In Harun Ali v. Principal Commissioner of Income Tax, Dehradun, the Delhi Bench of the Income Tax Appellate Tribunal examined the validity of revisionary proceedings initiated under Section 263 of the Income-tax Act, 1961 for Assessment Year 2015–16.

The assessee’s case was selected for limited scrutiny under CASS for specific reasons relating to mismatch in tax credit, mismatch in turnover, and increase in capital and sundry creditors. The assessment was completed under Section 143(3) after examination of issues falling within the limited scrutiny mandate. Subsequently, the Principal Commissioner invoked Section 263 alleging that the Assessing Officer had failed to examine labour and material payments and the applicability of disallowance under Section 40(a)(ia), treating the assessment order as erroneous and prejudicial to the interests of Revenue.

The Tribunal noted that the issues raised by the Principal Commissioner for revision were not part of the original limited scrutiny selection criteria. It held that the Assessing Officer is not empowered to travel beyond the scope of limited scrutiny and, correspondingly, the Principal Commissioner cannot invoke revisionary jurisdiction on issues which were never the subject matter of assessment.

The Tribunal further reiterated that Section 263 can be invoked only when both statutory conditions—erroneous order and prejudice to Revenue—are satisfied. Where the Assessing Officer has taken a possible view within the scope of limited scrutiny, revision under Section 263 amounts to substitution of opinion, which is impermissible in law.

Accordingly, the ITAT held that the revisionary order passed under Section 263 was without jurisdiction and unsustainable in law, and allowed the appeal of the assessee.

Source Link- https://itat.gov.in/public/files/upload/1767771858-WdFKnv-1-TO.pdf

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