04,68,750/-. The case of the assessee was selected for limited scrutiny as discernable from the copy of notice dated 2 1.09.2016 issued under section 143(2). The issues, which have been contemplated in this notice for scrutinisation, are :-
(i) Income from heads of income other than business/profession mismatch;
(ii) Contract receipts/Fees mismatch;
(iii) Sales Turnover mismatch;
(iv) Tax Credit mismatch.
The ld. Assessing Officer thereafter passed the scrutiny assessment under section 143(3) of the Income Tax Act on 18.12.2017.
4. The ld. Principal Commissioner perused the record and formed an opinion that assessment order is erroneous as well as prejudicial to the interest of revenue. He issued a show-cause notice and the reasons for issuance of such show-cause notice are reproduced by him on pages no. 2 & 3 of the impugned order. Apart from the various aspects, the major reason assigned by the ld. Commissioner is confined to two items, which are relevant for the purpose of this appeal:-
“And whereas a sum of Rs. 1,46,628/- was debited in your P& L A/c as ‘Loss on shares’ under ‘Other Expenses’ and allowed at the time of assessment in contravention to provisions of section 71(3) of the Income Tax Act, 1961.
And whereas an amount of Rs.51,750/- has been claimed as ‘Expenses on let out property’ and an amount of Rs. 79,936/- has been claimed as ‘Expenses against Rental Income’ and allowed at the time of assessment, even though such expenses were not covered under Chapter IV of the Income Tax Act, 1961.
5. The assessee did not respond to the notice of ld. CIT. In the absence of any explanation at the end of the assessee, the ld. Commissioner set aside the assessment order being erroneous and prejudicial to the interest of revenue and remitted them back to the ld. Assessing Officer. He set aside for fresh enquiry and passing of the fresh assessment order on these two issues.
6. The ld. Counsel for the assessee while impugning the order of ld. Pr. CIT contended that the case of the assessee was selected for limited scrutiny and it cannot be converted to a complete scrutiny. These items could have not been examined by the ld. CIT. he made a reference to the CBDT Circular No. 20 of 2015 dated 29.12.2015 and also put reliance upon the ITAT, Indore order dated 7th February, 2022 in the case of M/s. Sahita Construction Company –vs.- PCIT in ITA No. 119/Ind./2021. He has placed on record copies of all these documents in the paper book, which contain 12 pages.
7. With the assistance of ld. Representatives, we have gone through the record carefully. The emphasis of ld. Counsel for the assessee is misplaced that these two items cannot be looked into by the ld. Commissioner because it is a case for limited scrutiny. It is pertinent to observe that we have take note of all the issues on which limited scrutiny was to be carried out. The first item in these issues is ‘income from heads of income other than business/profession mismatch’. The other head of income of the assessee, is ‘house property income’ and apart from the expenditure provided under Chapter (iv) of the Income Tax Act, no other expenditure could be claimed. It is patently erroneous claim at the end of the assessee, which has been accepted by the ld. Assessing Officer, therefore, this CBDT Circular is not attracted in the present case. The scrutiny of the income of the assesee is not being converted from limited scrutiny to complete scrutiny. These items duly fall within the first issue provided in the limited scrutiny itself, therefore, neither the decision of the ITAT Indore Bench applicable nor CBDT Circular. The assessee has not appeared before the ld. Commissioner or filed any explanation qua the proposed errors. Therefore, considering the stand of both the sides as well as perusal of the impugned order of the ld. Pr. Commissioner, we do not find any error in it. The appeal of the assessee is devoid of any merit and accordingly dismissed.
8. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court on 09.10.2023.
