TaxTMI 
TaxTMI 
2019 (7) TMI 861
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....spect of "CASS" assessment. Therefore, assessment order passed in violation of Board"s Instructions, which are binding upon the AO is certainly bad in law and void-ab-initio, may please be quashed and addition may please be deleted. Appellant be granted just and proper relief in this respect. The ground raised above is a legal ground and goes to the root of the matter. The adjudication of the above ground, in our belief, do not require any investigation of new facts pertaining to the case. It is requested that the additional ground may kindly be allowed to be raised by the appellant and the same may kindly be admitted and adjudicated in the interest of justice since the issue goes to the root of the matter." This additional ground relates to the issue of making addition by the Assessing Officer outside the said limited scrutiny under Computer Aided Scrutiny Selection (in short "CASS") for the assessment year 2009-10 without obtaining the written approval of the concerned Commissioner of Income Tax as directed by the Circular of CBDT dated 8th September, 2010 and Board Instruction No. 7/2014 dated 26. 09. 2014. 2. 1 The Ld. AR of the assessee in order to establish the....
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....nd the Deputy Commissioner of Income Tax in writing. For ready reference, these documents are made part of this order as follows: CBDT Circular dated 08. 09. 2010 F. No. 225/26/2006-ITA. II (Pt. ) Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, dated the 8th September, 2010 To All Chief Commissioners of Income Tax All Directors General of Income Tax Sir/Madam, Subject: Selection of cases for scrutiny on the basis of data in AIR returns and subsequent assessment proceedings-regarding. Reference is invited to Board"s letter of even number dated 23rd May, 2007 regarding scope of enquiry in the scrutiny cases selected only on the basis of information received through the AIR returns. 2. The above mentioned guidelines have been reconsidered by the Board and it has been decided that the scrutiny of such cases would be limited only to the aspects of information received through AIR. However, a case may be taken up for wider scrutiny with the approval of the administrative Commissioner, where it is felt that apart from the AIR information there is....
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....obtained from third party sources which apparently did not match with the details submitted by the tax payer in the return of income. 2. Therefore, for proper administration of the Income-tax Act, 1961 ('Act'), Central Board of Direct Taxes, by virtue of its powers under section 119 of the Act, in supersession of earlier instructions/ guidelines on this subject, ere by directs that the cases selected for scrutiny during the Financial Year 2014-20 5 under CASS, on the basis of either AIR data or CIB information or for non re-conciliation with 26AS data, the scope of enquiry should be limited to verification these particular aspects only. Therefore, in such cases, an Assessing Officer s hall confine the questionnaire and subsequent enquiry or verification only to the specific point(s) on the basis of which the particular return has been selected for scrutiny. 3. The reason(s) for selection of cases under CASS are displayed to the Assessing Officer in AST application and notice u/s. 143(2), after generation from AST, is issued to the taxpayer with the remark "Selected under Computer Aided Scrutiny Selection (CASS)". The functionality in AST is being modified ....
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.... passed in violation of Board Instruction as well as CBDT Circular as referred herein above should be held as void ab-initio and therefore, should be quashed. Placing reliance in support of this proposition, the Ld. AR further referred to the decision of Co-ordinate Bench of the Tribunal, Pune in ITA No. 05/PUN/2016 for the assessment year 2011-12 decided on 04. 05. 2018 wherein on the same issue and on similar facts and circumstances, the Tribunal has held the assessment order to be bad in law. 3. Per contra, the Ld. DR has placed reliance on the orders of the Sub-ordinate Authorities. 4. We have perused the case records and heard the rival contentions. We have also given considerable thought to the judicial pronouncement placed before us. It is clearly evident from the facts on records that the case was selected for scrutiny under CASS as per the notice u/s. 143(2) of the Act issued to the assessee. That under such circumstances, the relevant Board"s Instruction and CBDT Circular as hereinabove referred to clearly states that written approval from the Commissioner of Income Tax/ Pr. Commissioner of Income Tax has to be obtained in such case. In the instant case before us....
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.... mentioning "AIR case" etc. Ld. Counsel also submitted that for extending the scrutiny to the interest disallowance and denial of deduction u/s. 54 of the Act in the present case, AO did not obtain any Administrative approval from the concerned CIT. The notices do not indicate the same. This fact is made out in the AO"s letter dated 11-04-2018 addressed to the Administrative CIT. Therefore, Ld. Counsel for the assessee submitted that the assessment order passed by the AO dated 12-03-2014 is unsustainable and void ab-initio. For this proposition, Ld. Counsel for the assessee relied on the following two decisions of the Pune Bench of the Tribunal and submitted that the case of the assessee stands squarely covered and in favour of the assessee : 1. M/s. Nitin Killawala & Associates Vs. ITO - ITA No. 1611/M/2013 2. M/s. S. H. Chougule Vs. JCIT - ITA No. 458/PN/2012 and ITA No. 605/PN/2012, dated 21-12-2016 6. On the other land, Ld. DR for the Revenue submitted that circular No. 225/26/2006-ITA. II(PL), dated 08-09-2010 issued by the CBDT does not override the provisions of the statute. Elaborating the same, Ld. DR submitted that if the AO is authorised to scr....
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....t that the AO did not obtain the written approval of the concerned Commissioner before extending the scope of scrutiny to the interest disallowed and denial of claim of deduction u/s. 54 of the Act. Further, it is on record that the Board did not permit the Assessing Officers to extend the scope of scrutiny to the issues other than the ones which are authorised the Board in this regard under CASS. It is also a fact that judgment cited by the Ld. DR for the Revenue in the case of Banque Nationale De Paris Vs. CIT 237 ITR 518 (Bom. ) was not issued in connection with the jurisdiction of the AO in matters relating to extension of areas of scrutiny to the ones than the authorised ones by the Board. In this connection, we perused the CBDT Instruction No. 7/2014, dated 26-09-2014 and find it relevant to extract the relevant lines. The same reads as under : "4. In case, during the course of assessment proceedings, it is found that there is potential escapement of income exceeding Rs. 10 lakhs (for non-metro charges, the monetary limit shall be Rs. 5 lakhs) on any other issue(s) apart from the AIR/CIB/26AS information based on which the case was selected under CASS requiring subst....
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....S. In reply, the Central Public Information Officer stated that the case of assessee was not selected for scrutiny under CASS. Further, the assessee has asked as to why its case was selected for scrutiny since it was covered by relaxed scrutiny norms. In answer, it was pointed out that the case was selected for scrutiny, in view of guidelines for selection of scrutiny issue during financial year 2010-11; copies of RTI application and the reply are placed at pages 20 to 22 of the Paper Book. The learned Authorized Representative for the assessee further referred to the criteria of guidelines for income-tax scrutiny, copy of which is placed at page 23 and 24 of the Paper Book and reiterated that in the case of assessee, Survey was carried out and criteria was fixed for not picking up the case under scrutiny and the assessee clearly fulfils the same. He further pointed out that in case the criteria is not met with, then as per clause (g), the Assessing Officer can select any return for scrutiny after recording reasons and after obtaining the approval of CCIT/DGIT. In this regard, he pointed out that no such approval was received from the CCIT. Our attention was drawn to the letter dat....
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....merits of the case. It was also stressed by the learned Departmental Representative for the Revenue that the declared income in the hands of assessee means the book profit. 12. The learned Authorized Representative for the assessee in rejoinder pointed out that in the case of assessee, he declared additional income during the course of Survey. He further pointed out that the details of expenses were compared by the Assessing Officer. 13. We have heard the rival contentions and perused the record. The preliminary issue raised in the present appeal by way of ground of appeal No. 5 is against the validity of assessment made in the hands of assessee. The assessee claims that the case of assessee was not selected for scrutiny under CASS but was selected manually. For selection of any return for scrutiny manually by the Assessing Officer, the requirement of guidelines issued for this purpose for relevant assessment year was that the same should be after obtaining approval of the CCIT / DGIT. Since no such approval was received from the CCIT / DGIT, the Assessing Officer had no jurisdiction to proceed with the scrutiny assessment in the case of assessee. The assessee had....
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....08-09. The specific question asked by the assessee was whether its case was selected for scrutiny under CASS and in case it was not selected under CASS and why the same was picked up for scrutiny. The assessee also asked that under which norms the case was selected for scrutiny and whether relaxation in selection of cases in which survey action was carried out on fulfilling the criteria was available in the said norms or not. In reply, it was stated that the guidelines / instructions were followed and since the guidelines were confidential in nature, the copy of same could not be provided. In reply to the next question whether the case was selected under CASS, the categorical answer was "No". The said RTI reply further stated that the case was selected for scrutiny in view of the guidelines contained in F. No. 225/93/2009/ITA. II. 15. The said guidelines for selection of scrutiny were published and it was pointed out that the said guidelines were only for the use of Officers of Income Tax Department and the same could not be disclosed even under the RTI Act, 2005. The said application under the RTI Act and the order under the RTI Act are placed at pages 20 to 22 of the Pap....
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...., where the order has been passed against the norms laid down by the CBDT vide its guidelines which were binding upon the Assessing Officer, then the order passed by the Assessing Officer is bad in law. The instructions issued by the CBDT are to be strictly followed by the authorities i. e. Assessing Officer and in the absence of the same, the assessment order passed in the case is annulled. Such is the proposition laid down by the Hon"ble High Court of Andhra Pradesh in CIT Vs. Smt. Nayana P. Dedhia (supra) and the Hon"ble High Court of Delhi in CIT Vs. Best Plastics (P) Ltd. (supra). In view thereof, we hold that where the Assessing Officer has failed to follow the guidelines issued for selecting the cases for scrutiny and in the facts of the present case, where the case was selected manually for scrutiny, but no previous approval of CCIT was obtained, then the Assessing Officer lacks jurisdiction to carry out the scrutiny assessment in the present case and accordingly, assessment order passed by the Assessing Officer is bad in law. Hence, we hold so. Since the assessment order is held to be bad in law, the issue on merits becomes academic and the grounds of appeal raised by both....