Tax officer exceeded jurisdiction by making additions beyond original assessment scope without required approval under section 147

The ITAT Raipur held in favor of the assessee on two grounds. First, regarding validity of reopening under section 147, the AO failed to make any addition for the specific reason the case was reopened (interest income receipt), thus lacking valid jurisdiction to frame the assessment. Second, concerning limited scrutiny assessment, the AO exceeded jurisdiction by making additions on items not covered under the original scope (large share premium verification) without obtaining required Pr. CIT approval to convert limited scrutiny into complete scrutiny as mandated by CBDT Circular 20/2015. Both assessments were quashed.

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Issues Involved:
1. Validity of jurisdiction assumed by the Assessing Officer (A.O) under Sections 143(3)/147.
2. Additions confirmed by the Commissioner of Income-tax (Appeals) under Sections 2(22)(e) and 40(a)(ia).
3. Disallowance of interest expenses on an estimated basis.
4. Scope of limited scrutiny and the jurisdiction of the A.O in making additions beyond the specified issues.

Summary:

Issue 1: Validity of Jurisdiction Assumed by A.O under Sections 143(3)/147
The primary issue was whether the A.O had validly assumed jurisdiction and framed the assessment under Sections 143(3)/147. The A.O reopened the case based on the reason to believe that the assessee had received interest income of Rs. 7,21,147/- which had escaped assessment. However, the A.O did not make any addition regarding this interest income but made independent additions. The Tribunal found that since the A.O did not make any addition regarding the reason for reopening the assessment, he could not assume valid jurisdiction to make other additions. This view was supported by the judgment in CIT Vs. Jet Airways (I) Ltd. (2011) and other judicial pronouncements. Consequently, the Tribunal quashed the assessment for lack of valid jurisdiction.

Issue 2: Additions Confirmed by CIT(A) under Sections 2(22)(e) and 40(a)(ia)
The CIT(A) confirmed the addition of Rs. 91,16,214/- as deemed dividend under Section 2(22)(e) and Rs. 1,23,312/- under Section 40(a)(ia). The Tribunal did not delve into the merits of these additions as it had already quashed the assessment due to the invalid assumption of jurisdiction by the A.O.

Issue 3: Disallowance of Interest Expenses on an Estimated Basis
The CIT(A) also confirmed the disallowance of Rs. 82,208/- out of interest expenses on an estimated basis. Similar to the other additions, the Tribunal refrained from adjudicating this issue due to the quashing of the assessment for lack of valid jurisdiction.

Issue 4: Scope of Limited Scrutiny and Jurisdiction of A.O
For the assessment year 2015-16, the A.O made additions on issues not covered under the scope of limited scrutiny. The Tribunal observed that the case was selected for limited scrutiny to verify the applicability of Section 56(2)(viib) regarding large share premium received. The A.O made additions/disallowances on issues beyond this scope without obtaining the necessary approval to convert the limited scrutiny into complete scrutiny. The Tribunal found that the A.O exceeded his jurisdiction by making these additions, relying on CBDT Instruction No. 20/2015 and various judicial pronouncements. Consequently, the Tribunal vacated the additions/disallowances made by the A.O for the assessment year 2015-16 as well.

Conclusion:
Both appeals of the assessee company were allowed. The Tribunal quashed the assessments for both assessment years 2013-14 and 2015-16 due to the invalid assumption of jurisdiction by the A.O and the exceeding of jurisdiction in the case of limited scrutiny.

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