INCOME TAX OFFICER, WARD - 3(1), VARANASI vs. M/S BHGYASHREE VINCOM PVT. LTD., VARANASI

The first issue involved in the grounds raised by the Revenue is against the deletion of addition of Rs.2,88,00,000/- on account of unaccounted money invested in loans and advances. Secondly, the Revenue has challenged that the ld. CIT(A) has erroneously held that the Assessing Officer has to issue the questionnaire beyond the limit of limited scrutiny criteria.

In the Cross Objection, the assessee has challenged that the Assessing Officer has erred in law in converting the ‘Limited Scrutiny” into a “Complete Scrutiny”, without following the procedure as laid down by the CBDT.

The facts of the case in brief are that the assessee has furnished the return of income for Assessment Year 2017-18 on 29.1.2018 showing Nil income. The said return was selected for limited scrutiny assessment under CASS and accordingly notice under section 143(2) of the Act was issued. The Assessing Officer observed that the assessee did not respond to any of the notices and accordingly he proceeded to pass assessment order under section 144 of the Act. He noted that the assessee has failed to produce the record, the net profit declared and he has also failed to comply with the terms and conditions of notice under section 142(1) of the Act. He further noted that the assessee has also failed to get the accounts audited and he was unable to produce the books of account. Finally, he held that the assessee has “constructed an elaborate smokescreen to channelize unaccounted money in the form of loans and advances received and invested in non-existing companies/parties by way of :-3-:

The ld. CIT(A) has quashed the assessment, holding that the Assessing Officer has failed to follow the guidelines issued for completing the case under limited scrutiny guidelines.

We have heard the parties on merits of the additions made by the Assessing Officer and not on the validity of annulment of assessment. From the perusal of the assessment order, it is seen that the Assessing Officer has made addition under section 68 of the Act on loans and advances given by the assessee. On the perusal of balance sheet as at 31.3.2017, it is seen that the assessee had shown under the head “Current Assets”, short-term loans and advances at Rs.2.88 crores. Once the assessee had showed short-term loans and advances under the head “Current Assets”, we fail to understand how it is an unexplained cash credit to be added under section 68 of the Act. It is not even an unexplained investment outside the books. Even if the Assessing Officer was making best judgment assessment by taking the figures from the balance sheet, atleast he should have applied his mind that whether an item of loans and advances shown under the head “Current Assets” can be treated as unexplained investment or unexplained cash credit to be added under section 68 of the Act. Thus, on this ground, the addition made by the Assessing Officer is deleted and the Revenue’s appeal is dismissed on merits.

The Cross Objection of the assessee, which is in support of the order of the ld. CIT(A), is not being adjudicated nor we are giving any finding on the view taken by the ld. CIT(A). Accordingly, the Cross Objection of the assessee is treated as infructuous.

In the result, the appeal of the Revenue stands dismissed and the Cross Objection of the assessee is dismissed as infructuous. Order pronounced in the open court on 26.9.2023.