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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI MANISH AGARWAL
O R D E R Per Bench : This is an appeal filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 16.01.2024, in DIN & Order No.ITBA/NFAC/S/250/2023- 24/1059784550(1) for the assessment year 2017-2018.
As per the office note, there is a delay of 14 days in filing the appeal. In this regard, the assessee has filed an application for condonation of delay along with Affidavit stating therein sufficient reasons for condonation of delay. Ld. Sr. DR did not raise any serious objection. Accordingly, we condone the delay of 14 days in filing the present appeal and the appeal is heard and disposed off finally on merits.
Brief facts of the case are that the case of the assessee was taken up for limited scrutiny for the sole reason to verify the cash deposit during the year and the assessment was completed u/s.143(3) of the Act dated 29.12.2019 by making various additions including cash deposit during the year. In first appeal, the ld. CIT(A) has partly allowed the appeal of the assessee including the issue of cash deposit which was decided in favour of the assessee. The assessee, being aggrieved, is in further appeal before us.
During the course of hearing, ld AR of the assessee has raised certain additional grounds through an application submitted, which reads as under :- 1. That, at the time of filing of appeal before the Ld. CIT(A) the following grounds could not be taken inadvertently due to ignorance of law & ill advice, which is neither intentional nor deliberate but due to unfortunate and unavoidable circumstances beyond control of the appellant and the appellant neither acted deliberately nor in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation.
2. That in view of the facts under the circumstances the assessee may kindly be permitted to raise the additional ground which goes to the root of the matter and clearly transpires from the proceedings before the lower authorities with complete facts on record and the above ground is purely a legal ground and does not require fresh facts to be investigated and therefore, should be admitted and reliance is placed on the decision of Hon'ble Supreme Court in the case of National Thermal Power Company Limited vs. CIT - 229 ITR 383 (SC) in this regard.
3. That therefore, the assessee appellant request and pray before your Honour to kindly allow & adjudicate the additional ground herein under as added: a. For that, the assessment order passed U/s 143(3) of the LT. Act, 1961 on Dt.29/12/2019 by ITO, Ward Kendrapara deserves to be quashed on the ground that the Ld. AO clearly exceeded his jurisdiction by making disallowances/additions which never formed the basis for selection of the case of the assessee for "Limited Scrutiny". b. For that, the assessment order passed U/s 143(3) of the I.T. Act, 1961 on Ot.29/12/2019 by ITO, Ward Kendrapara deserves to be quashed in absence of any approval received from Pr. CIT/ CIT in converting Limited Scrutiny into Complete Scrutiny when the Ld. AO clearly exceeded his jurisdiction by making disallowances/additions which never formed the basis for selection of the case of the assessee for "Limited Scrutiny". c. For that, the assessment order passed U/s 143(3) of the I.T. Act, 1961 on Ot.29/12/2019 by ITO, Ward Kendrapara deserves to be quashed on the ground that addition/disallowances on issues other than Limited Scrutiny issue, before conversion of Limited Scrutiny into Complete Scrutiny is against the procedure laid down in instruction No.- 5/2016 of CBDT Dt.14/07/2016.
During the course of hearing, the ld. AR submitted that as per the notice issued u/s.143(2) of the Act dated 09.08.2018, the case of the assessee was selected for limited scrutiny and the issues were identified for examination is of cash deposit during the year. The notice u/s.143(2) of the Act dated 09/08/2018, is reproduced as under :-
Ld. AR further submitted that though the case was selected for examination of the cash deposit, however, during the course of assessment proceedings, the AO examined the other issues which are described in para 3 of the assessment, which reads as under :- 3. During the course of scrutiny proceeding, it is found that total amount of Rs.2,48,23,500/· has been debited from the bank account NO.1496102000002592 lDBI Bank to Indian Oil Corporation Ltd. (in short IOCL) which was taken into purchase of petroleum items where as assessee has disclosed purchase at Rs.2,70,90,287/- in the audited P&L account. (i) Sales difference of Rs.7,29,987/- between VAT figure and sale disclosed in P&L A/c. (ii) Excess cash deposit over the sale proceeds; (iii) introduction of capital of Rs.25,00,000/-: . (iv)Deposits of old specified notes (SBN) of Rs,46,500/-. 3.1 After covering of all the relevant points a show cause notice was issued on 16/12/2019 seeking for compliance by 19/12/2019, There is no compliance by that date or till date. On basis of materials gathered during the proceedings, the Assessing Officer is proceeded to complete the assessee since the case is going to be time barred by 31/12/2019.
Ld. AR submitted that the AO without having the necessary approval from the competent authorities has travelled beyond the issues identified for limited scrutiny. For this, he placed reliance on the Instruction No.20/2015 issued by the CBDT, which reads as under :- "Instruction No. 20/2015 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block, New Delhi, the 29th of December, 2015 Subject: Scrutiny Assessments-some important issues and scope of scrutiny in cases selected through Computer Aided Scrutiny Selection ('CASS')-reg. The Central Board of Direct Taxes (CBDT'), vide Instruction No. 7/2014 dated 26.09.2014 had clarified the extent of enquiry in certain category of cases specified therein, which are selected for scrutiny through CASS. Further clarifications have been sought regarding the scope and applicability of the aforesaid Instruction to cases being scrutinized. 2. In order to facilitate the conduct of scrutiny assessments and to bring further clarity on some of the issues emerging from the aforesaid Instruction, following clarifications are being made. i Year of applicability: As stated in the Instruction No. 7/2014, the said Instruction is applicable only in 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 CA SS 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 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 selected for scrutiny in the current Financial Year - one is 'Limited Scrutiny' and other is Complete Scrutiny'. The assessees concerned have duly been intimated about their cases falling either in 'Limited Scrutiny' or 'Complete Scrutiny' through notices issued under section 143(2) of the Income-tax Act, 1961 ('Act'). The procedure for handling 'Limited Scrutiny' cases shall be as under: a. In 'Limited Scrutiny 'cases, the reasons/issues shall be forthwith communicated to the assessee concerned. b. The Questionnaire under section 142( 1) of the Act in 'Limited Scrutiny 'cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the 'Limited Scrutiny issues. c. These cases shall be completed expeditiously in a limited number of hearings. d. During the course of assessment proceedings in ' Limited Scrutiny , cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs.five lakhs (for metro charges, the monetary limit shall be Rs. ten lakhs) requiring substantial verification on any other issue(s), then, the case may be taken up for 'Complete Scrutiny 'with the approval of the Pr. CIT/CIT concerned. However, such an approval shall be accorded by the by the Pr. CIT/CIT in writing after being satisfied about merits of the issue(s) necessitating 'Complete Scrutiny' in that particular case. Such cases shall be monitored by the Range Head concerned. The procedure indicated at points (a), (b) and (c) above shall no longer remain binding in such cases. (For the present purpose, 'Metro charges' would mean Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Ahmedabad). 4.The Board further desires that in all cases under scrutiny, where the Assessing Officer proposes to make additions or disallowances, the assessee would be given a fair opportunity to explain his position on the proposed additions/disallowances in accordance with the principle of natural justice. In this regard, the Assessing Officer shall issue an appropriate show-cause notice duly indicating the reasons for the proposed additions/disallowances along with necessary evidences/ reasons forming the basis of the same. Before passing the final order against the proposed additions/disallowances due consideration 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.
6. Hindi version to follow. "
Ld. AR submitted that when the case of the assessee was selected for limited scrutiny, if the AO desires to examine the other issues as per the Instruction of the CBDT, supra, necessary approval has to be taken from the competent authority to convert into the complete scrutiny without which the additions made on the issues other than the issues covered under the limited scrutiny, is without jurisdiction and, therefore, the same deserves to be deleted. For this, he placed reliance on the decision of the coordinate bench of the Tribunal in & ITA No.148/Kol/2020, order dated 23.02.2023 in the case of Sukhdham Infrastructures LLP and copy of the same is placed before us.
On the other hand, ld. Sr. DR supported the orders of the authorities below and submitted that though in the notice u/s.143(2) of the Act, only one issue has been stated, however, when the details in which CASS selection is sent to the AO, it contains all the other issues required to be examined and the same was intimated to the AO. Thus, it is not the case of the AO where approval was not taken to examine the issues beyond the issue taken up for the limited scrutiny. He, accordingly submitted that the AO acted within the permissible issues and, thus, there is no need to take approval of the competent authority since it is not the case where limited scrutiny is converted into the complete scrutiny. He, therefore, requested to confirm the order passed by the lower authorities.
We have considered the rival submissions and perused the material available on record. From perusal of the notice issued u/s.143(2) of the Act and also looking to the assessment order, it is very much clear that the case was selected under “limited scrutiny” under CASS with a direction to verify the “cash deposit during the year”. Notice u/s.143(2) of the Act issued also speaks about this issue for which the case of the assessee is selected for limited scrutiny. The AO during the course of scrutiny proceedings has observed certain other issues which in his mind require further examination and accordingly he issued a show cause notice on 16.12.2019 to the assessee. Nowhere in the proceedings any approval of the competent authority was taken by the AO before going into the examination of the issues which are not stated therein in the notice issued u/s.143(2) of the Act for limited scrutiny. The CBDT vide Instruction No.20/2015 in para 3.d & 3.e has specifically provided that where the AO noticed that there is potential escapement of income exceeding Rs.five lakhs requiring substantial verification on any other issues, then the case may be taken up for „Complete Scrutiny‟ with the approval of the Pr.CIT/CIT concerned. Thus, the case could be taken up for complete scrutiny. As observed by us in the instant case, no such step has been taken by the AO. Therefore, his jurisdiction is limited to the reasons recorded in the limited scrutiny assessment notice issued u/s.143(2) of the Act dated 09/08/2018. The ITAT Kolkata Bench of the Tribunal in the case of Sukhdham Infrastructures LLP (supra) under identical circumstances has held that the assessment order is bad in law. The observation of the Tribunal are as under :- 9. xxxxxxxxxxx Considering the facts of the assessee’s case and also the ratio laid down drawn in the above decisions and also the CBDT Instruction No. 5/2016, we are of the considered view that the AO has exceeded his jurisdiction in enquiring into those issues beyond the scope of limited scrutiny even prior to the date of conversion which is in clear violation of mandate given by CBDT in the said Circular and has been held by the Co-ordinate Bench of Delhi in the case of Dev Milk Foods Pvt. Ltd. (supra) to be bad in law. We note that CBDT has in para 4 of the said instruction clarified that in a limited scrutiny, the scrutiny assessment proceedings would initially be confined only to issues and questionnaire, enquiry, investigation etc. would be restricted to such issues in the limited scrutiny. Only upon conversion of such case to complete scrutiny after following the procedure laid down as stated , the AO may examine the issues other than the issues involved in the limited scrutiny but in the present case the procedures were not followed and assessment was conducted in violation of this Instruction. In our opinion, the order passed by the AO is bad in law and cannot be sustained for the said reason. Accordingly we quash the assessment order as nullity and bad in law. Issue raised by the assessee in ground no. 1 is allowed.
The facts of the present case are also identical to the facts in the case of Sukhdham Infrastructures LLP (supra), therefore, in our considered view, for the reason as has been observed earlier, the additions which are other than the issue stated in the notice issued for limited scrutiny is beyond the jurisdiction and, therefore, are directed to be deleted. In the instant case, the limited scrutiny is for verification of cash deposit during the year, however, the AO made the addition of Rs.25.00 lacs towards capital introduced by the assessee which is a journal entry passed against the assets placed in the business premises. This has no relevance with cash deposit. In view of these facts, the addition of