Limited-scrutiny jurisdiction bars expenditure disallowance outside contract-receipt verification without approved conversion to complete scrutiny.

In a limited-scrutiny assessment selected only to verify contract-receipt mismatches between Form 26AS and the return, enquiry must remain confined to that issue. The notes state that reconciliation was furnished and no adverse finding was made on the selected parameter. A disallowance of expenditure was a separate issue and could be examined only after the Assessing Officer formed a reasonable view, obtained written approval from the competent authority and converted the case to complete scrutiny. As no such conversion occurred, the disallowance was beyond the scope of limited scrutiny and the appellate order sustaining it was quashed.

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Issues: Whether, in a limited-scrutiny assessment selected solely to verify correct offering of contract receipts, the Assessing Officer could disallow expenditure on an issue outside the selected parameter without converting the case into complete scrutiny under the prescribed procedure.

Analysis: The limited-scrutiny selection concerned mismatch of contract receipts reported in Form 26AS and the return. The reconciliation of such receipts was furnished, and no adverse finding on the selected issue was recorded. The disallowance of payment claimed as expenditure concerned a distinct issue. CBDT instructions confined enquiry in limited scrutiny to the identified issue and permitted examination of additional issues only after formation of a reasonable view, written approval of the competent authority and conversion to complete scrutiny. Contract receipts could be verified independently through reconciliation and related documents; expenditure could not be treated as integral to verification of the correctness of gross contract receipts merely because it affected taxable income. No conversion to complete scrutiny was made.

Conclusion: The disallowance was made beyond the Assessing Officer's jurisdiction in limited scrutiny; the appellate order sustaining it was quashed, in favour of the assessee.

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