TaxTMI 
TaxTMI 
2025 (12) TMI 854
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.... facts and circumstances of the case of the appellant, the assessment order, having been passed pursuant to the action of the AO expanding the scope of limited scrutiny without following the due procedure is bad in law and deserves to be quashed. 3. In law and in the facts and circumstances of the case of the appellant, the CIT(A) has grossly erred in confirming the addition of Deemed Dividend u/s 2(22)(e) of the Act of Rs. 1,95,00,000/- when no such addition is called for. 4. In law and in the facts and circumstances of the case of the appellant, the AO has grossly erred in making the addition of Rs. 1,95,00,000/- u/s 2(22)(e) of the Act as 'Deemed Dividend' in the hands of the appellant even when the no benefit has been received by the appellant. 5. The appellant craves leave to add, alter or amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal." 3. The brief facts of the case are that the case of the assessee was selected for limited scrutiny on following two issues: (i) Sales turnover mismatch. (ii) Increase in Capital 3.1. The Assessing Officer (AO), however,....
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....cision of the Co-ordinate Bench of the Tribunal in the case of Sagalaxmi Agriseeds Pvt.Ltd. vs. ACIT in ITA No.1918/Ahd/2024 for AY 2017-18, decided on 05/08/2025. The Ld. Counsel for the assessee has further invited our attention to Page No.15 of the impugned order of the Ld. CIT(A) to submit that a Certificate from the Bank was duly furnished before the Ld. CIT(A), wherein, the Bank has certified that the aforesaid amounts were erroneously debited by the Bank from the account of the company to the assessee's account and that the same was reversed on the same day. The Ld. CIT(A), however, did not appreciate the aforesaid certificate and observed that the said mistakes cannot be inadvertently repeated time and again and, therefore, confirmed the impugned addition. The Ld. Counsel for the assessee, however, submitted that since the bank has duly certified that the amounts were debited from the company's account and credited to the assessee's bank account by inadvertent mistake and that the same entries were made by bank on the same day, hence, it was not a case of deemed dividend u/s.2(22)(e) of the Act. 7. The Ld. DR, however, has relied upon the findings of the lower authoritie....
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....e Jurisdiction of the AO had ceased at that point. The issue of depreciation on goodwill was altogether different which was to be considered in terms of s. 32 of the Act. If the AO wanted to further examine the issue of claim of depreciation of Goodwill, in our view, he should have taken the permission to enlarge the scope of limited scrutiny from the Jurisdictional Commissioner as per the law. Merely because the issue of claim of depreciation was germane to the issue of purchase of assets/Goodwill, that itself, in our view, will not confer jurisdiction upon the AO to suo moto to enlarge his jurisdiction from limited scrutiny to full scrutiny and entitle him to make the addition by disallowing depreciation on goodwill, which issue was neither the subject nor within the scope of the limited scrutiny issue of increase in share capital. The scope of limited scrutiny on any issue cannot be enlarged in the absence of previous approval of the administrative Commissioner as directed by the CBDT's (Central Board of Direct Taxes) instructions dated 26.09.2014, 29.12.2014 and 14.07.2016 in respect of "CASS" assessment. The Ld. CIT(A) himself, has referred to CBDT's Instruction No. 5/....
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....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. 5. It is also clarified that once a case has been converted to 'Complete Scrutiny, the AO can deal with any issue emerging from ongoing scrutiny proceedings notwithstanding the fact that the reason for such issue have not been included in the Note. 6. To ensure proper monitoring in cases which have been converted from Limited Scrutiny to 'Complete 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 ....
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....intenance of note sheets in assessment folders. (Rakesh Gupta) ADG (V) HQ-I New Delhi" 10. Admittedly, in this case the Id. AO did not seek any permission of the competent authority for converting the limited scrutiny to a full scrutiny. As observed above, neither the AO nor the Ld. CIT(A) had jurisdiction to go into the said issue of depreciation on Goodwill as it was a case of limited scrutiny on the issue of increase in share capital, the scope of which could not have been enlarged to a new issue of claim of depreciation that too by further going into the issue of correctness of the valuation amount of the assets of the Proprietorship Concern and that too without joining or summoning the said proprietorship concern in the proceedings, therefore, assessment order is not sustainable. The Hon'ble Calcutta High Court in the case of Principal Commissioner of Income Tax-vs.- Weilburger Coatings (India) (P.) Limited reported in 155 taxman.com 580, 296 ITR 205, [2024] 463 ITR 89, wherein the hon'ble High Court upheld the order of the Tribunal holding that the Assessing Officer exceeded his jurisdiction in enquiring into those issues which were bey....