Limited scrutiny cannot be expanded without approval; section 68 addition on share premium was unsustainable.

A limited scrutiny confined to verification of share premium and section 56(2)(viib) did not permit a wider enquiry under section 68 in the absence of shown approval for expanding the scope of scrutiny. The assessee had produced subscriber records, including bank statements, confirmations, PAN details and valuation material, to support identity, creditworthiness and genuineness. As no material established valid enlargement of scrutiny, the addition beyond the limited parameters was legally unsustainable. The addition under section 68 was deleted and the assessment quashed.

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Issues: Whether an addition under section 68 of the Income-tax Act, 1961 could be sustained where the scrutiny was limited to examination of share premium under section 56(2)(viib) of the Income-tax Act, 1961 and no approval was shown for enlarging the scope of scrutiny.

Analysis: The scrutiny was initiated only for verification of share premium and the applicability of section 56(2)(viib) of the Income-tax Act, 1961. The assessee furnished documents relating to the subscribers, including bank statements, ledger confirmations, PAN details and valuation material, to establish identity, creditworthiness and genuineness. The revenue authorities did not place on record any material showing that the Assessing Officer had obtained the requisite approval for converting the limited scrutiny into a wider enquiry so as to invoke section 68 of the Income-tax Act, 1961. In the absence of such approval, the addition made beyond the limited scrutiny parameters was held to be legally unsustainable.

Conclusion: The addition under section 68 of the Income-tax Act, 1961 was deleted and the assessment was quashed on the legal issue, resulting in relief to the assessee.

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