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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’ : NEW DELHI
Before: SHRI AMIT SHUKLA
The aforesaid appeal has been filed by the assessee/appellant against the impugned order dated 27.12.2018, passed by the ld. CIT (Appeals)-9, New Delhi for the quantum of assessment passed u/s 143(3) of the Income-tax Act, 1961 (for short ‘the Act’) for the Assessment Year 2015-16. 2. The assessee has challenged the impugned order on the following grounds:- “
1. That the Honorable CIT(A)-IX has erred in law and on facts in confirming an addition of Rs. 7,40,505.00 on untenable and illegal grounds, Hence, the addition as such may be deleted.
2. That the honorable CIT(A)-IX has erred in facts and law in sustaining the addition of Rs. 7,40,505.00 as being beyond the jurisdiction of selection of case under limited scrutiny. Hence, the addition as such may be deleted ./2019 3. That the Honorable CIT(A)-IX has erred in law and on facts in sustaining the assessment being made by non jurisdictional officer. Hence, the assessment order may be vacated.
4. That the Honorable CIT(A)-IX has erred in law and on facts in sustaining the assessment order as no order under section 127 passed before transferring the file from ITO ward 51(3) to 26(3). Hence, the assessment order may be vacated.
5. That the Honorable CIT(A)-IX has erred in law and on facts in sustaining the assessment order providing for rejecting the books of accounts of the appellant on untenable and illegal grounds. Hence, the books of accounts may be accepted and the profit as declared by assessee should be accepted.
6. That the Honorable CIT(A)-IX has erred in law and on facts in sustaining the addition of Rs.7,40,505.00 u/s 68 on untenable and illegal grounds. Hence, the addition, as such, may be deleted.
7. That the Honorable CIT(A)-IX has erred in law and on facts in sustaining the addition of Rs.7,40,505.00 on untenable and illegal grounds. Hence, the addition, as such, may be deleted.”
Facts, in brief, are that here in this case, the assessee had filed e- return of income on 31.01.2017 declaring income of Rs.10,490/-. Later on, the case was selected for limited scrutiny through CASS on the basis of SFT reporting that, “cash deposits for demonetization period (9th November to 30th December) is reported as per SFT reporting and the issue of investigation was whether the cash deposit has been made from disclosed income”. In response to the notice, the assessee had submitted that the assessee was conducting business of jewellery and jobwork for which certain documentary evidences were also filed. AO observed that here in this case, return for AY 2015-16 (FY 2014- 15) was filed post-demonetisation, i.e., 08.11.2016 and during the demonetisation period. Before me it has been stated that, however, AO travelled beyond the scope of limited scrutiny and went on to hold that the complete receipts shown from the business of jewellery amounting to Rs.7,45,505/- is bogus as the assessee could not establish the fact , ./2019 whether it had carried out any business or not. AO also referred to ITI report who was sent to enquire the address mentioned wherein ITI reported that no company existed in such building. Instead of limiting the scope for which the case was selected for scrutiny, AO travelled beyond and held that entire receipts shown in the books of the assessee is to be added u/s 68 of the Act.
Even, the ld. CIT (A) has confirmed the action of the AO holding that the assessee was unable to prove that it carried out any business of jewellery or job receipts and, therefore, AO is justified in taxing the entire receipts from ‘income from other sources’ liable to be added u/s 68 of the Act.
Before us, ld. Counsel for the assessee submitted that here in this case, there is no cash deposit in the bank account, because the FY involved is 2014-15 and the demonetisation happened in the FY 2015-16 relevant for AY 2016-17. So, the entire basis on which the case was selected for scrutiny was selected was wrong as the cash deposit was during the period of demonetisation was totally incorrect on this ground alone the assessment beyond the limited scrutiny cannot be sustained. He further explained that during the FY 2014- 15, the following fund flow statement was appearing in the audited books of account which are as under :- “Fund Flow Statement during the FY 2014-15 Share Application Money received 1,00,000.00 Job work receipts in cash 7,01,180.00 Sales including VAT 39,718.00 TOTAL 8,40,898.00 Cash Expenses 5,62,612.00 Cash deposited in bank during the FY 2014-15 2,43,000.00 Cash as on 31.03.2015 is Rs.35,286.00”
5.1 Thus, the entire cash deposits during the FY 2014-15 was only Rs.2,43,000/- and not Rs. 7,01,180. Insofar as the job receipts are concerned, he submitted that the same is duly appearing in the audited books of account and filed various documentary evidences before us in the form of VAT return, cash memo, bills & vouchers, VAT registration, etc. He also rebutted the ITI report and submitted that during the course of remand proceedings at the first appellate stage, assessee has categorically stated that the entire building on which the address of the assessee situated belongs to his father. He has also requested that ITI can be sent once again to verify this fact and any enquiry behind the back cannot be sustained. Thus, he submitted that not only the additions are beyond the scope of limited scrutiny but also the additions made by the AO are not based on correct appreciation of facts placed before the authorities below.
On the other hand, ld. Senior DR strongly relying upon the order of the AO and ld. CIT (A) submitted that even though the case was selected for scrutiny of cash deposits, however the assessee in his books of account had cash receipts and moreover the explanation of the assessee that it had carried out business could not be established in view of the detailed enquiry of the AO and ld. CIT (A).
I have heard the rival submissions and perused the relevant material placed on record as well as the finding given in the impugned order. Here in this case, the scope of assessment was circumscribed to the issue flagged in limited scrutiny through CASS to examine the cash deposits during the demonetisation period, i.e., 09.11.2016 to 30.12.2016. However, the AO instead of examining this issue has travelled beyond and has held that entire receipts shown by the ./2019 assessee as business income is ‘income from undisclosed sources’ and entire receipts have been added u/s 68 of the Act. First of all, there is no cash deposits post-demonetisation period i.e. 09.11.2016 to 30.12.2016, albeit present appeal pertains to FY 2014-15 and in this year only cash deposited in the bank account was Rs.2,43,000/- on various dates, which is clear from the bank statement and which has been stated to be received from job receipts and making of jewellery. Thus, the entire premise on which case was selected for scrutiny was non-existent and accordingly, AO could not have travelled beyond that for enlarging the scope of assessment by making addition on a different ground.
The CBDT vide its Instruction No.20/2015 dated 29.12.2015 and Instruction No.5/2016 dated 14.07.2016 has categorically held that AO cannot travel beyond the scope of limited scrutiny and in case the AO wants to convert the limited scrutiny into complete scrutiny then he has to seek approval from concerned Pr.CIT or CIT which has to be given in writing after getting satisfaction from the merits on the issues. In this case, no approval has been taken by the AO from concerned Pr.CIT/CIT before making any addition beyond the scope of limited scrutiny. Accordingly, I hold that the entire addition which has been made cannot be sustained and the same is beyond the scope and violation of limited scrutiny. Accordingly, on this ground alone, the addition is deleted and the appeal of the assessee is allowed.
Order was pronounced on 28TH day of April, 2022.