Kesar Buildcon Pvt. Ltd. Vs ld. PCIT (ITAT Ahmedabad)
PCIT, Don’t Cross Your Limit – 263 Can’t Expand Scrutiny- ITAT Ahmedabad Quashes Revision
Tribunal had to decide whether PCIT was justified in invoking revisionary powers u/s 263 when the original assessment was completed under limited scrutiny through the Faceless E-Assessment Scheme.
Assessee had filed its return declaring a loss of ₹27.49 lakh. The case was selected for scrutiny under CASS for the specific parameter of “very low PBDIT as compared to turnover”. AO issued notices, called for replies, examined the matter & , being satisfied, accepted the returned loss u/s 143(3) r.w.s. 144B. PCIT later invoked revision u/s 263 on the ground that AO had not examined a loan transaction of ₹1.35 crore received from Kesar Built Systems Pvt. Ltd., which allegedly attracted the provisions of deemed dividend u/s 2(22)(e). PCIT relied on audit observations, noting that both companies had common directors, that the transaction was not reported in Form 3CD, & that AO’s failure to examine this issue rendered the order erroneous & prejudicial to the interest of Revenue. Accordingly, he set aside the assessment & directed fresh adjudication.
Assessee argued that the case was selected under limited scrutiny, confined strictly to the parameter of low PBDIT, & AO was not empowered to travel beyond this without formal conversion into complete scrutiny with PCIT’s approval. No such conversion was ever made. Hence, the order could not be treated as erroneous merely because AO did not go into issues outside the CASS mandate. On merits, it was contended that Assessee was not a shareholder in the lending company, so s.2(22)(e) could never apply, relying on CIT v. Ankitech Pvt. Ltd. (340 ITR 14, Del HC) affirmed by the Supreme Court in Madhur Housing & Development Co..
