TaxTMI 
TaxTMI 
2025 (4) TMI 467
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....liable to be quashed as limited scrutiny assessment was enhanced as if it was complete scrutiny by making additions relating to (i) alleged cessation of liability u/s 41(1) and (ii) disallowance of transmission charges which were not covered by limited scrutiny reasons. Scope of limited scrutiny has been enhanced without prior approval from Pr CIT, without intimation to the appellant and contrary to binding CBDT instructions. Ld. CIT(A) has also erred in stating that the issue of unauthorized enhancement of limited scrutiny is an administrative action which is not appealable and accordingly, erred in not quashing the said assessment. 1.1 That in the alternative without prejudice to the above ground, the Ld. AO has erred in making addition for alleged cessation of liability u/s 41(1) of Rs 11,25,00,000 and disallowance of transmission charges of Rs 1,46,58,592/- which were outside the scope of limited scrutiny notice. The Ld. CIT(A) has erred in sustaining the said additions. Compulsorily Convertible Debentures (CCD): 2. That the Ld. CIT(A) has erred in sustaining the addition of Rs 1,91,70,000/- as notional, hypothetical interest income on 9% CCD. Strateg....
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.... 6 That the assessment as made and the order of the Ld. CIT(A) are against law and facts of the case involved. 7. That the grounds of appeal as herein are without prejudice to each other. 8. That the appellant respectfully craves leave to add, amend, alter and / or forego ground(s) at or before the time of hearing. 3. We have heard the rival submissions and perused the materials available on record. The assessee is engaged in the business of installation and sale of windmill projects and provision of consultancy services in relation to windmill projects and investment in other companies doing such business. The return of income for the Assessment Year 2015-16 was filed by the assessee company declaring total loss of Rs 7,26,558/- on 30-11- 2015. The case was selected for limited scrutiny by issuance of notice under section 143(2) of the Act dated 2-8-2016 for examination of the following specific issues :- 1. Contract receipt / fees mismatch 2. Sales turnover mismatch 3. Receipt of foreign remittance 4. Low income and high loans / advances / investments 5. Low income and high investments 6. Loss from curr....
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....ed for converting limited scrutiny to complete scrutiny in the instant case. The CBDT Instruction No. 20/2015 dated 29-12-2015 and CBDT Instruction No. 5/2016 dated 14-7-2016 read with DGIT (Vigilance) letter dated 30-11-2017 is very clear, wherein it is mentioned that before venturing into other issues outside the scope of limited scrutiny, the Learned AO should have taken prior approval of Learned PCIT. Admittedly, in the present case, the Learned AO had not taken any such approval of the concerned authorities. Therefore, the assessment order passed is in violation of CBDT instructions referred to above. Now a question arises as to what will be the fate of such an order passed in violation of extant CBDT instructions. We find that the Hon'ble Jurisdictional High Court in the case of CIT vs Best Plastics Private Limited reported in 169 Taxman 4 (Del) and the Hon'ble Supreme Court in the case of Commissioner of Customs vs Indian Oil Corporation Limited reported in 267 ITR 272 (SC) had categorically held that circulars and instructions issued by CBDT are binding on the officers of the Income Tax Department. Since the addition made on account of cessation of liability under s....
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....uld certainly fall within the scope of one of the parameters selected and reflected in the limited scrutiny. Hence there could be no objection for the assessee in this regard. But on merits, it was argued by the Learned AR before us that since before the close of the year, the assessee waived off its right to charge interest on CCDs, no such notional interest can be taxed in the hands of the assessee as neither it has accrued nor it has been received during the year. The Learned DR before us vehemently argued that the decision of waiver was taken by the assessee only on 31-3-2015 and hence interest had accrued to the assessee for the whole year. This was buttressed by the Learned AR by stating that the effective date of waiver was 1-4-2014 and hence no interest could accrue to the assessee. 10. It is not in dispute that the entire investment of Rs 21.30 crores in CCDs of group concerns were made out of own funds and not out of borrowed funds. The waiver of interest stipulated is always at the discretion of the debenture holders. On request from the borrower i.e. DJ Wind Solutions Pvt Ltd, the assessee waived off their right of interest on CCDs on 31-03-2015 for bona fide commerc....