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Income Tax Appellate Tribunal, PUNE“A” BENCH, PUNE
Before: HON’BLE SHRI S. S. GODARA & SHRI G. D. PADMAHSHALI
बनाम / V/s Deputy Commissioner of Income Tax, Circle-12, Pune. . . . . . . . प्रत्यर्थी / Respondent द्वारा/ Appearances Assessee by : Smt Deepa Khare Revenue by : Shri Ramnath P Murkunde सुनवाईकी तारीख / Date of conclusive Hearing : 12/07/2023 घोषणाकी तारीख / Date of Pronouncement : 07/08/2023 आदेश / ORDER PER G. D. PADMAHSHALI, AM; The present appeal by the assessee instituted challenging the DIN & Order No. ITBA/NFAC/S/250/2022-23/1049524703(1) dt. 08/02/2023 passed u/s 250 of the Income-tax Act, 1961 [‘the Act’] by the National Faceless Appeal Centre [‘NFAC’] for the assessment year [‘AY’] 2016-17.
Briefly stated the facts coming out of the records are; 2.1 The assessee an individual engaged in the business of development of residential complexes, had e-filed his return of income [‘ITR’] declaring total income of ₹30,81,380/- on 21/10/2016. The case of the assessee vide notice dt.
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Manikrao Amrutrao Satav 03/07/2017 was selected for limited scrutiny under CASS regime to verify two bullet issues viz; (i) Genuineness of sundry creditors and (ii) Deduction under capital gains. After according reasonable opportunity of being heard and considering the submission of the assessee, the Ld. Deputy Commissioner of Income Tax, Circle-12, Pune [‘AO’] vide DIN & Order ITBA/AST/S/143(3)2018-19/1014657865(1) dt. 29/12/2018 assessed the total income of the assessee at ₹2,79,62,673/- u/s 143(3) of the Act with three bullet additions viz; (1) Unexplained Cash deposits u/s 69A of the Act for ₹30,00,000/- (2) Capital Gain of ₹2,18,63,682/- and (3) Misc. Income ₹17,611/-.
2.2 Aggrieved assessee agitated aforestated first two additions in an appeal before first appellate authority. After considering submission of the assessee, the Ld. NFAC by the impugned order dt. 08/02/2023 has partly allowed the appeal deleting the addition made under the head capital gain, however echoing the findings of Ld. AO. has confirmed the addition made u/s 69A of the Act.
2.3 Still aggrieved by the aforestated addition made u/s 69A of the Act, the appellate assessee set-up the present appeal with following grounds alleging the very jurisdiction of Ld. AO as extra-territorial in the absence of prior approval from concerned authority in converting limited scrutiny into complete scrutiny;
1. In the facts and circumstances of the case and in law, the learned CIT-(A) has erroneously ignored the submission made by the appellant assessee that the amount of Rs.30,00,000/- was deposited out of withdrawal made in cash from SB account on 08.10.2014 of Rs.30,00,000/-. And further stated that this bank account was not disclosed in the return of income. The fact that the appellant assessee has disclosed his business accounts and this being personal SB account hence not disclosed in books of account of his business. Hence, the conclusions drawn by the learned CIT-(A) being bad in law, null and void arbitrary, baseless, devoid of merits the same may please be vacated.
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Manikrao Amrutrao Satav
2. In the facts and circumstances of the case and in law, the learned CIT-(A) has failed to appreciate that cash was withdrawn from personal savings account was lying with the appellant and it was deposited in the very same personal savings account. At the outset the appellant assessee submits that he has withdrawn Rs.30,00,000/- from SB account on 08.10.2014. This amount was lying with appellant and same was deposited on 29.04.2015 in the very same bank account. Thus, there is direct nexus of withdrawal of cash and deposit of cash in the very same bank account. Further the learned CIT-(A) established the availability of cash in hand. And as it was not spent elsewhere then the hypothetical reasons given merely on guess work are totally irrelevant. Thus, conclusions drawn by the learned CIT-(A) in this behalf being bad in law, null and void arbitrary, baseless, devoid of merits the same may please be vacated and annulled.
3. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal.
4. Any other equitable and just order that may be deemed fit and proper by your honour may please be passed in the matter.”
Additional Ground :
“On the facts and in the circumstances of the case and in law Learned Assessing Officer erred in extending the scope of limited scrutiny by making addition beyond the issues referred to in limited scrutiny notice, which is in violation of CBDT instruction no. 5 of 2016 dated 14/07/2016 and therefore the addition made deserves to be deleted and Assessment order shall be quashed.
It is submitted that all the facts are on record. It is prayed that the same may kindly be admitted and decided on merits.”
On the limited issue, we have heard the rival contentions of both the parties; and subject to the provisions of rule 18 of Income Tax Appellate Rules, 1963 perused the material placed on record, case laws relied upon by the appellant as well the respondent and duly considered the facts of the case in the light of settled legal position forewarned to either parties.
First thing first, in view of the Hon’ble Apex Court judgements in ‘National Thermal Power Company Ltd. Vs CIT’ reported in 229 ITR 383 and ‘Jute Corporation of India Ltd. Vs CIT’ reported in 187 ITR 688 there is a now ITAT-Pune Page 3 of 6
Manikrao Amrutrao Satav Tribunal either as main ground or as an additional ground only if the relevant facts are already on record. In the extant appeal, the additional legal ground raised by the appellant goes to challenge the very jurisdiction of the assessment without triggering any fresh enquiry or investigation into the facts of the case, therefore deserves to be admitted in the light of ‘NTPC Vs CIT’ (supra), thus same stands admitted.
We shall first deal with the additional legal ground and then the substantive meritare ground if it necessitates; 5.1 In doing so, it shall be purpose to state that the case of the appellant was subjected to limited scrutiny under CASS for the on two point verification as laid at foregoing para 2.1 hereinbefore. Whereas the Ld. AO framed the assessment making three additions as adumbrated at aforestated para 2.1 above. We note that, of the three additions, the subsisting impugned addition of ₹30,00,000/- made u/s 69A of the Act represents cash deposits the source of which remained unexplained. 5.2 Before adverting the merits of impugned addition made u/s 69A of the Act, the Ld. AR submitted that, primarily the case records suggest that, the Ld. AO while extending/enlarging the scope of the scrutiny had not obtained prior approval from the higher authority in terms of CBDT Circular 5/2016 dt. 14/07/2016. Per contra the Ld. DR could hardly showcase on record the proof of approval if any obtained in converting limited scrutiny into complete scrutiny.
5.3 It is to be noted that, the scheme of scrutiny of return is provided u/s 143(2) in two variants (1) limited scrutiny and (2) complete scrutiny. Where the case is ITAT-Pune Page 4 of 6
Manikrao Amrutrao Satav AO notices any potential escapement of income exceeding the threshold prescribed by the CBDT, then before proceeding to enlarge the scope to later type complete scrutiny, the AO is mandated to first form reasonable view on possibility of potential under assessment if remained unexpended and then seek prior approval of concerned authority. In the event of failure to adhere to these two dictates, the exercise in contravention thereof runs extra-territorial and thus renders void. Therefore it is imperative to quote the mandate set in para 2 of the CBDT circular (supra) as; “2. In order to ensure that maximum objectivity is maintained in converting a case falling under „Limited Scrutiny‟ into a „Complete Scrutiny‟ case, the matter has been further examined and in partial modification to Para 3(d) of the earlier order dated 29.12.2015, Board hereby lays down that while proposing to take up „Complete Scrutiny‟ in a case which was originally earmarked for „Limited Scrutiny‟, the Assessing Officer („AO‟) shall be required to form a reasonable view that there is possibility of under assessment of income if the case is not examined under „Complete Scrutiny‟. In this regard, the monetary limits and requirement of administrative approval from Pr. CIT/CIT/Pr. DIT/DIT, as prescribed in Para 3(d) of earlier Instruction dated 29.12.2015, shall continue to remain applicable.”
5.4 In context of binding nature of instruction issued by Board and pros of outstepping therefrom, we note that, way back in 1988, the Hon’ble Rajasthan High Court in ‘CWT Vs Sanwarmal Shivkumar’ reported in 171 ITR 377 held that, the tax authorities and Officer are bound to follow all circulars issued by their mother body CBDT u/s 119 of the Act. Even earlier in 1983 the Hon’ble Kerala High Court in ‘CIT Vs Malayala Manorama & Co Ltd.’ reported in 143 ITR 29 has observed that circulars of general directions issued by the CBDT are binding u/s ITAT-Pune Page 5 of 6
Manikrao Amrutrao Satav 119 of the Act on all officers and persons employed in the execution of the Act therefore any action or proceedings outstepping the scope shall render unlawful. Consistently same view has been propounded in plethora of judicial precedents including the cases reported in 187 CTR (SC) 297 : (2004) 267 ITR 272 (SC) ‘CoC Vs Indian Oil Corporation Ltd.’ and 343 ITR 270 ‘Catholic Syrian Bank Vs. CIT’, and 295 ITR 0256 & 169 taxmann 0004 ‘CIT Vs Best Plastics (P) Ltd.’ and 120 taxmann.com 167 ‘CIT Vs Padmavati’ etc.
In the present case, the Ld. AO made the impugned addition of ₹30,00,000/- made u/s 69A of the Act not falling within the scope of limited scrutiny and admittedly is without converting the limited scrutiny into complete scrutiny. This outstepping action of Ld. AO being extra-territorial to the scope of limited scrutiny in the light of foregoing judicial precedents rendered itself void, resultantly no legs to stands, therefore directed for deletion. Since the legal ground is adjudicated in favour of the assessee, all remaining meritare grounds rendered themselves academic in nature, thus called-off for adjudication.
In the result, the appeal of the assessee is ALLOWED. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Monday 07th day of August, 2023.
-S/d- -S/d- S S GODARA G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे/ PUNE ; ददनाांक / Dated : 07th day of August, 2023. आदेशकीप्रतितितिअग्रेतिि / Copy of the Order forwarded to : 1.अपीलाथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The Pr.CIT(TDS),Pune 4. The CIT(A), NFAC Delhi 5. DR, ITAT, Pune Bench ‘A’, Pune 6.गार्डफ़ाइल / Guard File. *SGR आदेशानुसार / By Order वररष्ठदनजीसदिव / Sr. Private Secretary आयकरअपीलीयन्यायादधकरण, पुणे / ITAT, Pune.
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