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The Tax Publishers2007 TaxPub(DT) 1082 (Del-Trib) : (2007) 108 TTJ 0312 Gift Land Handicrafta v. CIT INCOME TAX ACT, 1961 Revision under section 263- Powers of CIT-Orders prejudicial to interest of revenue Assessee was manufacturer and exporter of handicrafts items. It claimed deduction under sections 80-IB and 80HHC. AO selected it for a limited scrutiny and issued a notice under section 143(2)(i) only for the purpose of verification of the claim of the assessee under section 80-IB. He completed the assessment under section 143(2)(i) by allowing the claim of the assessee for deduction under section 80-IB, after seeking necessary explanation from the assessee and in addition he allowed the claim under section 80HHC. CIT exercised his revisionary powers under section 263 and held that the deduction under section 80HHC was not properly allowed. Therefore, he cancelled the assessment order of AO. *Held:There was no dispute that the claim of the assessee had been taken up only for a limited scrutiny by issuance of a notice under section 143(2)(i). The issue that was under consideration was that limited scrutiny was the allowability or otherwise of the claim made by the assessee under section 80-IB. The provisions of section 143(2)(i) as it existed between the period 1-6-2002 and 1-6-2003 contemplated taking up cases for limited scrutiny and taking up cases for a general scrutiny. If a case is taken up for limited scrutiny, AO could not exceed his jurisdiction beyond the one which he had carved out for himself in the notice issued for limited scrutiny. In the present case, there was no dispute that the notice under section 143(2)(i) was issued between the period 1-6-2002 to 1-6-2003. The Delhi Bench of Tribunal, in the case of Ajit Gupta v. ITO [IT Appeal Nos. 2990 & 2994 (Delhi) of 2004, dated 6-1-2007] had held that exercise of jurisdiction under section 263 was not justified in respect of deduction under section 80HHC when the same was not the subject matter of limited scrutiny before AO. Therefore, CIT was not justified in invoking jurisdiction under section 263 on issues other than those decided in limited scrutiny assessment. Loss has been defined under section (baa) of Explanation to section 80HHC, the provisions of section 80HHC(3) have been amended retrospectively with effect from 1-4-1992 and as per the amendment, the claim of the assessee was in accordance with law. Even the claim for deduction under section 80HHC was never the subject-matter of the limited scrutiny assessment, therefore, AO could not have considered the same. CIT in exercise of the jurisdiction under section 263, could not held that the order of AO was erroneous on this ground. Therefore, the exercise of jurisdiction by CIT under section 263 was not justified. Hence, the appeal of the assessee was allowed. Income Tax Act, 1961* Section 263 read with sections 80-IB and 80HHC Case Law Analysis:Ajit Gupta v. ITO [IT Appeal Nos. 2990 & 2994 of dated January 6, 2007], IFCA Laboratory Ltd. v Dy. CIT [2004] 266 ITR 521/ 135 Taxman 594 (SC), CIT v. Anderson Marine & Sons (P.) Ltd. [2004] 266 ITR 694/ 139 Taxman 16 (Bom.), CIT v. Chidambaram Construction Co. [2003] 261 ITR 754 (Mad.), Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC), CIT v. Sterling Foods [1999] 237 ITR 579/ 104 Taxman 204 (SC), Hindustan Lever Ltd. v. CIT [1999] 239 ITR 297/[2000] 108 Taxman 181 (SC), Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278/ 129 Taxman 539 (SC), CIT v. M.M. Khambhatwala [1992] 198 ITR 144 (Guj.). SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2007 TaxPub(DT) 1082 (Del-Trib) : (2007) 108 TTJ 0312

Gift Land Handicrafta v. CIT

INCOME TAX ACT, 1961

Revision under section 263- Powers of CIT-Orders prejudicial to interest of revenue

Assessee was manufacturer and exporter of handicrafts items. It claimed deduction under sections 80-IB and 80HHC. AO selected it for a limited scrutiny and issued a notice under section 143(2)(i) only for the purpose of verification of the claim of the assessee under section 80-IB. He completed the assessment under section 143(2)(i) by allowing the claim of the assessee for deduction under section 80-IB, after seeking necessary explanation from the assessee and in addition he allowed the claim under section 80HHC. CIT exercised his revisionary powers under section 263 and held that the deduction under section 80HHC was not properly allowed. Therefore, he cancelled the assessment order of AO. Held:There was no dispute that the claim of the assessee had been taken up only for a limited scrutiny by issuance of a notice under section 143(2)(i). The issue that was under consideration was that limited scrutiny was the allowability or otherwise of the claim made by the assessee under section 80-IB. The provisions of section 143(2)(i) as it existed between the period 1-6-2002 and 1-6-2003 contemplated taking up cases for limited scrutiny and taking up cases for a general scrutiny. If a case is taken up for limited scrutiny, AO could not exceed his jurisdiction beyond the one which he had carved out for himself in the notice issued for limited scrutiny. In the present case, there was no dispute that the notice under section 143(2)(i) was issued between the period 1-6-2002 to 1-6-2003. The Delhi Bench of Tribunal, in the case of Ajit Gupta v. ITO [IT Appeal Nos. 2990 & 2994 (Delhi) of 2004, dated 6-1-2007] had held that exercise of jurisdiction under section 263 was not justified in respect of deduction under section 80HHC when the same was not the subject matter of limited scrutiny before AO. Therefore, CIT was not justified in invoking jurisdiction under section 263 on issues other than those decided in limited scrutiny assessment. Loss has been defined under section (baa) of Explanation to section 80HHC, the provisions of section 80HHC(3) have been amended retrospectively with effect from 1-4-1992 and as per the amendment, the claim of the assessee was in accordance with law. Even the claim for deduction under section 80HHC was never the subject-matter of the limited scrutiny assessment, therefore, AO could not have considered the same. CIT in exercise of the jurisdiction under section 263, could not held that the order of AO was erroneous on this ground. Therefore, the exercise of jurisdiction by CIT under section 263 was not justified. Hence, the appeal of the assessee was allowed.

Income Tax Act, 1961 Section 263 read with sections 80-IB and 80HHC

Case Law Analysis:Ajit Gupta v. ITO [IT Appeal Nos. 2990 & 2994 of dated January 6, 2007], IFCA Laboratory Ltd. v Dy. CIT [2004] 266 ITR 521/ 135 Taxman 594 (SC), CIT v. Anderson Marine & Sons (P.) Ltd. [2004] 266 ITR 694/ 139 Taxman 16 (Bom.), CIT v. Chidambaram Construction Co. [2003] 261 ITR 754 (Mad.), Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC), CIT v. Sterling Foods [1999] 237 ITR 579/ 104 Taxman 204 (SC), Hindustan Lever Ltd. v. CIT [1999] 239 ITR 297/[2000] 108 Taxman 181 (SC), Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278/ 129 Taxman 539 (SC), CIT v. M.M. Khambhatwala [1992] 198 ITR 144 (Guj.).