Sh. Rajinder Pal Verma, Solan V. Pr. C.I.T. Chandigarh -1, Chandigarh

ITA 419/CHANDI/2022

AI Insights

The case revolves around an appeal by Shri Rajinder Singh Verma against the order of the Pr. CIT, Chandigarh-1, which set aside the original assessment order for the Assessment Year 2017-18. The Pr. CIT had invoked section 263, claiming the original assessment was erroneous and prejudicial to the interests of the Revenue due to inadequate inquiry regarding the assessee's agricultural income and other financial transactions. The Tribunal examined whether the Pr. CIT was justified in expanding the scope of scrutiny beyond the limited scrutiny for which the case was originally selected. The Tribunal concluded that the Pr. CIT exceeded his jurisdiction by addressing issues outside the scope of limited scrutiny without proper conversion to complete scrutiny.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127775 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-07-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 08-05-2022
• Other Referred Cases: Mahendra Singh Dhankhar HUF vs ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Opportunity of being heard; Tangible material; Wrong claim; Bad and doubtful debts; Competent authority; Assessment record; Set aside
• Section: 147; 263; 143(3); 142(1); 143(2); 44AB; 2(A)

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी आकाश द प जैन, उपा य एवं ी $व%म 'संह यादव, लेखा सद,य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM आयकर अपील सं./ ITA NO. 419/Chd/ 2022 नधा रण वष / Assessment Year : 2017-18 Shri Rajinder Singh Verma C/o Parikshit Aggarwal, C.A H.No. 3035, Sector 27D, Chandigarh बनाम The Pr. CIT Chandigarh-1 थायी लेखा सं./PAN NO: AAHPV9001B अपीलाथ /Appellant यथ /Respondent नधा रती क! ओर से/Assessee by : Shri Parikshit Aggarwal, CA राज व क! ओर से/ Revenue by : Shri Ram Mohan Singh, CIT, D.R स ु नवाई क! तार&ख/Date of Hearing : 04/07/2023 उदघोषणा क! तार&ख/Date of Pronouncement : 01/08/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the assessee against the order of the Ld. Pr. CIT, Chandigarh-1 dt. 09/03/2022 pertaining to Assessment Year 2017-18 wherein the assessee has raised the following grounds of appeal: 1. That on law, facts & circumstances of the case, the Worthy Pr. CIT has grossly erred in assuming jurisdiction u/s 263 even when: 1.1 The original assessment order passed u/s 143(3) do not satisfy the twin conditions of being an ‘erroneous order’ and ‘prejudicial to the interests of revenue’. 1.2 The original assessment order passed u/s 143(3) was under limited scrutiny and the Worthy CIT has travelled beyond that scope. 1.3 The Worthy Pr. CIT has erred in setting aside the assessment order u/s 143(3) and in directing the AO to make assessment afresh on the ground that the assessment order was passed under inadequate enquiry. 1.4 The Worthy Pr. CIT failed to appreciate that in proceedings u/s 263, he cannot substitute the views of AO unless the view of AO is totally unsustainable. 1.5 The Worthy Pr. CIT has erred in holding that the assessment order requires to be revised u/s 263 since agricultural income declared by the assesee may be ingenuine. 1.6 The Worthy Pr. CIT has erred in holding that the assessment order requires to be revised u/s 263 since books have not been audited u/s 44Ab and the AO should have got the assessment converted from Limited scrutiny to complete scrutiny. 2 1.7 The Worthy Pr. CIT has conducted the impugned proceedings u/s 263 in extreme haste and without affording reasonable opportunity of being heard to the appellant. 2. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same.” 2. Briefly, the facts of the case are that the assessee filed his return of income declaring total income of Rs. 2,50,340/- and agricultural income of Rs. 30,66,660/-. Subsequently, the case of the assessee was selected for limited scrutiny through CASS to examine large agriculture income and notice under section 143(2) and 142(1) were issued alongwith detailed questionnaire. Thereafter, taking into consideration the submissions filed by the assessee that the agricultural income reported in ITR was mistakenly reported as Rs. 30,66,666/- as against the actual figure of Rs. 3,06,666/- being a clerical mistake and after taking into consideration the affidavit filed by the assessee, the agricultural income was determined at Rs. 3,06,666/- and the return income of Rs 2,50,340/- was accepted. 3. Subsequently, the assessment records were called for and examined by the Ld. Pr. CIT and a show cause dt. 16/02/2022 was issued to the assessee and the contents of the show cause reads as under: “1. The assessee had filed his return of income on 24.09.2017, for the Assessment Year 2017- 18, declaring total income of Rs.250,340-'- and agricultural income of Rs. 30,66,666/-. The income was returned under the head 'House Property' and from 'Other Sources'. The case of the assessee was selected for Limited scrutiny through CASS on account of huge agricultural income. The assessee submitted his reply in response to the questionnaire issued by the Assessing Officer, and the assessment was completed under section 143(3) of the Income Tax Act, 1961 on 09.05.2019 accepting the returned income. The agricultural income was reduced by the assessee himself during the cou r se of assessment proceedings to Rs. 3,06.666/- from Rs. 30,66.666/- on the plea that a typographical mistake had occurred while filing the ITR. 2. On perusal of the relevant case records, it is noted that during the course of assessment proceedings, the AO had issued a single line questionnaire along with the notice u/s 142(1) on 12.04.2019, which reads as under: "Please furnish documents like land holding, bills etc. in respect of large income shown by you during the year under consideration" 3. Thus the very questionnaire issued by the AO was vague and sketchy. The AO was required to make enquiry on certain core issues related to the claim of the agricultural income, e.g. ownership of agricultural land, size of the land holding, period of acquisition of land, description of land, agricultural activities carried out by the assessee, expenses incurred, quantum of the agricultural yield sale of the agricultural produce/yield, and the receipt of income. From the perusal of records, it is found that the AO failed to make any enquiry whatsoever in respect of these issues related to the agricultural income disclosed 3 by the assessee. The assessee chose to scale down the initial claim of agricultural income from Rs.30,66,666/- to Rs.3,06,666/- citing it as a typographical mistake and the Assessing Officer accepted this contention as well without batting an eyelid. He also accepted the claim of the remaining agricultural income without any cross verification of the necessary facts as discussed above. 4. During the course of assessment proceedings, the assessee furnished an affidavit dated 26.04.2019, affirming that the agriculture income was shown at Rs. 30,66,666/-due to a typographical mistake. From the perusal of Schedule El of the ITR, in column No. 4, however, it is noted that the gross agriculture receipts were shown at Rs. 49,06,696/-, and after claiming the agricultural expenses of Rs. 18,39,996/-, the net agriculture income was shown at Rs.30,66,666/-. This does not appear to be a simple typographical mistake, as in the ITR net agricultural income was calculated after taking out the expenditure. The assessee has mentioned in the affidavit that one extra zero was marked in the agricultural income. The mistake rectified however, pertains to an extra ' 6 ' an d not zero. As the income was duly calculated from the gross income by reducing the expenditure, this certainly was not a case of clerical mistake. The AO failed to make necessary inquiry in respect of the agricultural income of the assessee, and to ascertain whether the agricultural income was revised downwards to escape penalty by the assessee on account of misrepresentation of facts. The assessee failed to give the description of the agricultural land in his possession, the details of the agricultural activities carried out by him, details of the agricultural produce and its sale. Therefore, the AO failed to make necessary enquiry even in respect of the residual agricultural income disclosed by the assessee. The A.O. also did not make any enquiries about the agricultural income returned by the assessee in earlier years. 5. From the perusal of the account statements filed during the course of the assessment proceedings, it is noted that the assessee has retuned negative opening capital balance as on 01.04.2016. He has also returned a meagre value of the Fixed Assets at Rs.17,670/- only, with the WDV of Car at Rs.7,672/- only. As contrasted to this, the assessee has shown a huge unsecured loan of Rupees Two Crore Thirty Thousand Five Hundred and Twenty Two (Rs.2,00,30,522/-) from one Jasdeep Singh Barar, to which interest of Rs.20,03,052/- has been added during the year. He has shown another unsecured loan of Rs.4 lac from one Brij Lai. The assessee has also shown advances received for the sale of some land amounting to Rs. 1,03,91,252/-from various persons. The assessee was prima-facie engaged in the business of property dealing/real estate. Despite the gross receipts exceeding Rs. 1 Crore, claimed as advance money from the customers, the accounts have not been got audited by the assessee as per the mandate of section 44AB of the Act. The AO thus dearly failed to convert the case into complete scrutiny on the given facts, and to enquire about the genuineness of the assessee's claim of such huge unsecured loans and advances. The said claim too prima-facie appears to be an exercise in bogus capital formation like the one resorted to through the false claim of agricultural income. 6. In view of above, the assessment order passed u/s 143(3) of the Act dated 09.05.2019 is prima facie erroneous in so far as it is prejudicial to the interest of revenue with the meaning of [explanation 2(a) of section 263(1) of the Income Tax Act, 1961 as the order has been passed without making enquiries or verification which should have been made. 7. The assessee is hereby given an opportunity to explain as to why the assessment order passed u/s 143(3) of the Act dated 09.05.2019 by the ITO, Ward-1, Shimla for the A.Y 2017- 18 may not be cancelled and the AO may not be directed to make a fresh assessment.” 4. In response to the show-cause, there was however no response from the assessee and thereafter, basis material available on the record, the Ld. Pr. CIT has 4 passed the impugned order wherein the assessment order passed under section 143(3) dt. 09/05/2019 was held as erroneous in so far as prejudicial to the interest of the Revenue and the matter has been set aside to the file of the AO to make requisite inquiries and proper verification with regard to the issue mentioned in the impugned order and make the assessment denovo after due consideration of the facts and the law in this regard and after providing adequate opportunity of being heard to the assessee. 5. Against the said findings and the direction of the Ld. Pr. CIT, the assessee is in appeal before us. 6. During the course of hearing, the Ld. AR has submitted that the Ld. Pr. CIT has broadly raised two issues as to why the assessment order is to be treated as erroneous in so far as prejudicial to the interest of the Revenue. It was submitted that the first issue relates to the claim of the agricultural income so reported by the assessee while filing his return of income and the second issue relates to the fact that the assessee has taken unsecured loans as well as advances from certain persons for sale of land and the AO has failed to convert the case of the assessee from limited scrutiny to complete scrutiny. 7. It was submitted that the case of the assessee was selected for limited scrutiny through CASS to examine large agricultural income and therefore as far as the second issue which has been raised by the Ld. Pr. CIT in terms of non- examination of advances and loan transactions undertaken by the assessee during the Financial Year relevant to the impugned Assessment Year, the same is clearly beyond the scope of the limited scrutiny and therefore where the AO cannot examine those transactions, the Ld. Pr. CIT is equally precluded from examining the said transactions. It was submitted that it is now a settled position that unless the case of the assessee was converted from limited scrutiny into complete scrutiny by the AO after seeking permission from the competent authority during the course of assessment proceedings, the AO cannot go beyond the reasons for which the case of the assessee was selected for limited scrutiny. It was submitted that in the instant case, it is an admitted position that there is no conversion of limited scrutiny into complete scrutiny and no approval has been sought by the AO from the competent authority in this regard and all throughout the assessment 5 proceedings, the matter was limited to examine agricultural income and therefore in the said facts and circumstances of the case, there is no basis for the Ld. Pr. CIT to invoke his jurisdiction under section 263 of the Act highlighting the failure on the part of the AO to examine these advances and loan transactions which are clearly beyond the scope of limited scrutiny. 8. Coming to the issue of the agricultural income, it was submitted that during the course of assessment proceedings, the AO did issue the necessary notice and raised relevant queries to exame the agricultural income so shown by the assessee as evident from the notice under section 142(1) dt. 12/04/2019. It was submitted that in response to the said notice, the assessee submitted that the agricultural income has been wrongly and mistakenly reported as Rs. 30,66,666/- instead of Rs 3,06,666/- and it was merely a clerical and typographical mistake which has happened while filing the return of income and in support of his submission, the assessee also filed the copy of the books of account and on perusal of the assessee’s capital account which is available at the assessee’s paper book page 13, it was submitted that it is evident the agriculture income has been shown at Rs. 306,666/-. It was submitted that after taking into consideration the submissions including the affidavit of the assessee and examining thereof with books of account and the balance sheet so submitted by the assessee, the AO has accepted the claim of the assessee regarding quantum of the agriculture income. It was accordingly submitted that the matter was duly examined by the AO and it is therefore clearly not a case where the AO failed to conduct any inquiries during the course of assessment proceedings as so held by the Ld. Pr. CIT in the impugned order. 9. It was further submitted that the claim of the assessee that the agriculture income for the impugned Assessment Year is to the tune of Rs. 3,06,666/- is also corroborated by the agriculture income which has been reported by the assessee for the previous and the subsequent assessment years. It was submitted that the assessee has reported agriculture income of Rs. 6,52,910/- for A.Y. 2015-16, Rs. 413,300/- for A.Y. 2016-17, Rs. 207,485/- for A.Y. 2018-19, and Rs. 395,804/-. for A.Y. 2019-20. It was submitted that the agricultural income so reported for A.Y 2017-18 at Rs 306,666/- is thus within close range of agriculture income which has been reported in the past and 6 subsequent years. It was accordingly, submitted that it is clearly a case where the agriculture income of Rs 30,66,660/-has been wrongly reported while filing the return of income and given the comparative position in the previous and the subsequent years, it is evident that the actual agriculture income of Rs 306,666/- is commensurate with the assessee’s land holding and tax filings and therefore where the AO has accepted the claim of the agriculture income at Rs. 3,06,666, the same has been passed after due enquiry and verification and the order so passed by the AO cannot be held to be erroneous in so far as prejudicial to the interest of the Revenue. 10. Per contra, the Ld. CIT DR has relied on the order of the Ld. Pr. CIT. Regarding the non verification of transaction of unsecured loans and advances taken by the assessee during the year, it was submitted that it is clearly apparent from the record that these transactions called for further verification and given that these were apparent from the face of the record, it was incumbent on the part of the AO to seek conversion of the case from limited scrutiny into complete scrutiny and to inquire about genuineness of the assessee claim for such huge unsecured loans and advances and therefore where the Ld. Pr. CIT after examining the assessment record has highlighted such failure on the part of the AO, the order so passed by the Ld. Pr. CIT is clearly in accordance with the provisions of the law and reliance was placed on the CBDT Instruction No. 20/2015 dt. 29/12/2015 r/w Instruction no. 5/2016 dated 14/07/2016. It was accordingly submitted that the contention raised by the Ld. AR in this regard deserves to be dismissed and the order of the Ld. Pr. CIT be upheld. 11. It was further submitted that the AO has completed the assessment in complete haste without conducting any inquiry and the assessment order has been passed by simply completing the formality of placing the documents as furnished by the assessee on record. The AO accepted the self serving bald claim of the assessee to prove the genuineness of the assessee’s claim regarding the agriculture income. The AO did not even try to ascertain whether the agriculture income was revised downwards to escape penalty on account of misrepresentation of facts. It was further submitted that the documentary evidence for the genuineness of the assessee’s claim regarding the agriculture income amounting to Rs. 3,06,666/- remained totally unverified and thus defeating the very purpose of the selection of the case for scrutiny assessment under 7 CASS. It was accordingly submitted that there is no infirmity in the order so passed by the Ld. Pr. CIT and thus, the appeal so filed by the assessee deserve to be dismissed. 12. We have heard the rival contentions and purused the material available on record. Firstly, we refer to the contention advanced by the ld AR that where the case of the assessee was selected for limited scrutiny to examine agriculture income, the Assessing Officer was not required to examine transactions of unsecured loans and other advances which are beyond the scope of limited scrutiny and therefore, on this count, the order so passed by the Assessing Officer cannot be held to be erroneous and prejudicial to the interest of the Revenue and therefore, outside the purview of jurisdiction of ld PCIT u/s 263 of the Act. 13. It is no doubt true that where the matter is selected for limited scrutiny, the line of the inquiry and investigation by the Assessing Officer is required to be limited to the matters for which the case was selected for limited scrutiny as per the CBDT’s Instructions and unless the matter is converted from limited scrutiny to complete scrutiny, the AO is precluded from conducting any enquiry on any other matter/issue which is outside the scope of limited scrutiny and the Pr. CIT u/s 263 therefore cannot traverse beyond the jurisdiction that was vested with the A.O while framing the assessment as what cannot be done directly cannot be done indirectly. Therefore, where the matter was selected for limited scrutiny, revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was originally vested with the A.O while framing the assessment. The same is a consistent stand of this Bench as well as across various Benches of the Tribunal. 14. Now, coming to the contention advanced by the ld CIT DR that where there is a potential escapement of income, the AO is required to convert the limited scrutiny case into a comprehensive scrutiny case after taking the prior approval of ld. PCIT and if the AO does not get the limited scrutiny case converted to comprehensive scrutiny case even though there are material on record, the assessment order becomes erroneous as it is prejudicial to the interest of Revenue and jurisdiction u/s section 263 of the Act has been rightly invoked by the ld PCIT. In this regard, we refer to the decision of the Coordinate Jaipur Benches in case of Mahendra Singh Dhankhar HUF vs ACIT (ITA 8 No. 265/JP/2020 dated 30/06/2021), wherein similar contention was raised and addressed by the Bench (speaking through one of us) and it would be appropriate to refer to the findings therein which are equally relevant in the instant case and the same reads as under: “16. We have heard the rival contentions and perused the material available on record. There is no dispute that the case of the assessee was selected for limited scrutiny under CASS on account of mismatch of sales turnover as reported in audit report, ITR, AIR and CIB data. The A.O. issued notice u/s 143(2) of the Act and enquired about the issues under consideration and in response, the assessee submitted copies of the sale deeds executed during the year under consideration and also submitted reconciliation of sales turnover with financials, ITR, AIR and CIB data which is also placed on record before us. Being satisfied, the AO completed the assessment u/s 143(3) without any adverse finding regarding the issues for which the matter was selected for limited scrutiny. 17. There is no dispute that scope of enquiry in case of limited scrutiny is only to the extent of the issues for which case was selected for scrutiny under CASS. The CBDT has issued instructions from time to time in this respect and has specifically instructed the taxing authorities that scope of enquiry should be limited to verification of all the particulars for which limited scrutiny was taken up under CASS. However, in case during the assessment proceeding if the AO is of the view that substantial verification of other issue is also required then the case may be taken up for comprehensive scrutiny with the approval of the Pr.CIT/DIT concerned. It is also instructed that such an approval shall be accorded by the Pr.CIT/DIT in writing after being satisfied about the merits of the issue(s) necessitating wider and detailed scrutiny in the case. In the latest Instruction No. 5/ 2016 dated 14-07- 2016, CBDT has again instructed the taxing authorities in para 2 to 4 as under:- "2. In order to ensure that maximum objectivity is maintained in converting a case falling under 'Limited Scrutiny' into a 'Complete Scrutiny' case, the matter has been further examined and in partial modification to Para 3(d) of the earlier order dated 29.12.2015, Board hereby lays down that while proposing to take up 'Complete Scrutiny' in a case which was originally earmarked for 'Limited Scrutiny', the Assessing Officer ('AO') shall be required to form a reasonable view that there is possibility of under assessment of income if the case is not examined under 'Complete Scrutiny'. In this regard, the monetary limits and requirement of administrative approval from Pr. CIT/CIT/Pr.DIT/DIT, as prescribed in Para 3(d) of earlier Instruction dated 29.12.2015, shall continue to remain applicable. 3. Further, while forming the reasonable view, the Assessing Officer would ensure that: a. there exists credible material or information available on record for forming such view; b. this reasonable view should not be based on mere suspicion, conjecture or unreliable source; and c. there must be a direct nexus between the available material and formation of such view. 4. It is further clarified that in cases under 'Limited Scrutiny', the scrutiny assessment proceedings would initially be confined only to issues under 'Limited Scrutiny' and questionnaires, enquiry, investigation etc. would be restricted to such issues. Only upon conversion of case to 'Complete Scrutiny' after following the procedure outlined above, the AO may examine the additional issues besides the issue(s) involved in 'Limited Scrutiny'. The AO shall also expeditiously intimate the tax payer concerned regarding conducting 'Complete Scrutiny' in such cases." 18. Thus the AO is duty bound to follow the instructions in case limited scrutiny assessment proceeding are proposed to be converted into complete scrutiny and without following said procedure and necessary approval of the competent authority conducting an 9 enquiry on the issue which is outside the limited scrutiny would be beyond the jurisdiction of the AO. As a necessary corollary, the Pr. CIT u/s 263 cannot be permitted to traverse beyond the jurisdiction that was vested with the A.O while framing the assessment as what cannot be done directly cannot be done indirectly. Therefore, where the matter was selected for limited scrutiny, revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was originally vested with the A.O while framing the assessment as also held consistently by various Benches of the Tribunal as referred supra. 19. A contention which has been raised by the ld CIT/DR is that where there is a potential escapement of income, the AO is required to convert the limited scrutiny case into a comprehensive scrutiny case after taking the prior approval of ld. PCIT and if the AO does not get the limited scrutiny case converted to comprehensive scrutiny case even though there are material on record, the assessment order becomes erroneous as it is prejudicial to the interest of Revenue and provisions of section 263 of the Act are applicable. For the purposes of converting limited scrutiny to complete scrutiny, what is relevant is that there must be some credible material or information on face of the record and basis review thereof during the assessment proceedings, the AO is required to form a reasonable view that there is possibility of under assessment of income if the case is not examined under 'Complete Scrutiny' and after seeking approval from the competent authority, the case can be converted into complete scrutiny and that too, during the currency of assessment proceedings. Therefore, what is essential is the existence of credible material and basis examination thereof and formation of belief by the AO at first place during the course of assessment proceedings that there is a case of under assessment or escapement of income which is similar to provisions of section 147 of the Act. In the instant case, we find that the assessee, being in business of real estate development has followed percentage completion method of accounting and has accounted for actual costs incurred though after the end of the financial year as the project was substantially completed and revenues have been recognized. Therefore, we find that there is no infirmity in assessee following the accepted method of accounting and basis thereof, determination of income which is offered to tax and thus, we find that there was no tangible material or information available during the course of assessment proceedings basis which reasonable belief can be formed of escapement or under assessment of income and which could have led the AO to seek permission to convert limited scrutiny into complete scrutiny. Therefore, the AO not seeking permission to convert limited scrutiny to complete scrutiny is not borne out of facts on record. Even for sake of arguments, if we were to assume that there is material on record pointing towards potential escapement of income and which has escaped the attention of the AO during limited scrutiny assessment proceedings and no action has been taken by him, it is not that the Revenue doesn't have any recourse and correct course of action would have been for AO to record his satisfaction though after completion of current assessment proceedings and invoke jurisdiction u/s 147 of the Act subject of course to satisfaction of conditions specified therein rather than the ld. PCIT invoking jurisdiction u/s 263 of the Act. As we have discussed earlier, the revisional jurisdiction u/s 263 cannot be exercised for broadening the scope of jurisdiction that was originally vested with the A.O for limited scrutiny while framing the assessment and enlarging his scope of limited enquiry. 20. The decision in case of Baby Memorial Hospital (supra) is distinguishable as in that case, the assessee itself had agreed that PCIT is justified in giving direction to work MAT income after adding back the provision for doubtful debts and basis such concession on part of the assessee, the Tribunal has held that the argument of the assessee that in case of limited scrutiny, the PCIT could not exercise jurisdiction u/s 263 is devoid of merit. Therefore, the said decision doesn't support the case of the Revenue. 21. Now, coming back to reasoning adopted by the ld PCIT to invoke his jurisdiction u/s 263 in the instant case. As per ld PCIT, the reason for which the matter was selected for limited scrutiny i.e, mis-match of the sales turnover vis-à-vis ITR, CIB & AIR has a direct bearing on opening and closing stock of cost of construction and W.I.P and in turn, on taxable income, therefore, the AO was duty bound to examine these issues and the AO having 10 failed to examine these issues, the AO has effectively failed to examine the issues for which matter was selected for limited scrutiny. In our view, the transactions reflected in the financial statements are sum total of various independent transactions undertaken during the year, and the balance sheet represent a consolidated picture of the financial position of the assessee at the end of the year and similarly, the profit/loss account represent the consolidated position of revenues and costs and net profit during the financial year. It is likely that some of the transactions are directed connected and some are indirectly connected, however, they all have a common thread in terms of impacting the financial position of the assessee and for tax purposes, in determination of net taxable income. Therefore, the reasoning adopted by the ld PCIT that transactions of cost of construction will have an effect on closing work in progress and taking sales turnover and closing WIP into account, all these transactions taken together will effect the determination of net taxable income is no doubt correct but as far as determination of correct sales turnover is concerned for which the matter was selected for limited scrutiny, the same can be determined on a standalone basis on examination of sale deeds and related documents for sale of flats and is not connected with determination and examination of cost of construction and work in progress. 22. As we have discussed above, in case of limited scrutiny, the AO is duty bound to restrict himself to examine the matters for which matter was selected for limited scrutiny and where the AO takes a view and forms a reasonable belief that some other matters are required to be examined, the same will in effect be traversing beyond the scope of limited scrutiny which is not permissible unless the matter is converted into complete scrutiny and which has not happened during the course of present assessment proceedings. Therefore, the issue of valuation of closing work-in-progress as well as matter relating to agriculture income, which are held by the ld PCIT as matters not been examined by the AO, are matters which are not part of the reasons for which the case was selected for limited scrutiny and are not even remotely connected, therefore, no fault lie on the part of the AO resulting in order being held as erroneous and prejudicial to the interest of revenue. As far as matters for which case was selected for limited scrutiny in terms of mis-match of sales turnover, the same has been duly examined by the AO and even the ld PCIT has not recorded any adverse findings in terms of lack of enquiry or inadequate enquiry on part of the AO. In light of aforesaid discussions, we hereby set-aside the order passed by the ld PCIT u/s 263 and the order of the AO is sustained.” 15. As held in the aforesaid case, what is therefore, relevant to examine is whether as part of assessment proceedings, the AO was seized of certain credible material and/or information that there are other issues/matters and forms a reasonable view that where these matters are not examined and scrutinized properly, the same may lead to potential escapement of income or under assessment of income. The view so formed by the AO should not be based on mere suspicion, conjecture or unreliable sources and there has to be nexus between the available material and formation of view regarding potential escapement of income. Once such a view has been formed, then in such cases, the AO is expected to bring the same to the notice of his superior authorities and seek guidance and approval for conversion of limited scrutiny cases to complete scrutiny cases. It has been further held that where no such view is formed by the AO and no action has been taken by the AO even though there exists some 11 material suggesting potential escapement of income, the right course of action is to invoke the jurisdiction under section 147 of the Act and the order so passed by the AO cannot be held as erroneous in so far prejudicial to the interest of Revenue. 16. In the instant case, the ld PCIT has referred to the fact that the assessee has negative opening capital balance, has received huge unsecured loans from Jasdeep Singh Brar and Brij Lal and advances towards sale of land and thus, held that there are gross receipts exceeding Rs 1 crores and the accounts of the assessee have not been audited, that the assessee was prima facie engaged in business of property dealing/real estate, and that the AO has failed to convert the case into complete scrutiny to verify genuineness of such huge unsecured loans and advances. 17. We find that these transactions of unsecured loans and advances are clearly reflected on the face of the financial statement so submitted by the assessee and at the same time, there are other transactions in terms of land holdings and other advances so reflected therein, however, the question that arises for consideration is how the ld PCIT has formed an opinion that these transactions so reflected in the financial statements constitute credible material for forming a prima facie view that there is possibility of escapement of income or under assessment of income is not emerging from the order of the ld PCIT. Merely looking at the transactions reflected in the financial statements and not discovered from any extraneous and tangible material and the fact that these are huge transactions in terms of quantum in opinion of the ld PCIT cannot lead us to any reasonable view that these are not genuine transactions. The quantum of transactions may raise some initial suspicion or doubt but to hold that these transactions are not genuine, there has to be something more tangible and credible and there is nothing on record in this regard. Therefore, in the instant case, we find that there are no material on record to lead the AO to seek conversion of limited scrutiny to complete scrutiny and thus, the order so passed by the AO cannot be held to be erroneous on this account. In any case, as we have held above, the Revenue is not without any recourse and can take suitable actions as per law. 18. In light of the aforesaid discussions and in the entirety of facts and circumstances of the case, we are of the considered opinion that there is no justifiable basis to invoke 12 the provisions of section 263 so far as non- examination of transactions of unsecured loans and other advances is concerned and the order passed by the AO cannot be held to be erroneous in so far as prejudicial to the interest of the Revenue and the order so passed by the ld PCIT on this count is hereby set-aside. 19. Now, coming to the issue of limited scrutiny and examination of agriculture income, we find that the matter was duly enquired into by the AO during the course of assessment proceedings, necessary queries were raised, submissions were filed by the assessee along with affidavit and after considering the same, the claim of actual agriculture income of Rs 3,06,666/- has been accepted by the AO as against agriculture income of Rs 30,66,660/- inadvertently and wrongly reported by the assessee while filing his return of income. The agriculture income so accepted by the AO is also corroborated by the tax filings of the assessee for the previous and subsequent assessment years. In view of the same, the order so passed by the AO cannot be held as erroneous in so far as prejudicial to the interest of the Revenue. 20. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 01/08/2023 Sd/- Sd/- आकाश द प जैन $व%म 'संह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा य / VICE PRESIDENT लेखा सद,य/ ACCOUNTANT MEMBER AG Date: 01/08/2023 आदेश क! त,ल-प अ.े-षत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आय ु /त/ CIT 4. आयकर आय ु /त (अपील)/ The CIT(A) 5. -वभागीय त न4ध, आयकर अपील&य आ4धकरण, च7डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File आदेशान ु सार/ By order, सहायक पंजीकार/ Assistant Registrar