TaxTMI 
TaxTMI 
2019 (7) TMI 861
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....t 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 basic foundation of this additional ground raised befor....
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.... ) 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 a potential escapement of income more than Rs. 10 Lacs. 3. It has also been decided that in all the cases which are picked for scrutiny only on the basis of AIR information, the notice u/s 143(2) of Income Tax Act 1961 should clearly be stamped with "AI....
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....g 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 suitably to flag the reasons for scrutiny selection in AIR/CIB/26AS cases. This functionality is expected to be operationalised by 15th October, 2014. Further, the Assessing Officer while issuing notice under section 142(1) of the Act which is enclosed with the first questionnaire would proceed to verify only the specific aspects requiring examination/verification. In such cases, all efforts would be mad to ensure that assessment proceedings....
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....e 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, nowhere on record, it is seen that prior written approval was obtained from the Commissioner of Income Tax. 4. 1 In the same facts and circumstances, the Co-ordinate Bench of the Tribunal, Pune in ITA No. 05/PUN/2016 (supra. ) faced with the similar issue which is as follows: "1. The huge additions (more than Rs. 10 lacs) other than CASS subject matter (i. e. verification of cash deposit in saving bank account and scope of scrutiny is limited) made by the Assessing Officer cannot be sustained in absence of previous approval of the administrativ....
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.... 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 scrutinise the accounts of the assessee and claims in the returns as per the provisions of section 143(2) of the Act and the CBDT Circular should not create any hurdles on the AO in matters of scrutiny assessment once notice u/s. 143(2) of the Act is issued. Therefore, it is the case of the Ld. DR that AO has all powers to examine any issue which he deems fit despite the restrictions imposed by the Board on the AOs. For this proposition, he relied on the judgment of Hon"ble Bombay High Court in the case of Banque Nationale De Paris Vs. CIT 237 ITR 518. 7. During the rebuttal time, o....
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....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 substantial verification, the case, may be taken up for comprehensive scrutiny with the approval of the Pr. CIT/DIT concerned. However, such an approval shall be accorded by the Pr. CIT/DIT in writing after being satisfied about merits of the issue(s) necessitating wider and detailed scrutiny in the case. Cases so taken up for detailed scrutiny shall be monitored by the Jt. CIT/Addl. CIT concerned. " 10. We also perused the CBDT letter dated 08-09-2010 which deals with selection of cases for scrutiny on the basis of data in AIR returns and subsequent assessment proceedings. The instructions given in the said letter reads as under : ....
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....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 dated 13. 05. 2013 issued from the office of ACIT, Circle (1), Sangli, wherein the Assessing Officer informed the assessee that there was no record to show that previous approval of CCIT was obtained to select the cases manually for scrutiny for assessment year 2008-09. The learned Authorized Representative for the assessee stressed that where the selection was not through CASS but was manually made, then the previous approval of the CCIT was compulsory. Referring to the order of CIT(A), the assessee pointed out that the CIT(A) states that the case of assessee was selected through CASS and also mentions that the contention of assessee would have been acceptable h....
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....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 raised the issue before the Assessing Officer and CIT(A) but the facet of argument before the authorities below was that the case of assessee could not be selected for scrutiny under CASS since in the case of Survey, certain conditions were laid down and the assessee having fulfilled the said conditions, then no scrutiny could takes place in the hands of assessee. 14. In the facts of the case, Survey under section 133A of the Act was carried out at the premises of assessee on 30. 01. 2008. During the course of Survey, the assessee made declaration of additional income of Rs. 45,93,467/- which was offered as additional income over and above the income to be returned for the ....
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....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 Paper Book. The assessee has also placed the copy of guidelines issued for scrutiny, copy of which is placed at page 23 of Paper Book. The said guidelines were for use of Income Tax Department, wherein selection criteria was provided which was applicable to all Income Tax returns at all stations. The guidelines vis-à-vis survey cases are provided therein and vide clause (g), it is provided that the Assessing Officer may select any return for scrutiny after recording reasons and after obtaining the approval of CCIT / DGIT. The cases under this category should be selected, if there are compelling reasons and cases not selected under CASS. These cases are watched by the CCIT / CIT for the....
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....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 the assessee and the Revenue in their respective appeals are infructuous. The appeal of assessee is thus, allowed and the appeal of Revenue is dismissed. " Therefore, the Board circular do not permit the AO from converting the limited scrutiny case like the present one to the unlimited one without the approval of Administrative Commissioner of Income Tax. AO did not mention the reasons for not taking such an administrative approval before making the said addition. As such, the Pune Bench of the Tribunal has already taken the favourable view in these matters in favour of the assessee. We do not understand why AO failed to take approval for such conversion. Considering the settled nature....