2015 (9) TMI 1649 - AT - Income Tax

Tribunal nullifies additions, disallows education & travel expenses beyond jurisdiction

The Tribunal allowed the assessee's appeal, setting aside the additions made beyond the scope of AIR information due to the AO's actions being without ... Scope of scrutiny in cases selected under CASS - conversion the limited scrutiny in to unlimited - revised ground - CBDT letter dated 23.05.2007 - approval of the Pr.CIT/DIT for taken up for comprehensive scrutiny - HELD THAT:- Admittedly, the necessary approval had not been taken by the AO while widening the scope of inquiry. Though the Ld. D.R. has submitted that the notice in this case was issued on 20.08.09 whereas the instruction of CBDT regarding the wider scrutiny was issued on 08.09.2010 and that the said circular was applicable prospectively and not retrospectively, however, it is noted that the said instruction of 2010 has been passed in reconsideration of instruction dated 23.05.2007. Under such circumstances, the instruction of 2007 was operative on the date of issue of notice. The Ld. D.R. has not submitted any evidence on the file that the AO had taken the necessary approval of ACIT/JCIT for widening the scope of inquiry. The action of the AO in widening the scope of the inquiry without obtaining the necessary permissions as per the Board’s instruction was without jurisdiction and the same is accordingly set aside and consequently the additions made beyond the scope of AIR information are ordered to be deleted. The assessee’s appeal succeeds on technical/legal ground taken by the assessee vide revised ground of appeal. Issues:1. Extending areas of scrutiny beyond items mentioned in AIR2. Disallowance of education expenses3. Disallowance of foreign travel expensesAnalysis:Issue 1: Extending areas of scrutiny beyond items mentioned in AIRThe appeal was filed against the order of the Commissioner of Income Tax (Appeals) for assessment year 2008-09. The assessee challenged the widening of the inquiry by the Assessing Officer (AO) beyond the items mentioned in the AIR. The AO disallowed education expenses and foreign travel expenses. The assessee argued that the AO did not obtain necessary approval for extending the scrutiny, as required by CBDT instructions. The Board's circulars emphasized limiting scrutiny to AIR information unless approved for wider scrutiny. The AO's actions were found to be without jurisdiction as necessary approval was not obtained, rendering the additions beyond AIR information to be deleted.Issue 2: Disallowance of education expensesThe assessee debited an amount towards education expenses of an employee, justifying it as beneficial for the firm. However, the AO disallowed this expense due to unsatisfactory explanations. The CIT(A) upheld this disallowance. The assessee argued that the AO's decision was without valid jurisdiction, as per CBDT instructions. The Tribunal found the AO's actions to be unjustified due to lack of necessary approvals, leading to the disallowance being set aside.Issue 3: Disallowance of foreign travel expensesThe AO disallowed foreign travel expenses as the assessee failed to provide supporting documents. The CIT(A) confirmed this disallowance. However, the Tribunal found the AO's actions to be without jurisdiction as necessary permissions were not obtained for extending the inquiry. Consequently, the disallowance of foreign travel expenses was ordered to be deleted. The Tribunal allowed the appeal based on technical/legal grounds, rendering the merits of the case irrelevant for adjudication.In conclusion, the Tribunal allowed the assessee's appeal, setting aside the additions made beyond the scope of AIR information due to the AO's actions being without jurisdiction. The disallowances of education expenses and foreign travel expenses were deleted.