2025 (7) TMI 1736 - AT - Income Tax

Assessing Officer Exceeded Limited Scrutiny Scope by Adding Unexplained Cash Credits Under Sections 68/69A

Income Tax Officer, New Delhi Versus GSP Power Systems Pvt. Ltd. And (Vice-Versa)

The ITAT Delhi held that the assessing officer exceeded the scope of limited scrutiny by making additions as unexplained cash credits under sections ... Scope of Limited of scrutiny assessment - assessee’s case was taken up for scrutiny on the twin issues of non-furnishing of quantitative details and “investments/advances/loans” whereas it ended up in adding an amount as unexplained cash credits u/s 68/69A which stands deleted in the lower appellate discussion HELD THAT:- Ld' assessing authority has travelled beyond the reason(s) of scrutiny in the assessee’s case. We quote PCIT vs. Weilburger Coatings (India) P. Ltd [2023 (10) TMI 921 - CALCUTTA HIGH COURT] as held making additions in respect of issues not mentioned in limited scrutiny were beyond jurisdiction of the Assessing Officer as the scrutiny assessment was selected for limited scrutiny under Section 143(2) and not complete scrutiny. ISSUES: Whether the Assessing Officer exceeded jurisdiction by completing assessment on grounds beyond the reason(s) of limited scrutiny under section 143(3) of the Income-tax Act, 1961.Whether an assessment framed on issues not subject matter of limited scrutiny is sustainable in law.Whether the Revenue can challenge the deletion of additions made under sections 68/69A when the assessment itself is challenged for jurisdictional defect. RULINGS / HOLDINGS: The Court held that an assessment order completed on grounds beyond the reason(s) of limited scrutiny is 'not sustainable in law' and amounts to exceeding jurisdiction.The Court accepted that the issue of jurisdictional excess by the Assessing Officer in limited scrutiny cases can be raised at any stage, including by way of additional grounds before the Tribunal.The Court relied on the principle that the scheme of assessment under section 143 is a 'complete code by itself' and the Assessing Officer must confine assessment to the issues specified in the limited scrutiny notice.The Court dismissed the Revenue's appeal and allowed the assessee's cross objection, quashing the assessment framed beyond the scope of limited scrutiny. RATIONALE: The Court applied the statutory framework of section 143 of the Income-tax Act, 1961, emphasizing that subsection (3) requires the Assessing Officer to make assessment only on the points specified in the limited scrutiny notice issued under subsection (2).The Court relied on binding precedent and CBDT instructions (including Instruction No.5 of 2016 and others dated 26.09.2014, 29.12.2015, 14.07.2016, and 30.11.2017) which mandate that Assessing Officers must not expand scrutiny beyond the limited issues without proper approval and recording of reasons.The Court noted that failure to comply with these instructions and exceeding the scope of limited scrutiny raises strong suspicion of mala fide intentions and is a jurisdictional error.The Court referenced a recent authoritative decision holding that the assessment scheme under section 143 is not merely procedural but substantive, thereby invalidating assessments made beyond the limited scrutiny scope.No dissent or doctrinal shift was indicated; the Court adopted the detailed reasoning of the cited precedent mutatis mutandis.