Limited scrutiny cannot be expanded without prior approval; addition beyond scope was held unsustainable.

A limited scrutiny assessment cannot be expanded to make an addition on an issue outside the specified scope unless the case is first converted into complete scrutiny with the required prior administrative approval. The CBDT instruction governing limited scrutiny was treated as binding on the tax authorities, and non-compliance with that mandatory procedure rendered the wider addition unsustainable. The addition made under section 69A was therefore deleted in favour of the assessee.

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Issues: Whether the Assessing Officer could travel beyond the scope of limited scrutiny and sustain the addition made under section 69A without first converting the case into complete scrutiny and obtaining the requisite prior approval.

Analysis: The assessment was selected for limited scrutiny on specified issues, but the addition ultimately made under section 69A related to a matter outside that limited scope. The governing CBDT instruction required the Assessing Officer to form a reasonable view about possible underassessment and to obtain prior administrative approval before enlarging the scrutiny into a complete scrutiny case. The instruction was treated as binding on the tax authorities, and failure to comply with that mandatory procedure rendered the expanded assessment exercise unlawful.

Conclusion: The addition made beyond the limited scrutiny was unsustainable and was deleted; the issue was decided in favour of the assessee.

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