The Principal Commissioner of Income Tax cannot invoke section 263 for issues outside the scope of limited scrutiny, as the Assessing Officer acted within jurisdiction.

ORDER

PER MANISH AGARWAL, AM:

This appeal is filed by the assessee against the order passed u/s 263 of the Income Tax Act, 1961 (the Act, in short) by the ld. Principal Commissioner of Income Tax, vide DIN & Order No: ITBA/REV/F/REV5/2022-23/1051132223(1) dated 22.03.2023 for Assessment Year 2018-19.

2. Brief facts of the case are that the assessment in this case was completed u/s 143(3) r.w.s 143(3A) and 143(3B) of the Act dated 07.04.2021 accepting the income declared by assessee. The case of the assessee was selected under limited scrutiny for the issue “Capital Gains deduction claimed”. On examination of the assessment record, the Ld. PCIT found that the assessment order so passed by the National E-assessment Centre, Delhi does not speak about any enquiry or investigation done in the matter. He thus opined that the order so passed is erroneous and prejudicial to the interest of the Revenue. Further ld. PCIT observed that the deduction claimed u/s 54 of the Act at Rs.5,00,00,000/- was allowed by the Assessing Officer, however, as the assessee has sold the land and has not invested the entire amount of sale consideration in the acquisition of the house property, only proportionate deduction should be allowed. According to Ld. PCIT, the same is worked out at Rs.4,67,16,151/- as against Rs.5,00,00,000/- allowed by the AO in the order passed u/s 143(3) of the Act. The Ld. PCIT further observed that assessee has declared the sale consideration on the basis of the agreement of sale/registered sale deed whereas the sale price as per provisions of section 50C being higher. Thus, the provisions of section 50C are to be invoked. This fact has not been examined by the Assessing Officer. Accordingly, the Ld. PCIT vide order passed u/s 263 of the Act has held the order so passed u/s 143(3) as erroneous in so far as it is prejudicial to the interest of Revenue and direct the AO for passing fresh a fresh assessment order in accordance with law after making proper enquiry and investigation on both the issues.

4. Against such order, the assessee has preferred the appeal before the Tribunal by taking the following grounds of appeal:-

“1. That on the facts and in law, the Learned Principal Commissioner of Income Tax-10 (Ld. PCIT) has erred in setting aside the assessment order to be redone on two issues in accordance with law by holding the same erroneous in so far as it is prejudicial to the interest of the revenue.

1.1 That the order of Learned Assessing Officer (Ld. AO) is not an erroneous order prejudicial to the interest of the revenue within the meaning of section 263 of the Act on the issues of (i) Applicability of section 50C on sale of farm house and (ii) Deduction claimed and allowed u/s 54. The order of Ld. CIT is unlawful and beyond permissible jurisdiction under section 263 of the Act.

As such, the order of Ld. CIT is unlawful and is liable to be quashed.

2. That the Ld. PCIT has erred in not appreciating that in limited scrutiny case, the Ld. AO had no jurisdiction to go beyond the issues of limited scrutiny as per binding CBDT instructions. Accordingly, Ld. CIT has no jurisdiction to pass revisionary order on other aspects and remit matter to Ld. AO for fresh assessment. As such too the impugned revision order passed by Ld. PCIT being erroneous deserves to be quashed.

3. That the Ld. CIT has erred in setting aside the assessment order on the erroneous grounds that:

(1) Provisions of Section 50C are applicable in this case.

(0) Deduction was allowable u/s 54F and not u/s 54 on the incorrect ground that the property sold is "plot of land" as against "Farm House" as claimed by the assessee.

4. That the order of the Ld. CIT, setting aside the said two issues to be re made in accordance with law after examination and investigation rather than giving a final finding is unlawful, as held by Hon’ble Delhi High Court in the case of Globus Infocom Ltd. 369 ITR14 (Del).

5. That on the facts and in law, the Ld. PCIT has erred in invoking Explanation