TaxTMI 
TaxTMI 
2023 (7) TMI 1554
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....n CASS subject matter (cash withdrawal). The Assessing Officer, Ward- 2(4), Raiganj travelled beyond his jurisdiction to frame the assessment order, for which the assessment order is bad-in-law and liable to be quashed. 1b. That the Assessing Officer Ward-2(4), Raiganj, Uttar Dinajpur made the additions to the tune of T 28,43,478/- in the point other than 'Limited Scrutiny' cannot be sustained in the eye of the law in absence of obtaining the prior approval from the Ld. Pr. CIT/CIT as directed by the CBDT Instruction no: 20/2015 dated 29th. December 2015. The assessment order passed by the Assessing Officer Ward-2(4), Raiganj is illegal, bad-in-law, void-ab-initio. 1c. That the facts and circumstances of the case, Assessing Officer, Ward-2(4), Raiganj, Uttar Dinajpur violating the CBDT Instruction in respect 'Limited Scrutiny' assessment, and passed the assessment order beyond his jurisdiction is illegal, arbitrarily, bad-in-law, void-ab-initio and liable to be quashed. 2. That on the facts and circumstances of the case the Ld. CIT (appeals) National Face Less Appeal Centre (NFAC) has erred to ignore the fact that the assessing officer has added back an a....
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.... with affidavit of Sh. Panjit Basak dated 12.04.2023. A perusal of the said affidavit reveals that the reason for delay in filing of appeal is the location of the assessee in a very remote village named Ramganj, Uttar Dinajpur, West Bengal. According to him the Advocates are not available who argue the matters before the ITAT and this is the sole reason for the delay in filing of the appeal. After hearing both the parties and the reasons stated before us, we are of the view that there is a reasonable cause for late filing of appeal. Accordingly, we condone the delay and adjudicate the issue in the following paras. 3. The issue raised in the first ground of appeal is against the order of Ld. CIT (A) upholding the order of Assessing Officer (in short ld. 'AO') wherein Ld. AO has made addition over stepping and going beyond his jurisdiction on the ground that the case was selected for limited scrutiny and the addition was made on account of gross profit which was not the subject matter of the limited scrutiny and that too without converting the limited scrutiny into complete scrutiny. 4. The facts in brief are that the assessee filed return of income on 29.03.2018 showin....
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....isdiction by trespassing into those issues which were not the subject matter of the limited scrutiny. Ld. A/R contended that Ld. AO during the course of assessment proceedings noticed from the bank statement of the assessee with SBI, Kaliganj that the total credit entries were Rs. 7,84,62,187/- whereas in the trading account the assessee has shown the sales of Rs. 1,29,44,244/- only and as such the sales amounting to Rs. 6,55,17,943/- were found to be not disclosed or suppressed. Ld. A/R submitted that Ld. AO added a sum of Rs. 28,43,478/- to the income of the assessee by estimating the suppressed income @ 4.34% for those undisclosed sales of Rs. 6,55,17,943/-. The main thrust of Ld. A/R was that since the issue on which the addition was made was not the subject matter of the limited scrutiny, therefore, Ld. AO has apparently crossed the boundaries without seeking any approval from the competent authority to convert the limited scrutiny into complete scrutiny and therefore, the assessment framed is in violation of the CBDT Circular No. 5/2016 dated 14.07.2016. Ld. A/R in support of his arguments relied on the decision of Coordinate Benches namely: ....
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....ntly and arguably not the issue in the limited scrutiny. In our opinion, the said action of Ld. AO is in violation of the CBDT Circular No. 5/2016 dated 14.07.2016 which provides for the procedure to be followed for conversion of limited scrutiny into the complete scrutiny. In our opinion, the action of Ld. AO is not sustainable as the same is in violation of the said circular. 10. The case of the assessee finds support from the judicial decisions passed by the Coordinate Benches as discussed above. In the case of Sukhdham Infrastructures LLP (supra) the Coordinate Bench held as under: "8. After hearing the rival contentions and perusing the material on record, and also notice dated 143(2) dated 28.07.2016 issued for limited scrutiny covering four issues namely) Interest expenses, ii) Income from Real Estate Business, iii) Sales Turnover mismatch and iv) Other expenses claimed in the profit and loss a/c and also subsequent notice issued u/s 142(1) dated 20.02.2017 called for information on secured and unsecured loan deposits, we find that there is no dispute that even prior to conversion of limited scrutiny to complete scrutiny on 14.12.2017 the AO has started enqu....
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....s further clarified that in cases under 'Limited Scrutiny', the scrutiny assessment proceedings would initially be confined only to issues under 'Limited Scrutiny' and questionnaires, enquiry, investigation etc. would be restricted to such issues. Only upon conversion of case to 'Complete * Scrutiny' after following the procedure outlined above, the AO may examine the additional issues besides the issue(s) involved in 'Limited Scrutiny'. The AO shall also expeditiously intimate the taxpayer concerned regarding conducting 'Complete Scrutiny' in such cases. Instruction no. 4 provides only complete scrutiny after following the procedure laid down above and the AO may examine the additional issues besides the issue involved in limited scrutiny and AO shall also expeditiously conducted complete scrutiny in such cases. We note that in the present case there has been a complete violation of the Circular issued by the CBDT. The case of the assessee finds support from the decision of Co-ordinate Bench of Delhi in the case of Dev Milk Foods Pvt. Ltd. (supra) wherein it has been held as under: 6.0 We have heard the rival submissions an....
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....20/2015 which states as under: "Instruction No. 20/2015 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block, New Delhi, the 29th of December, 2015 Subject: Scrutiny Assessments-some important issues and scope of scrutiny in cases selected through Computer Aided Scrutiny Selection ('CASS')-reg .- The Central Board of Direct Taxes ('CBDT'), vide Instruction No. 7/2014, dated 26 09.2014 had clarified the extent of enquiry in certain category of cases specified therein, which are selected for scrutiny through CASS. Further clarifications have been sought regarding the scope and applicability of the aforesaid Instruction to cases being scrutinized. 2. In order to facilitate the conduct of scrutiny assessments and to bring further clarity on some of the issues emerging from the aforesaid Instruction, following clarifications are being made. i Year of applicability : As stated in the Instruction No. 7/2014 , the said Instruction is applicable only in respect of the cases selected for scrutiny through CASS-2014 ....
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....erification on any other issue(s), then, the case may be taken up for 'Complete Scrutiny 'with the approval of the Pr. CIT/CIT concerned. However, such an approval shall be accorded by the by the Pr. CIT/CIT in writing after being satisfied about merits of the issue(s) necessitating 'Complete Scrutiny' in that particular case. Such cases shall be monitored by the Range Head concerned. The procedure indicated at points (a), (b) and (c) above shall no longer remain binding in such cases. (For the present purpose, 'Metro charges' would mean Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Ahmedabad). 4. The Board further desires that in all cases under scrutiny, where the Assessing Officer proposes to make additions or disallowances, the assessee would be given a fair opportunity to explain his position on the proposed additions/disallowances in accordance with the principle of natural justice. In this regard, the Assessing Officer shall issue an appropriate show-cause notice duly indicating the reasons for the proposed additions/disallowances along with necessary evidences/ reasons forming the basis of the same. Before passing the final order....
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....d scrutiny to complete scrutiny. We have also gone through the statement of assessee's Director Mr. Rohit Verma which was recorded on 18.07.2017 i.e., after the conversion of the case and even in his statement nothing adverse is coming out vis. a vis. the impugned transactions. If the proposal of the Assessing Officer dated 05.10.2017 and the approval of the Ld. Pr. Commissioner of Income Tax dated 10.10.2017 are examined on the anvil of paragraph 3 of CBDT Instruction No. 5/2016, it is very much clear that no reasonable view is formed as mandated in the said CBDT Instruction No. 5/2016 in an objective manner and secondly merely suspicion and inference is the foundation of the view of the Assessing Officer. We also note that there is no direct nexus brought on record by the Assessing Officer in the said proposal and, therefore, it is very much apparent that the proposal of converting the limited scrutiny to complete scrutiny aimed at making fishing enquiries. We also note that the Ld. Pr. Commissioner of Income Tax has accorded the approval in a mere mechanical manner which is in clear violation of the CBDT Instructions No. 20/2015. 6.5 The Hon'ble Calcutta High Court....
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....lected for limited scrutiny issue i.e. regarding security transaction. The Assessing Officer could not find any reason to make any addition in respect of issue for which the limited scrutiny was done. However, the Assessing officer made the certain other additions for which the Assessing Officer did not have any jurisdiction. 4. The Ld. D.R has been fair enough to admit that the impugned additions have been made by the Assessing Officer on certain other issues, whereas, the case of the assessee was selected for the purpose of limited scrutiny relating to security transactions." Considering the facts of the assessee's case and also the ratio laid down drawn in the above decisions and also the CBDT Instruction No. 5/2016, we are of the considered view that the AO has exceeded his jurisdiction in enquiring into those issues beyond the scope of limited scrutiny even prior to the date of conversion which is in clear violation of mandate given by CBDT in the said Circular and has been held by the Co-ordinate Bench of Delhi in the case of Dev Milk Foods Pvt. Ltd. (supra) to be bad in law. We note that CBDT has in para 4 of the said instruction clarified that in a limited scr....
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....ed under CASS for any other reason(s)/parameter(s) besides the AIR/CIB/26AS data, then the said Instruction would not apply. iii. Scope of Enquiry: Specific issue based enquiry is to be conducted only in those scrutiny cases which have been selected on the parameter(s) of AIR/CIB/26AS data. In such cases, the Assessing Officer, shall also confine the Questionnaire only to the specific issues pertaining to AIR/CIB/26AS data. Wider scrutiny in these cases can only be conducted as per the guidelines and procedures stated in Instruction No. 7/2014. iv. Reason for selection: In cases under scrutiny for verification of AIR/CIB/26AS data, the Assessing Officer has to intimate the reason for selection of case for scrutiny to the assessee concerned. 3. As far as the returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial Year- one is 'Limited Scrutiny' and other is 'Complete Scrutiny'. The assessees concerned have duly been intimated about their cases falling either in 'Limited Scrutiny' or 'Complete Scrutiny' through notices issued under section ....
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....concerned for strict compliance. (Ankita Pandey) Under Secretary to Government of India 11. Further, Instruction No. 5 of 2016 dated 14.07.2016 reads as under: Instruction No. 5/2016 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block, New Delhi, the 14th of July, 2016 Subject: Direction regarding scope of enquiry in cases under 'Limited Scrutiny' selected through CASS 2015 & 2016-regd.- Vide Instruction No. 20/2015 dated 29.12.2015 in File of even number, Board has laid down Standard Operating Procedure for handling of cases under 'Limited Scrutiny' which were selected through Computer Aided Scrutiny Selection in 'CASS Cycle 2015'. In these cases, it was stated that the general scope of enquiry in scrutiny proceedings should be restricted to the relevant parameters which formed the basis for selecting the case for scrutiny. However, in revenue potential cases, it was further provided that 'Complete Scrutiny' could be conducted, if there was potential escapement of income above a prescribed monet....
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....of section 144A of the Act may be invoked in suitable cases. To prevent possibility of fishing and roving enquiries in such cases, it is desirable that these cases should invariably be picked up while conducting Review or Inspection by the administrative authorities. 7. The above Instruction shall be applicable from the date of its issue and would cover the cases selected under CASS 2015 which are pending scrutiny cases as well as cases selected/being selected under the CASS 2016. 8. The contents of this Instruction may be brought to the notice of all for necessary compliance. 9. Hindi version to follow. (Rohit Garg) Deputy Secretary to the Government of India 12. The crux of the instructions are summarized as under: i. The questionnaire u/s 142(1) shall be confined only to the issue of limited scrutiny. ii. Approval of PCIT/CIT concern iii. PCIT/CIT concern shall grant approval in writing and after being satisfied on the merits of the case. iv. Such cases shall be monitored by range head. v. In limited scrutiny cases enquiry shall be restricted only on the issues of limited scrutiny.....