Limited scrutiny assessment cannot support a section 68 addition without prior approval to expand the enquiry.

In a limited scrutiny assessment confined to share premium and the applicability of section 56(2)(viib) of the Income-tax Act, an addition under section 68 could not be sustained where the Assessing Officer enlarged the enquiry without obtaining the required approval. The record showed no material evidencing permission to extend the scope of scrutiny beyond the specified issue. As the addition arose from an impermissible expansion of the limited scrutiny, it was held invalid and the assessment was quashed in favour of the assessee.

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Issues: Whether, in a case selected for limited scrutiny to examine share premium and the applicability of section 56(2)(viib) of the Income-tax Act, 1961, the Assessing Officer could validly make an addition under section 68 of the Income-tax Act, 1961 without obtaining the requisite approval for enlarging the scope of enquiry.

Analysis: The scrutiny was initiated only to verify the large share premium received during the year and the applicability of section 56(2)(viib) of the Income-tax Act, 1961. The addition was ultimately made under section 68 of the Income-tax Act, 1961. No material was brought on record to show that approval of the competent authority had been obtained for expanding the enquiry beyond the limited scrutiny parameters. In the absence of such approval, the addition based on the enlarged enquiry could not be sustained.

Conclusion: The addition under section 68 of the Income-tax Act, 1961 was invalid, and the assessment was quashed in favour of the assessee.

Ratio Decidendi: In a limited scrutiny assessment, an addition beyond the scope of the specified issue cannot be sustained unless the Assessing Officer first obtains the requisite approval to enlarge the enquiry.

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