TaxTMI 
TaxTMI 
2025 (1) TMI 1481
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....25/402/2018/ITA.II, Dated 28- 11-2018, and Instruction No.5/2016 [F.NO.225/269/2015- ITA.11], Dated 14-7-2016. 2. Hon'ble CIT(Appeals), NFAC has erred in law and on facts in confirming the addition of Rs. 44,00,000.00 u/s 68 of the Income Tax Act, 1961. 3. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 2. Brief facts of the case are that the assessee is an individual and is engaged in the business of printing and publishing besides having transactions in shares through stock market. The return of income for the year under appeal was filed declaring income of Rs. 5,61,830/- which constitutes the income from business of printing and no income was declared on account of transactions carried out in shares. The case was taken up for limited scrutiny for the reason that during the year under appeal the assessee has entered into the share transactions where the STT was paid on the transactions made without actual delivery under "STT Code 3" and no income is declared in the return of income filed. The reason for limited scrutiny was to verify as ....
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....in law and on facts in confirming the action of the learned AO even though the learned AO has exceeded his jurisdiction in a 'limited scrutiny case selected under CASS only to examine whether the investment and income relating to securities transactions are duly disclosed or not and added a sum of Rs. 44,00,000.00 u/s 68 of the Income Tax Act, 1961, without obtaining prior administrative approval of the concerned Pr. CIT/CIT as prescribed in Circular F. No.225/402/2018/TTA.II, Dated 28-11- 2018, and Instruction No.5/2016 [F.NO.225/269/2015-ITA.11], Dated 14-7-2016." 3.1.2. Ground No-1 goes to the root of the matter being a jurisdiction issue, even though not specifically taken before the 1" appellate authority. 3.1.3. The appellant would make a prayer before this Hon'ble Bench of the Tribunal to allow the raising of this ground for the 1" time keeping in view the ratios of the following judgments: a) National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) b) Jute Corpn of India Ltd. v. CIT [1991] 187 ITR 688 (SC) c) Siksha "O" Anusandhan vs. Commissioner of Income-tax [2012] 20 taxmann.com 798 (Orissa) 3.1.4. Para....
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....osed the share market transactions in her ITR because the net loss from such transactions was Rs. 16,88,418.00. 3.1.11. Accordingly, the appellant's ITR neither contained any turnover figure relating to share transactions of the appellant which were settled otherwise than by the actual delivery nor any profit/loss from such activities. 3.1.12 This has resulted in the mismatch of the information uploaded in Form-1 by stock exchanges with the information provided in ITR by the appellant. 3.1.13. It is thus evident that due to the mismatch of the turnover figure as reported in ITR with that of Form-1, 'limited scrutiny' was initiated Computer Aided Scrutiny Selection (CASS) to examine whether the investment and income relating to securities transactions are duly disclosed. 3.1.14. It is pertinent to mention here that the Income Tax Act makes a distinction between a "capital asset" and a "trading asset". Gains from the sale of "capital assets" are taxable under the head "Capital Gain" and gains from the sale of "trading assets" are taxable under the head "Profits and gains of business or profession". 3.1.15. CBDT has issued Instr....
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....'limited scrutiny'. 3.1.22. CBDT has issued, from time to time, the following instructions for laying down the Standard Operating Procedure for handling cases under 'limited scrutiny and converting 'limited scrutiny' to 'Complete Scrutiny': Particulars Annexure No Instruction No. 20/2015 dated 29.12.2015 Annexure-13: P:40-41 Instruction No. 05/2016 dated 14.07.2016 Annexure-14: P:42 Letter [F.NO.DGIT(VIG.)/HQ/S1/2017-18] Dated 30-11-2017 Annexure -15: P:42 3.1.23. Sub-paragraphs (a) to (c) of paragraph 3 of Instruction No. 20/2015 dated 29.12.2015, which contain the procedure for conducting the 'limited scrutiny' are reproduced hereunder: a. In 'limited scrutiny cases, the reasons/issues shall be forthwith communicated to the assessee concerned. b. The Questionnaire under section 142(1) of the Act in 'limited scrutiny cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the 'limited scrutiny' issues. c. These cases shall be completed expeditiously in a ....
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.... Officers are travelling beyond their jurisdiction while making assessments in 'limited scrutiny' cases by initiating inquiries on new issues without complying with mandatory requirements of the relevant CBDT Instructions dated 26-9-2014, 29-12-2015, and 14-7-2016. These instances have been viewed very seriously by the CBDT and in one case the Central Inspection Team of the CBDT was tasked with examination of assessment records on receipt of allegations of several irregularities. Amongst other irregularities, it was found that no reasons had been recorded for expanding the scope of 'limited scrutiny', no approval was taken from the PCIT for conversion of the 'limited scrutiny' case to a complete scrutiny case and the order sheet was maintained very perfunctorily. This gave rise to a very strong suspicion of mala fide intentions. The Officer concerned has been placed under suspension. 4. In view of discussion in the preceding paragraphs it is once again reiterated that the Assessing Officers should abide by the instructions of CBDT while completing 'limited scrutiny' assessments and should be scrupulous about maintenance of note sheets in ass....
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....SI/2017-18 Dated 30-11-2017, the learned AO assumed jurisdiction illegally to ask for the source of investment in Kotak Securities Limited and ultimately made an addition u/s 68 in a 'limited scrutiny case. 3.1.36. The appellant would therefore make a prayer for deletion of the addition of Rs. 44,00,000.00 made u/s 68. 3.1.37. As the learned AO has assumed jurisdiction illegally and made an addition u/s 68, he can't be permitted to legalize it by allowing him to take post facto permission from the competent authority. 3.1.38. The appellant would cite some case decisions in support of her prayer. 3.1.39. In the case of Vudatha Vani Rao v. ITO [2024] 159 taxmann.com 1394 (Visakhapatnam Trib.), 'limited scrutiny' was initiated to examine the sources of the cash deposits made during the demonetization period. The learned AO added a sum of Rs. 5,00,000.00 u/s 69A relating to cash deposits made before the demonetization period. The Hon'ble Tribunal deleted the addition because cash deposited before the demonetization period was beyond the scope of notice issued under section 143(2) for 'limited scrutiny' assessment. ....
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....limited scrutiny' before the date of conversion of 'limited scrutiny' into complete scrutiny, entire assessment proceedings were to be quashed as such conversion was in clear violation of mandate given by CBDT Instruction No. 5/2016, dated 14-7-2016 Cases relied on / referred to: a) Vijay Kumar v. ITO [IT Appeal No. 434 (Chad.) of 2019, dated 12- 9-2019] (para 6) b) Dev Milk Foods (P.) Ltd. v. Addl. CIT [IT Appeal No. 6767 (Delhi) of 2019, dated 12-6-2020] (para 6). 3.1.44. Sukhdham Infrastructures LLP case (Supra) has been upheld by Hon'ble High Court in PCIT V Sukhdham Infrastructures LLP [2024] 165 taxmann.com 84 (Calcutta) 3.1.45. In the case of Dev Milk Foods (P.) Ltd V ACIT [2020] 118 taxmann.com 685 (Delhi Trib.) it has been held that where the assessee's case was converted from 'limited scrutiny' to 'complete scrutiny' on mere suspicion, entire assessment proceedings were to be quashed as such conversion was in clear violation of mandate given by CBDT's Instruction No. 5/2016, dated 14-7-2016. 3.1.46. This Hon'ble Bench in ITA No.30/CTK/2022, relying on the ratio of the judgmen....
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.... consideration of the AO, firstly, the investment and secondly is of the income from share transaction business whether these are disclosed by the assessee or not. Since the assessee has not shown any income/loss from share transaction business in her return of income filed and further no details were filed with respect of the investment made in the share transactions business, in our opinion, the AO was well within the jurisdiction for examining the investments as they were not disclosed by the assessee which include the source thereof and identity, genuineness and creditworthiness of the transaction. When the AO has reason to examine the issue of investment it covers all the aspects related to it i.e. source. As the assessee stated that investments were made out of loans taken, the AO has left with no other option but to examine these loans and it is the duty of assessee to establish the genuineness and creditworthiness of such loan creditors. Under these circumstances, we are not inclined to accept the argument of the ld. AR that the AO has exceeded his jurisdiction without following the procedure of converting the limited scrutiny assessment to the completed scrutiny. According....
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....ould have been treated as explained credits and no addition is required to be made. He, therefore, prayed for the deletion of the addition so made. Apart from the above, ld. AR also filed his written submission to the above ground which read as under :- 3.2. Submission in respect of grounds No.2 3.2.1. Grounds No.2 of this appeal are as follows: 3.2.2. Paragraph-2 of 142(1) notice dated 22.11.2018 (Annexure-9; P:30-31) is reproduced hereunder: 2. As per the copy of the Ledger received from the Kotak Securites Ltd., it is also found following amount have been deposited by you and credited in your trading account. Please explain the sources of such investments and evidences thereof." 3.2.3. It is thus evident that the learned AO relied on the credit entries of a ledger statement issued by Kotak Securities Ltd to make an addition u/s 68. 3.2.4. It is submitted that an addition can be made u/s 68 only when the amount is credited in the books of accounts of the assessee. Bank passbooks or bank statements are not books of accounts of an assessee. Even, the ledger copies of accounts of an assessee in the books of accounts of any other ....
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....been held that the addition made under section 68 only based on the assessee's passbook, which was not a book of account, would not be sustainable. This same view has also been held in the case of (a) Smt. Ramilaben B. Patel v. ITO [2018] 100 taxmann.com 325 (Ahmedabad Trib.) and (b) Kuldeep Jiwan Mahant v ITO [2023] 157 taxmann.com 532 (Raipur Trib.) 3.2.10. In the present case, the learned AO has obtained from Kotak Securities Ltd (KSL) a ledger account of the appellant maintained by KSL in its books of account and went on to make an addition u/s 68 based on the credit entries found in the ledger account. This ledger account can never be treated as the books of account of the appellant. 3.2.11. This point was also raised before Hon'ble CIT(A), NFAC by the appellant in its submission dated 01.02.2021 (1ª paragraph of page-2 of Annexure-16; P:45) citing the case of Mayawati v. DCIT [2008] 19 SOT 460 (Delhi). Despite this, Hon'ble CIT(A), NFAC confirmed the addition u/s 68. 3.2.12. It is therefore submitted that relying on the ratios of the judgments cited above, the addition made u/s 68 by the learned AO and subsequently upheld by Hon'....
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.... Date of deposit Kotak Bank Amount Kalpana Mishra (appellant) SB1 Account TRF or CLG 24-12-15 2.00.000 Kalpana Mishra (appellant) SBI Account TRF or CLG 21-1-16 2,00,000 Devi Prasad Dash TRF or CLG 21-08-15 30,000 Devi Prasad Dash TRF or CLG 12-8-15 50.000 Auro Srijan Dash TRF or CLG 23-7-15 50.000 Aura Srijan Dash TRF or CLG 12-8-15 3.00.000 Nalini Manjari Dash CASH 21-8-15 1,20,000 Tapaswini Pani CASH 28-7-15 4,50,000 Tapaswini Pani CASH 8-9-15 4,00,000 Tapaswini Pani CASH 12-1-16 5.00.000 Pradipta Kumar Pradhan CASH 24-8-15 8,00,000 Pradipta Kumar Pradhan CASH 25-8-15 3,00,000 Pradipta Kumar Pradhan CASH 11-1-16 5,00,000 Pradipta Kumar Pradhan CASH 14-1-16 5,00,000 Total 44,00,000 3.2.19. From the aforesaid summary, it is evident that though Mrs. Kalpana Mishra (i.e. the appellant) has remitted Rs. 2,00,000.00 and Rs.....
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....of the amounts to the appellant. 3.2.26. It is thus evident that when the appellant has discharged the initial onus, the learned AO should not have made an addition without making further inquiries. The Hon'ble CIT(Appeals), NFAC also agreed with the action of the learned AO. 3.2.27. The appellant therefore prays for deleting the addition of Rs. 44,00,000.00 even on merit. 3.3. The appellant craves leave to add, amend, alter, vary, and/or withdraw any or all the above grounds of appeal at the time of hearing of the appeal. 9. On the other hand, ld. Sr. DR vehemently supported the orders of the lower authorities and submitted that the assessee has failed to establish the creditworthiness as except filing their PAN No., no details were filed whether they had filed their returns of income and whether the amount of the income declared by them were sufficient to make advance to assessee. Further the assessee has failed to explain the circumstances under which the loans were taken in cash through both the assessee and creditors, have their own bank accounts from which such cash was withdrawn. He, therefore, prayed for confirmation of the addition so made....