Limited scrutiny and revised return rules barred additions beyond notice scope and required assessment on the revised return.

A limited scrutiny assessment cannot travel beyond the issues identified in the section 143(2) notice; additions made on matters outside the stated scope, such as denial of section 54F relief or recharacterisation of capital gains, are not sustainable. A valid revised return filed within section 139(5) supersedes the original return, and the assessment must be framed on the revised return rather than the original filing. Where the assessment ignores the revised return and proceeds on the original return, it is bad in law to that extent. On these principles, the additions were deleted and the assessee succeeded.

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Issues: (i) Whether the assessment could sustain additions made beyond the scope of the limited scrutiny notice issued under section 143(2) of the Income-tax Act, 1961. (ii) Whether the revised return filed under section 139(5) of the Income-tax Act, 1961 superseded the original return so that the assessment had to be framed on the revised return.

Issue (i): Whether the assessment could sustain additions made beyond the scope of the limited scrutiny notice issued under section 143(2) of the Income-tax Act, 1961.

Analysis: The scrutiny notice identified cash deposit as the subject of examination under limited scrutiny. The assessment, however, travelled to denial of the claim under section 54F and treatment of capital gains as business income. A subsequent assertion in the assessment order that transfer of property was also within the scrutiny scope was not accepted as sufficient to enlarge the original notice.

Conclusion: The assessment action was beyond the scope of the limited scrutiny notice and could not be sustained against the assessee.

Issue (ii): Whether the revised return filed under section 139(5) of the Income-tax Act, 1961 superseded the original return so that the assessment had to be framed on the revised return.

Analysis: The revised return was filed within the permissible time and replaced the original return. The assessment order proceeded on the income disclosed in the original return and did not give effect to the revised return. The governing principle applied was that once a revised return is validly filed, the original return stands obliterated.

Conclusion: The assessment was bad in law to the extent it ignored the revised return and proceeded on the original return.

Final Conclusion: The additions were deleted and the assessee succeeded on the substantive grounds, resulting in allowance of the appeal.

Ratio Decidendi: A valid revised return supersedes the original return, and an assessment cannot be sustained when it disregards the revised return or when it makes additions beyond the defined scope of a limited scrutiny notice.

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