S. 263 : Commissioner – Revision of orders prejudicial to revenue -Limited Scrutiny – Deemed rental income -Order passed after due enquiry cannot be treated as erroneous and prejudicial to the interests of revenue – PCIT cannot revise assessment to include issues beyond the scope of limited scrutiny (S.143(3), IND AS-115)
The assessee, an individual builder and developer, filed return declaring income from house property and other sources after setting off business loss. The case was selected for limited scrutiny to verify business loss and agricultural income. The Assessing Officer issued detailed notices u/s 142(1), examined all expenses claimed, verified supporting evidence, and accepted the returned income. The PCIT invoked s. 263 holding that the assessment order was erroneous and prejudicial to the interests of the revenue, inter alia, for not bringing to tax deemed rental income from a flat at Greater Noida and for not applying IND AS-115. The Tribunal held that since the assessment was made under limited scrutiny, the Assessing Officer was not required to examine issues beyond those specified. Further, detailed enquiries were made and replies furnished by the assessee on the issues of business loss and agricultural income. Hence, the assessment could not be considered as passed without enquiry or application of mind. The Tribunal observed that IND AS-115 applies only to companies and not to individual proprietary concerns. Relying on Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) and ITO v. DG Housing Finance Co. Ltd. (2012) 343 ITR 129 / 20 taxmann.com 587/ 212 Taxman 132 (Delhi)(HC), it held that both conditions of “erroneous” and “prejudicial” must coexist for invoking S. 263 and that the PCIT cannot travel beyond the limited scrutiny scope or direct a roving enquiry without recording a finding of error. Accordingly, the order passed u/s 263 was quashed and the assessee’s appeal allowed. (AY 2018-19 (ITA No. 164/Mum/2025; dt. 30.10.2025)
Sameer Ramesh Vashi v. PCIT (Mum)(Trib)www.itatonline.org
[Coram : Hon’ble Shri Amit Shukla, JMand Hon’ble Shri Girish Agrawal, AM]