KALPESH DHANJIBHAI MAKASANA,SURENDRANAGAR V. PR. CIT, AHMEDABAD-3, AHMEDABAD, AHMEDABAD

ITA 1231/AHD/2025

AI Insights

The case revolves around an appeal by Kalpesh Dhanjibhai Makasana against the revision order passed by the PCIT, Ahmedabad-3, which arose from an assessment order under section 143(3) of the Income Tax Act, 1961, for the Assessment Year 2020-21. The assessee, a director in a private limited company, had filed his return declaring a total income of Rs.6,12,13,850, which included a significant donation and salary income. The assessing officer initially accepted the return after a 'limited scrutiny' but later, the PCIT found discrepancies in the reported salary income and non-disallowance of certain exempt incomes under section 14A read with Rule 8D, leading to a revision order. The Tribunal, referencing several judicial precedents, concluded that the PCIT's revision was beyond the scope of the original 'limited scrutiny' and thus not permissible.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 771924 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2020-2021
• Other Referred Cases: PCIT vs. M/s. Green Park, Sahyadri Agencies Ltd. vs. PCIT, PCIT vs. Hill Queen Investment (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Opportunity of being heard; Corroborative evidences; Salary income; TDS; Earning of tax free income; Charitable institution; Rule 8D; Revision of order; FORM 26AS
• Section: 144; 143(3); 142(1); 263; 14A; 80G

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri T.R. Senthil Kumar, Judicial Member And Shri Narendra Prasad Sinha, Accountant Member Kalpesh Dhanjibhai Makasana Rajkot Highway, Surendranagar, Surendranagar Gujarat-363020 PAN: ABIPM7576J (Appellant) Vs The PR.CIT Ahmedabad-3, Ahmedabad (Respondent) Assessee Represented: Shri Mehul Ranpura, A.R. Revenue Represented: Shri Alpesh Parmar, CIT-DR Date of hearing : 10-07-2025 Date of pronouncement : 28-08-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the Revision order dated 31-03-2025 passed by the Principal Commissioner of Income Tax, Ahmedabad-3 arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2020-21. ITA No: 1231/Ahd/2025 Assessment Year: 2020-21 Printed from counselvise.com I.TA No. 1231/Ahd/2025 A.Y. 2020-21 Page No Kalpesh Dhanjibhai Makasana Vs. Pr.CIT 2 2. Brief facts of the case is that the assessee is an individual and Director in Private Limited Company drawing Salary. For the Asst. Year 2020-21, assessee filed his Return of Income on 15-02-2021 declaring total income of Rs.6,12,13,850/-. The return was taken for limited scrutiny assessment to verify the claim of deduction from total income under Chapter VIA of the Act. The assessing officer issued notice u/s 143(2) dated 15-11-2021 calling for the Name, Address and PAN of the Donee, amount of donation, mode of payment with supporting evidence, copy of u/s 80G Certificate issued by Donee and copy of approval u/s 80G(5)(vi) and computation of deduction claim u/s. 80G(5) of the Act. 3. In response, the assessee vide letter dated 29-11-2021 submitted that Rs. 65,00,000/- donated to Shree Anandjibhai Motibhai Patel Charitable Trust, Wadhwan through banking channel and also furnished other details as required by the assessing officer. On due verification of the details, the assessing officer accepted the Returned Income and passed the assessment order u/s 143(3) dated 20-09-2022. Perusal of the above assessment order, Ld. PCIT found that the assessee had shown income from salary of Rs.4.05 crores from M/s Makson Pharmaceuticals Pvt. Ltd. However the employer had shown payment of remuneration of Rs. 3.6 crores only. Thus the balance amount of Rs. 45,00,000/- not explained by the assessee, which is liable to be taxed at special rate instead of normal rate. Further the Assessing Officer has failed to verify disallowance u/s 14A read with Rule 8D on the total value of investment as on 31-03-2020. Thus the order passed by the A.O. is both erroneous and prejudicial to the interest of Revenue and Printed from counselvise.com I.TA No. 1231/Ahd/2025 A.Y. 2020-21 Page No Kalpesh Dhanjibhai Makasana Vs. Pr.CIT 3 hence a show cause notice dated 24-01-2024 was issued to the assessee. 4. In response, the assessee filed a detailed reply that significant amount of investment were in Private Limited Company from which no exempt income had been earned, the assessee had sufficient non-interest bearing funds which is more than the investment which has yielded exempt income, Auditor had certified that no disallowance was called for u/s 14A read with Rule 8D of the Act. 4.1. Regarding salary income of Rs.4.05 crores, it is erroneously made due to incorrect filing of TDS statement by the company. The inadvertent mistake committed by the company has been duly acknowledged and filed revised Form No. 16 as well as Form 26AS showing the correct salary as Rs.3.6 crores. Thus there is no escapement of income of Rs.45,00,000/- towards salary and requested to drop the revision proceedings. 5. The Ld. PCIT considered the submission of the assessee and directed the assessing officer to invoke provisions of section 14A read with Rule 8D disallowance by giving proper opportunity of hearing to the assessee. 6. Aggrieved against the revision order, assessee is in appeal before us raising the following Grounds of Appeal: 1. The learned Pr. CIT erred on facts as also in law in setting aside the assessment order dated 20.09.2022 passed u/s. 143(3) of the Income Tax Act, 1961 directing the AO to pass a fresh assessment order. The order passed u/s 263 of the Act by the leaned Pr. CIT is totally unjustified on facts as also in law therefore the same may kindly be quashed. Printed from counselvise.com I.TA No. 1231/Ahd/2025 A.Y. 2020-21 Page No Kalpesh Dhanjibhai Makasana Vs. Pr.CIT 4 2 Your Honour's appellant craves leave to add, to amend, alter, OR withdraw any OR more grounds of appeal on OR before the hearing of appeal. 3. The grounds of appeal mentioned hereunder are without prejudice to one another 4. The order passed by Pr. Commissioner of Income-tax, Ahmedabad-3, Ahmedabad (hereinafter referred as to the \"PCIT] is bad in law, invalid AMD requires to be quashed, the same may kindly be quashed. 5. The Ld. PCIT erred in law AMD on facts in arriving at a conclusion that the assessment order passed by the AO was erroneous as well as prejudicial to the interest of the revenue on the ground that the order has been passed by the AO without making properly enquiries/verification in respect of (1) difference is respect of director remuneration of Rs45,00,000/- being remuneration as per books of account of appellant Rs4,05,00,000/- AMD remuneration as per book of account of company from whom remuneration received AMD (1) applicability AMD disallowance u/s 144 r.w.r. 8D for exempt income earned by the appellant during the year. The order passed by PCIT requires to be quashed AMD may kindly be quashed 7. Ld. Counsel Mr. Mehul Ranpura appearing for the assessee submitted that the revision order passed by the Ld. CIT(A) is against the provisions of law. Since the case of the assessee was selected for “limited scrutiny” to verify the claim of deduction under Chapter VIA of the Act. Pursuant to the same, the assessing officer issued notice u/s 143(2) calling for various details which were furnished by the assessee vide its reply dated 15-11-2021 enclosing copy of the donation made by the assessee with relevant details. Since the assessment is being a “limited scrutiny”, the assessing officer has no power to travel beyond the issues as mentioned in the “limited scrutiny” for assessment. Ld. PCIT in his revision proceedings found that erroneous claim of salary income and non- Printed from counselvise.com I.TA No. 1231/Ahd/2025 A.Y. 2020-21 Page No Kalpesh Dhanjibhai Makasana Vs. Pr.CIT 5 disallowance u/s 14A read with Rule 8D which are not subject matter of “limited scrutiny” assessment. Ld. Counsel relied upon Jurisdictional High Court judgment in the case of PCIT vs. M/s. Green Park reported in [2024] 301 Taxmann. com 617 (Guj.) and requested to quash the revision order. 8. Per contra Ld. CIT-DR Shri Alpesh Parmar appearing for the Revenue supported the order passed by the Ld. PCIT and requested to uphold the order. Ld. CIT-DR in support of the claim that revision proceedings can be initiated beyond the scope of “limited scrutiny” assessment as held by the Kerala High Court in the case of Sahyadri Agencies Ltd. vs. PCIT reported in [2023] 149 taxmann.com 202 and Calcutta High Court in the case of PCIT vs. Hill Queen Investment (P.) Ltd. reported in [2023] 152 taxmann.com 335 (Calcutta). 9. We have given our thoughtful consideration and perused the materials available on record including the Paper Book and Case Laws relied by both the parties. It is undisputed fact that the original return was taken for “limited scrutiny” assessment to verify the deduction of total income under Chapter VIA of the Act by issuing notice u/s 143(2) dated 29-06-2021 which is available at Page No. 12 of the Paper Book. Pursuant the same, the assessing officer issued notice u/s. 142(1) dated 15-11-2021 calling for various details relating to the deduction claim u/s 80G of the Act. The assessee filed its reply on 29-11-2021 namely name of the Donee with full address, PAN details, donation amount through banking channel enclosing bank statement, copy of the donation Printed from counselvise.com I.TA No. 1231/Ahd/2025 A.Y. 2020-21 Page No Kalpesh Dhanjibhai Makasana Vs. Pr.CIT 6 receipt and u/s 80G(5)(vi) certificate of the Donee and computation of income. Thus the assessee discharged its initial onus cast upon him. Verification of the same by the assessing officer found that the donation made by the assessee is to be true, thereby passed assessment order (under section 143(3)) accepting the returned income as total income of Rs.6,12,13,850/-. 9.1. Perusal of the above assessment order, the Ld. PCIT found that the assessing officer failed to verify the salary income returned by the assessee as well as failed to make disallowance u/s 14A read with Rule 8D of the Act which are not subject matter of “limited scrutiny” assessment initiated by the department. In the event, if the assessing officer is of the opinion to make further disallowances other than the “limited scrutiny” he ought to have obtained permission from Ld. CIT making complete scrutiny assessment which is not been done in this case. The Ld. Assessing Officer issued notice u/s 142(1) relating to the limited scrutiny assessment against which the assessee furnished all necessary details before the assessing officer. Thus Ld. PCIT invoking Section 263 proceedings beyond the “limited scrutiny” assessment is not proper. 10. Co-ordinate Bench of this Tribunal in the case of PCIT vs. M/s. Green Park held that revision proceedings cannot be initiated other than the limited scrutiny assessment by observing as follows: 12. We have considered the rival submissions of both the parties and have gone through the assessment order passed by the Assessing Officer as well the order passed by the ld. Pr.CIT under Section 263 of the Act which is impugned before us. We find that the case of assessee was selected for limited scrutiny. We further find that for limited, scrutiny, the Assessing Officer issued necessary questionnaire about, Printed from counselvise.com I.TA No. 1231/Ahd/2025 A.Y. 2020-21 Page No Kalpesh Dhanjibhai Makasana Vs. Pr.CIT 7 secking details of bank accounts and other related information and evidences. The assessee in its reply, furnished such details of bank statement and other information. The Assessing Officer after taking such reply, completed the assessment on 18/12/2019 without any variation. The Id. Pr.CIT in its show cause notice, identified the issue which was not the subject matter of limited scrutiny. In the show cause notice, the ld. Pr.CIT raised the issue that survey action was conducted on the assessee firm in relevant financial year and that the assessee made declaration of Rs. 1.24 crore on account of undisclosed expenses. We find that such issue was not the subject matter of scrutiny, hence, the Assessing Officer was not entitled to raise such question. However, we find that the assessee in his reply dated 09/09/2019 submitted before Assessing Officer submitted that they have duly offered the disclosed income in their return of income. 13. We find that the Coordinate Bench of Delhi High Court in Balvinder Kumar (supra) has held that \"in case of limited scrutiny, Assessing Officer could not go beyond reason for which matter was selected for limited scrutiny thus, it would not be open to Principal Commissioner to pass revisionary order under section 263 on other aspects and remit matter to Assessing Officer for, fresh assessment.\" We further find that similar view was taken by Coordinate bench of Tribunal in series of decisions as has been relied by Id AR for the assessee. 14. The Supreme Court in celebrated/ leading case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 832 (SC), held that the prerequisite for the exercise of jurisdiction by the Commissioner suo-motu is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (1) the order of the Assessing Officer sought to be revised is erroneous; and (1) it is prejudicial to the interests of the revenue. If one of them is absent if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue recourse cannot be had to section 263(1) of the Act. It can be exercised only when an order is erroneous, the section 263 will be attracted. In view of aforesaid factual and legal discussions, in our considered view, the twin condition as required to revise the assessment order is not meet out in the present case, therefore, the order passed by the ld. Pr.CIT is set aside and the grounds of appeal raised by the assessee are allowed.\" 10.1. On filing Miscellaneous Application against the Tribunal order, Co-ordinate Bench of this Tribunal dismissed the Revenue Miscellaneous Application by observing as follows: \"3. We have considered the submissions of both the parties and perused the records carefully. We find that while adjudicating the appeal of the assessee this Bench on considering the rival submission of both the parties held that the case was selected for \"limited scrutiny\" which was examined thoroughly by assessing officer and there was no other issue in the selection of enquiry. Thus, the order passed by the Ld. Printed from counselvise.com I.TA No. 1231/Ahd/2025 A.Y. 2020-21 Page No Kalpesh Dhanjibhai Makasana Vs. Pr.CIT 8 PCIT by invoking the jurisdiction under section 263 of the Act was beyond the reason of selection for \"limited scrutiny. Thus, in our considered view and there is no mistake which can be classified as \"mistake apparent for recalling order dated 15.12.2022. It is ordered accordingly.” 10.2. On Revenue’s further appeal, Jurisdictional High Court in the case of PCIT vs. M/s. Green Park (cited supra) held that the Tribunal has passed the order considering the case of “limited scrutiny” under regular assessment and allowed the appeal filed by the assessee. Since there is no mistake apparent on record from the order passed by the Tribunal, the Miscellaneous Application was also dismissed by the Tribunal. Thus dismissed the Revenue’s appeal by observing as follows: “5. Considering the submissions made by the learned advocate for the petitioner, it emerges from the record that the Tribunal has passed the order considering the case of limited scrutiny under the regular assessment and accordingly, allowed the Appeal filed by the assessee. The petitioner could not have on the same ground filed the rectification application as the Tribunal has already considered the same. 6. We are therefore of the opinion that there is no mistake apparent on record from the order passed by the Tribunal in the Appeal so as to entertain the Misc. Application under Section 254(2) of the Act which reads as under: \"Section 254(2): The Appellate Tribunal may, at any time within [six months from the end of the month in which the order was passed], with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the [Assessing Officer]: Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard: [Provided further that any application filed by the assessee in this subsection on or after the 1st day of October, 1998, shall be accompanied by a fee of fifty rupees.]\" 7. On perusal of the above provisions, we are of the opinion that the Tribunal has not committed any error which is apparent on record while passing the order in Printed from counselvise.com I.TA No. 1231/Ahd/2025 A.Y. 2020-21 Page No Kalpesh Dhanjibhai Makasana Vs. Pr.CIT 9 Appeal. If the petitioner has any grievance, the recourse in accordance with law can be taken but the provisions of Section 254(2) of the Act would not be of any avail to the petitioner. 8. In view of the above, the petition being devoid of any merit, is accordingly dismissed.” 11. Respectfully following the above judicial precedent and binding Jurisdictional High Court judgment, we have no hesitation in quashing the revision order passed by Ld. PCIT which is beyond the scope of “limited scrutiny”. Thus the case laws relied by the Revenue namely Kerala High Court and Calcutta High Court are not applicable to the facts of the present case. Thus the Grounds of Appeal raised by the assessee are hereby allowed. 12. In the result, the appeal filed by the Assessee is allowed. Order pronounced in the open court on 28-08-2025 Sd/- Sd/- (NARENDRA PRASAD SINHA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 28/08/2025 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद Printed from counselvise.com "