TaxTMI 
TaxTMI 
2025 (3) TMI 946
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....art A-BS), Income in Part B-TI and Schedule EI of ITR) (3) Large other expenses claimed in the Profit and Loss a/c (4) Large current liability in comparison to total asset in balance sheet (Part A-BS of ITR)" as per the return of income filed for the assessment year concerned. Accordingly, statutory notices u/s 143(2) and 142(1) were issued and served on the assessee, in response to which the AR of the assessee filed the requisite details from time to time. 3. During the course of assessment proceedings the Assessing Officer noted from the balance sheet ending 31.03.2016 that an amount of Rs. 261, 16, 88, 424/- has been shown under the head "Current liabilities", out of which, advance received against land is at Rs. 164, 00, 20, 100/-. The assessee in its letter dated 03.09.2018 submitted that the funds have been received against the sale of land which the company proposed to purchase and sell. It was further stated that the assessee company has received advances against sale of land of Rs. 164 crores (Rs.94 crores from ABIL. Corporation Pvt. Ltd + Rs. 70 crores from Shashbindu Constructions Pvt. Ltd) and are reflected under the head "Current liabilities". The Assessing Officer ....
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.....2015 with corresponding amount of Rs. 70, 00, 00, 000/- received by assessee company from Shashhindu Constructions Pvt Ltd as unsecured loan/advance, the accumulated Reserve & Surplus at Rs. 9, 30, 66, 244/- has to be taxed as per the provisions of section 2(22)(e) of IT Act. 6.4.3 Hence in this case, it is clear that the transactions between M/s ABIL Realty Private Limited and M/s Shashbindu Constructions Pvt Ltd are plain loans and advances and not pertaining to any kind of land transactions. The assessee M/s ABIL Realty Private Limited & M/s Shashhinda Constructions Pvt Ltd were not having any authority or occasion to collect or raise these funds at this juncture as it has been made clear in the discussion above in the assessment order. The basis of quantification of FSI or of the amounts claimed to be advances against such land transactions could not be established at all by the assessee. Hence, it is clear that these figures are therefore imaginary hypothetical figures. In fact, it is amply clear that the unsigned unregistered MOU's have just been submitted by the assessee to give it a Colour of business transactions to the loans and advances transactions amongst....
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....o purchase and sell. The AO has given his findings in the assessment order that the advances received against the sale of land which the company proposed to purchase and sell is nothing but a transfer of accumulated Reserve & Surplus in the guise of unsecured loan/advance with no business nexus. 5.1 Ground No 1 is against the addition of Rs. 9, 30, 66.244/- u/s 2(22)(e) and in not treating the amount received from subsidiary company as part of normal business transaction. Further, the appellant company pleads for direction to the AO to restrict the addition u/s 2(22)(e) to 51 percent of Rs. 9, 30, 66, 244/- i.e. Rs. 4, 74, 64, 090/- being the shareholding of the appellant company in M/s. Shashbindu Constructions Pvt. Ltd. In the assessment order the AO has highlighted that the appellant company. engaged in Real Estate Projects had received advances against sale of land of Rs. 164 Crores (Rs.94 Crores from ABIL Corporation Pvt. Ltd Rs. 70 Crores from Shashbindu Constructions Pvt. Ltd) and reflected under the head current liabilities. The transactions between M/s ABIL Realty Private Limited and M/s. Shashbindu Constructions Pvt. Ltd are plain loans and advances and ....
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....ny in its submission speaks of the general practice in real estate sector, to accept advances against proposed sale of a property even before the proposed seller acquires the title to the property so as to get the proposed buyer committed to the transaction and accepts substantial advance from the proposed buyer as its commitment to the transaction. The same is not tenable as it is seen that the overall management and control of entire group company and the subsidiary companies is with 2 individuals only, the promoters, Mr. Avinash Bhosale, & Mr Amit Bhosale the father and son duo, the sole decision making authorities and the ultimate commitment to any transaction is to be taken by them only. The appellant company claims to have entered into Memorandum of Understanding (MOU) with M/s Shashbindu Constructions Pvt. Ltd. and M/s ABIL Corporation Pvt Ltd. and the business advances of 1.164cr received were business advances against specific MOUs. But the same was found unsigned during the course of assessment proceedings and the same can't be relied upon now. Further, the appellant company claim, to have not retained those loan funds for its own activities and have redistri....
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....rofits as per the provisions of section 2(22)(e). Therefore, ground of appeal no. 1 is dismissed." 6. Aggrieved with such order of Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: 1. Ld CIT(A) erred in confirming the addition of Rs. 9, 30, 66, 244/- as deemed dividend u/s. 2(22)(e) of the I.T. Act, 1961 without appreciating the fact that the advance received by the appellant from M/s Shashbindu Constructions Pvt Ltd is the business advance towards the proposed transaction of the immovable property between the appellant and M/s Shashbindu Constructions Pvt Ltd. Accordingly, the appellant prays before Your Honour that kindly direct the Ld AO to delete the addition of Rs. 9, 30, 66, 244/- made u/s 2(22)(e) of the 1.T. Act, 1961. 2. Ld CIT(A) erred in confirming the addition of Rs. 9, 30, 66, 244/- as deemed dividend u/s. 2(22)(e) of the I.T. Act, 1961 without appreciating the fact that the advance received by the appellant from M/s Shashbindu Constructions Pvt Ltd is in the normal course of business and the appellant has not availed any benefit from the funds received from M/s Shashbindu Constructions Pvt ....
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....ner Of Income Tax And Anr (1991) 187 ITR 688 he submitted that the additional ground raised by the assessee should be admitted. 10. After hearing both the sides and considering the fact that the additional ground raised by the assessee is purely legal in nature and all the material facts are already available on record and no new facts are required to be investigated, therefore, in view of the decision of Hon"ble Supreme Court in the case of the National Thermal Power Co. Ltd. v. CIT (supra) and in the case of Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr (supra), the additional ground raised by the assessee is admitted for adjudication. 11. The Ld. Counsel for the assessee referring to the additional ground submitted that the case was selected for limited scrutiny under CASS for examination of the following issues as stated in the notice u/s 143(2) of the Act: i. Whether tax aspects related to investments /advances/loans have been considered in the return of income. ii. Whether the current liabilities shown are genuine. iii. Whether deduction claimed on account of other expenses is admissible. 12. He submitted that in the b....
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.... have been the criteria as per the limited scrutiny, he has to take permission from the PCCIT / PCIT. 15. Referring to the following decisions, he submitted that in all these decisions it has been held that where the addition made by the Assessing Officer is outside the ambit of reason for which the case was selected for limited scrutiny under CASS, then such addition is not sustainable in law: 1. PCIT v. Weilburger Coatings (India) (P) Ltd. [(2024) 296 Taxman 205 (Cal)) 2. PCIT v. Sukhdham Infrastructures LLP [(2023) 335 CTR 476 (Cal)] 3. Bharatnagar Buildcon LLP v. PCIT [(2023) 226 TTJ 488 (PUNE)] 4. M/s. Organica v. PCIT (ITA No.465/ PUNE/2021] dated 14.12.2022 5. PCIT v. Shark Mines and Minerals Pvt. Ltd. [ITA No. 1/2023 (Orissa High Court)] 6. Sahyadri Agencies Ltd. v. PCIT ((2023) 332 CTR 748 (Ker)] 7. Storewell Construction & Engineers v. PCIT (ITA No.708/PUNE/2019] dated 05.12.2019 8. Shankarsingh C. Thakur v. CIT [ITA No.833/ PUNE/ 2014] dated 12.08.2016 9. Ms. Chengmari Tea Co. Ltd. v. ACIT [ITA No.812/Kolkata/ 2019] dated 31.01.2020 10. Manoj Kumar Poddar v. PCIT [ITA No.132/Ranc....
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.... this year is around Rs. 10 Crs. Thus, when the assessee in the earlier years had bestowed a huge favour upon SCPL by advancing interest free funds of around Rs. 61 Crs. for business needs of SCPL and in consideration of the said favour, M/s. SCPL has advanced interest free funds of around Rs. 10 Crs. to the assessee company in this year, therefore, such interest free advance / loan given by SCPL in this year cannot be considered to be a gratuitous advance as contemplated u/s 2(22)(e) of the Act, therefore, such addition u/s 2(22)(e) is not justified. For the above proposition, the Ld. Counsel for the assessee relied on the following decisions: 1. CIT v. Gayatri Chakraborty [(2018) 407 ITR 730 (Cal)] 2. CIT v. Suraj Dev Dada [367 ITR 78 (P&H)) 3. Gadgil Holdings Pvt. Ltd. v. ITO [ITA No. 1455/PUNE/2017] 4. Saamag Developers Pvt. Ltd. v. ACIT [168 ITD 649 (Del)] 5. Ravindra R. Fotedar v. ACIT [167 ITD 100 (Mum)] 6. Pradip Kumar Malhotra v. CIT [338 ITR 538 (Cal)/[ratio applicablel 20. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC. 21. We have heard the rival arg....
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....n respect of the cases selected for scrutiny through CASS-2014. ii. Whether the said Instruction is applicable to all cases selected under CASS: The said Instruction is applicable where the case is selected for scrutiny under CASS only on the parameter(s) of AIR/CIB/26AS data. If a case has been selected 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 se....
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....ion shall be given to the submissions made by the assessee in response to the show-cause notice. 5. The contents of this Instruction should be immediately brought to the notice of all concerned for strict compliance. Sd/- (Ankita Pandey) Under Secretary to Government of India" 23. Further, Instruction No.5/2016 issued by the CBDT 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 reven....
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.... Scrutiny", it is suggested, that provisions 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. Sd/- (Rohit Garg) Deputy Secretary to the Government of India" 24. Similarly, the CBDT on 30.11.2017 has issued the guidelines regarding unauthorized expansion of scope of limited scrutiny which read as under: "F.No. DGIT(Vig.)/HQ/SI/2017-18 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi-110001 Dated: 30th November, 2017 Subject: Unauthorized expansion of the scope of limited scrutiny -....
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.... (Rakesh Gupta) ADO (V) HQ-I New Delhi" 25. A perusal of the above three instructions / circulars issued by the CBDT from time to time clearly and categorically shows that if during the course of assessment proceedings in limited scrutiny cases, it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding certain limit requiring substantial verification on any other issue(s), then, the case may be taken up for "Complete Scrutiny" with the approval of the PCCIT / Pr. CIT / CIT concerned. Without taking prior approval of the PCCIT / Pr.CIT / CIT or Pr.DIT/DIT, the Assessing Officer cannot expand the scope of limited scrutiny to complete scrutiny. The CBDT has also cautioned the Assessing Officers who have travelled beyond their jurisdiction while making assessments in limited scrutiny by initiating inquiries on new issues without complying with the mandatory requirements of the relevant CBDT Instructions dated 26.09.2014, 29.12.2015 and 14.07.2016. The CBDT has viewed very seriously such instances and in certain cases explanations have been called for from the officers. It is also to be noted that the CBDT circulars....