LAVANYA ESTATES PRIVATE LIMITED,PATNA vs. ITW WARD 2 (1) PATNA, PATNA

This appeal is filed by the Lavanya Estates Private Limited (Assessee / Appellant) against the appellate order passed by the National Faceless Appeal Centre, Delhi [hereinafter referred as Ld. CIT(A)] dated 2nd November, 2023, for Assessment Year 2017-18, whereby the appeal filed by the Assessee against the assessment order dated 25.11.2019, passed by the Income Tax Officer, Patna

For that on the facts of the case the AO was wrong in adding other points when the limited scrutiny was fixed on CASS basis and the only reason was huge cash deposit in demonization period, but there was no addition on the same point, therefore the whole assessment is completely arbitrary, unjustified and illegal.”

After hearing both the parties and perusing the material available on record, we find that the issues in the additional grounds raised by the assessee are purely legal issues the facts qua which are available in the assessment folder and do not require any further verification of facts at the level of the AO. The assessee submitted that the issue is supported by the decision of Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 0383, wherein it was held that the Tribunal will have the discretion to allow or not allow a new ground raised but where the Tribunal is required to consider the question of law arising from the facts which are on record in the assessment proceedings such a question should be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. Therefore considering the facts and circumstances, we are inclined to admit the additional grounds raised by the assessee for adjudication.

Facts in brief are that the assessee engaged in the business of real estate filed the return of income during the year on 31st March, 2018, showing nil income. The case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) and the reasons for selection of scrutiny was that large cash deposits during demonetization period. Notice u/s 143(2) of the Act was issued on 22.09.2018 followed by notice u/s 142(1) along with the questionnaire which were replied by the assessee. Finally, the ld. AO has not made any addition in respect of cash deposits by the assessee in its bank account as alleged in the notice issued u/s 143(2). The AO made three additions; namely, ₹5,00,000/- for share capital, ₹25,79,791/- for Unsecured loans and ₹84,03,000/- for Sundry Creditors, aggregating to ₹1,9,82,781/- in the assessment framed u/s 143(3) of the Act dated 25th November, 2019 without converting the limited scrutiny into complete scrutiny with the approval of the competent authority during the assessment proceedings and the assessment was framed as such.

On the other hand, the ld. DR supported the orders of the lower authorities and submitted that it was not mentioned on the face of the notice issued u/s 143(2) of the Act dated 22nd

After hearing the rival contentions and perusing the materials available on record. We find that the case of the assessee was selected under Computer Assisted Scrutiny Selection (CASS) for scrutiny to examine the issue that the assessee has deposited huge cash into its bank account during demonetization period though it was not stated in the notice that whether it was limited scrutiny or complete scrutiny. The case of the assessee supported by the decision of Tribunal, Delhi Bench in case of Dev Milk Foods Pvt. Ltd. Vs. ACIT in dated 12.06.2020, held as under:-

In the result, the appeal of the assessee is allowed.