Tribunal directs AO to verify compliance with procedural requirements, stresses CBDT instructions and natural justice.

The Tribunal allowed the appeal for statistical purposes, directing the AO to verify compliance with procedural requirements for converting limited scrutiny to full scrutiny and to consider the revised return as per law. The Tribunal emphasized adherence to CBDT instructions and the principle of natural justice.

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Issues Involved:
1. Whether the Assessing Officer (AO) exceeded the scope of limited scrutiny.
2. The validity of the revised return filed by the assessee.
3. The disallowance of loss claimed from the sale of shares.
4. The addition of Rs. 13,60,000 as unexplained cash deposit under Section 68 of the IT Act.

Issue-wise Detailed Analysis:

1. Scope of Limited Scrutiny:
The assessee's case was selected for limited scrutiny to examine commodity transactions/derivatives (futures) transactions. The AO converted this limited scrutiny case into a full-fledged scrutiny without obtaining mandatory approval from the administrative PCIT/CIT/PDIT/DIT as required by CBDT Instruction No.5/2016 dated 14.07.2016 and Instruction No.225/402/2018 dated 28.11.2018. The Tribunal found that the AO did not adhere to these guidelines, making the additions unsustainable. Consequently, the Tribunal restored the issue to the AO to verify whether such approval was taken. If no approval was taken, the additions made by the AO and upheld by the CIT(A) would be deleted.

2. Validity of Revised Return:
The assessee filed a revised return under Section 139(5) declaring a total income of Rs. 5,90,400, which included a loss from the sale of shares not claimed in the original return. The AO rejected this revised return, relying on the Supreme Court's decision in CIT Vs. Raman Chettiar, arguing that the omission was deliberate. The CIT(A) upheld this view, citing similar judgments. However, the Tribunal referred to the Gujarat High Court's decision in PCIT Vs. Babu Bhai Ramanbhai Patel, which held that a revised return filed under Section 139(5) replaces the original return, provided it is filed within the prescribed time. The Tribunal found that the omission was inadvertent, not deliberate, and directed the AO to consider the revised return as per law.

3. Disallowance of Loss from Sale of Shares:
The AO disallowed the loss claimed from the sale of shares in the revised return, arguing that the original return did not disclose this loss. The Tribunal, however, noted that the revised return should be accepted as it was filed within the time limits and replaced the original return. The Tribunal directed the AO to consider the revised return and the loss claimed therein.

4. Addition of Rs. 13,60,000 as Unexplained Cash Deposit:
The AO added Rs. 13,60,000 as unexplained cash deposit under Section 68, noting that the assessee received consultancy charges in cash from 101 persons, each amount below Rs. 20,000. The Tribunal found that the AO exceeded the scope of limited scrutiny and did not obtain the necessary approval to convert it into a full-fledged scrutiny. The Tribunal restored the issue to the AO to verify if the required approval was taken. If not, the addition would be deleted.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, directing the AO to verify compliance with procedural requirements for converting limited scrutiny to full scrutiny and to consider the revised return as per law. The Tribunal emphasized adherence to CBDT instructions and the principle of natural justice. The order pronounced on 21.08.2019.

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