MAJESTIC DEALMARK P. LTD.,KOLKATA vs. I.T.O., WARD - 4(2), KOLKATA

Per Rajesh Kumar, AM:

This is an appeal preferred by the assess is against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 21.10.2025 for the AY 2017-18.

“That the ld. CIT (A) has erred in law and on facts in upholding the order of ld. AO wherein the addition has been made by the ld. AO in respect of unexplained investment u/s 69A of the act (sale of investment) when the same was not subject matter of limited scrutiny.”

ITA No. 3270/KOL/2025 Majestic Dealmark P Ltd; A.Y. 2017-18 2.1. After hearing the rival contentions and perusing the material on record, we find that the assessee has raised the above additional ground of appeal challenging the jurisdiction of the AO to make addition. In our opinion the issued raised in the additional ground is a purely a legal issue qua which all the facts are available in the appeal folder and no further verification of facts is required from any quarter whatsoever. In our considered view the assessee is at liberty to raise any legal issue before any appellate authority for the first time even when the same has not been raised before the lower authorities. The case of the assessee is squarely coverd by the decisions of the Apex court in the case of i) Jute Corporation of India Ltd. Vs CIT in 187 ITR 688 , ii) National Thermal Power Co. Ltd v. CIT [1998] 229 ITR 383 and also by the decision of Hon’ble Calcutta High Court in PCIT vs. Britannia Industries Ltd. [2017] 396 ITR 677 (Cal). Therefore, we are inclined to admit the same for adjudication.

ITA No. 3270/KOL/2025 Majestic Dealmark P Ltd; A.Y. 2017-18 ld. AO noted that during the year the assessee has sold investments amounting to ₹1,13,15,000/- which were not disclosed in the return of income or profit and loss account and the ld. AO accordingly held that the same is nothing but accommodation entries done by the assessee in order to bring back his own money into the books of account. Finally, the addition was made by the AO u/s 69A of the Income-tax Act, 1961 (the Act) of ₹ 1,13,50,000/- as unexplained investment to the income of the assessee in the assessment framed u/s 143(3) of the Act dated 27.12.2019.

ITA No. 3270/KOL/2025 Majestic Dealmark P Ltd; A.Y. 2017-18 amount credited by way of sale of shares in the books of account and the same was added to the income of the assessee without convertng limited scrutiny into the complete scrutiny by recording his satisfaction and obtaining approval from the competent authority. We note that the addition made by the ld. AO which is not a subject matter of the limited scrutiny is without jurisdiction and cannot be sustained. The case of the assessee is squarely covered by the decision of Shamim Khan Vs. ITO in ITA no. 281/KOL/2024 vide order dated 25.06.2026, wherein the co- ordinate bench held as under:-

“8. After hearing the rival contentions and perusing the material on record, and also notice dated 143(2) of the Act dated 09.08.2018. The assessee is engaged in the business of commission agent as Kacha Arhtia, selling fruits and vegetables in Raniganj Hatia on behalf of the owners of those goods. The ld. AR submitted that the addition has been made in respect of profit on undisclosed deposits in the bank account without converting limited scrutiny into complete scrutiny which is not permissible under the Act. In our view this is incomplete disregard of the Instruction No. 5/2016 issued by CBDT on 14.07.2016 which provides that while proposing to take up complete scrutiny which was fixed for limited scrutiny, the AO shall form a reasonable view that there is a possibility of under-assessment of income if the case is not examined under complete scrutiny and that plea has to be on the existence of the credible material not merely on suspicion and conjecture or unreliable sources. We note that the instruction provide that there has to be a direct nexus between the available material and formation of such view. The relevant part of the instruction are reproduced as under: 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.

ITA No. 3270/KOL/2025 Majestic Dealmark P Ltd; A.Y. 2017-18 3. Further, while forming the reasonable view, the Assessing Officer would ensure that: a. there exists credible material or information available on record for forming such view; b. this reasonable view should not be based on mere suspicion, conjecture or unreliable source; and c. there must be a direct nexus between the available material and formation of such view. 4. It is further clarified that in cases under 'Limited Scrutiny', the scrutiny assessment proceedings would initially be confined only to issues under 'Limited Scrutiny' and questionnaires, enquiry, investigation etc. would be restricted to such issues. Only upon conversion of case to 'Complete * Scrutiny' after following the procedure outlined above, the AO may examine the additional issues besides the issue(s) involved in 'Limited Scrutiny'. The AO shall also expeditiously intimate the taxpayer concerned regarding conducting 'Complete Scrutiny' in such cases. 9.. Instruction no. 4 provides only complete scrutiny after following the procedure laid down above and the AO may examine the additional issues besides the issue involved in limited scrutiny and AO shall also expeditiously conducted complete scrutiny in such cases. We note that in the present case there has been a complete violation of the Circular issued by the CBDT. The case of the assessee finds support from the decision of Co-ordinate Bench of Delhi in the case of Dev Milk Foods Pvt. Ltd. (supra) wherein it has been held as under: 6.0 We have heard the rival submissions and have also perused the material on record. After considering the entire factual matrix we first deal with the primary arguments of the Ld. Authorized Representative that the conversion of the case from limited scrutiny to completer scrutiny was not legally valid. The subject of conversion of case from limited scrutiny to complete scrutiny has been dealt with in CBDT Instruction No.5/2016 which is being reproduced herein under for the sake of convenience: “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 partialmodification 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 Page | 5

ITA No. 3270/KOL/2025 Majestic Dealmark P Ltd; A.Y. 2017-18 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. 3. Further, while forming the reasonable view, the Assessing Officer would ensure that: a. there exists credible material or information available on record for forming such view; b. this reasonable view should not be based on mere suspicion, conjecture or unreliable source; and c. there must be a direct nexus between the available material and formation of such view. 6. To ensure proper monitoring in cases which have been converted from ‘Limited Scrutiny’ to ‘Complete Scrutiny’, it is suggested, that provisions of section 144A of the Act may be invoked in suitable cases. To prevent possibility of fishing and roving enquiries in such cases, it is desirable that these cases should invariably be picked up while conducting Review or Inspection by the administrative authorities. 7. The above Instruction shall be applicable from the date of its issue and would cover the cases selected under CASS 2015 which are pending scrutiny cases as well as cases selected/being selected under the CASS 2016.” 6.1 Earlier preceding instruction in this regard was 20/2015 whichstates 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 scrutinyin cases selected through Computer Aided Scrutiny Selection ('CASS')-reg .- The Central Board of Direct Taxes ('CBDT'), vide Instruction No. 7/2014dated 26 09.2014 had clarified the extent of enquiry in certain category ofcases specified therein, which are selected for scrutiny through CASS.Further clarifications have been Page | 6

ITA No. 3270/KOL/2025 Majestic Dealmark P Ltd; A.Y. 2017-18 sought regarding the scope andapplicability of the aforesaid Instruction to cases being scrutinized. 2. In order to facilitate the conduct of scrutiny assessments and to bringfurther 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 saidInstruction is applicable only in respect of the cases selected for scrutinythrough CASS-2014 ii Whether the said Instruction is applicable to al l cases selected underCASS : The said Instruction is applicable where the case is selected for scrutinyunder CASS only on the parameter(s ) of AIR/CIB/26AS data . If a case hasbeen selected under CASS for any other reason(s)/parameter (s) besides theAIR /CIB/26AS data, then the said Instruction would not apply. iii Scope of Enquiry : Specific issue based enquiry is to be conducted only inthose scrutiny cases which have been selected on the parameter(s ) ofAIR/CIB/26AS data .In such cases, the Assessing Officer, shall also confine the Questionnaireonly to the specific issues pertaining to AIR/CIB/26AS data. Wider scrutinyin these cases can only be conducted as per the guidelines and proceduresstated in Instruction No. 7/2014. iv Reason for selection: In cases under scrutiny for verification ofAIR/CIB/26AS data , the Assessing Officer has to intimate the reason forselection of case for scrutiny to the assessee concerned. 3. As far as the returns selected for scrutiny through CASS- 2015 areconcerned, two type of cases have been selected for scrutiny in the currentFinancial Year - one is 'Limited Scrutiny' and other is Complete Scrutiny'.Theassessees concerned have duly been intimated about their cases fallingeither in 'Limited Scrutiny' or 'Complete Scrutiny' through notices issuedunder section 143(2) of the Income-tax Act, 1961 ('Act'). The procedure forhandling '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 Page | 7

ITA No. 3270/KOL/2025 Majestic Dealmark P Ltd; A.Y. 2017-18 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, 'Metrocharges' 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.” 6.2 We have also gone through the CBDT letter bearing No. DGITVIF/HQ SI/2017-18 dated 30.11.2017 which states that the idea behind such stipulation was to enforce checks and balances upon the power of the Assessing Officer to do fishing and roving enquiries in cases selected for limited scrutiny etc. In this very letter, the CBDT has also highlighted the aspect of cryptic order sheet entries which according to the CBDT shows irresponsible, ad hoc and indisciplined working of an Officer of the Department. A perusal of the aforesaid instructions would show that the objective behind the issuance of these instructions is (i) to prevent possibility of fishing and roving Page | 8

ITA No. 3270/KOL/2025 Majestic Dealmark P Ltd; A.Y. 2017-18 enquiries; (ii) ensure maximum objectivity; and (iii) to enforce checks and balances upon the powers of an Assessing Officer. 6.3 We have also gone through the proposal drafted by the Assessing Officer on 05.10.2017 for converting the case from limited scrutiny to complete scrutiny. This reads as under: “….4. In this regard it may be mentioned here that the assessee has shown a short term capital loss on sale of shares purchased on09.07.2014 and sold on 15.02.2015 . The purchase price of the shares has been stated at Rs 499,98,440 and sale price has been mentioned at Rs 79,03,676. The resultant loss of Rs 420,94,764 has been set off by the assessee against long term capital gains. This transaction appears to be suspicious in nature and probably this loss has been created to reduce the incidence of tax on long term capital gains discussed in para 3. This issue needs to be thoroughly examined to ascertain the genuineness of this loss” 6.4 We have also through the original order sheet entries, as were present in the assessment records and which had been submitted for our perusal by the Ld. Sr. Departmental Representative under our directions and it shows that there is not an iota of any cogent material mentioned by the Assessing Officer which enabled him to have reached the conclusion that this case was a fit case for conversion from limited scrutiny to complete scrutiny. We have also gone through the statement of assessee’s Director Mr. Rohit Verma which was recorded on 18.07.2017 i.e., after the conversion of the case and even in his statement nothing adverse is coming out vis. a vis. the impugned transactions. If the proposal of the Assessing Officer dated 05.10.2017 and the approval of the Ld. Pr. Commissioner of Income Tax dated 10.10.2017 are examined on the anvil of paragraph 3 of CBDT Instruction No.5/2016, it is very much clear that no reasonable view is formed as mandated in the said CBDT InstructionNo.5/2016 in an objective manner and secondly merely suspicion and inference is the foundation of the view of the Assessing Officer. We also note that there is no direct nexus brought on record by the Assessing Officer in the said proposal and, therefore, it is very much apparent that the proposal of converting the limited scrutiny to complete scrutiny aimed at making fishing enquiries. We also note that the Ld. Pr. Commissioner of Income Tax has accorded the approval in a mere mechanical manner which is in clear violation of the CBDT InstructionsNo.20/2015. 6.5 The Hon’ble Calcutta High Court in the case of Amal Kumar Ghosh reported in 361 ITR 458 (Cal.) discussed the purpose behind the CBDT Circulars. The relevant observations of the Hon’ble Calcutta High Court are as under: Page | 9

ITA No. 3270/KOL/2025 Majestic Dealmark P Ltd; A.Y. 2017-18 “…..Mrs. Gutgutia, learned Advocate submitted that the circulars are not meant for the purpose of permitting the unscrupulous assessees from evading tax. Even assuming, that to be so, it cannot be said thatthe department, which is State, can be permitted to selectively apply the standards set by themselves for their own conduct. If this type of deviation is permitted, the consequences will be that floodgate of corruption will be opened which it is not desirable to encourage. When the department has set down a standard for itself, the department is bound by that standard and cannot act with discrimination. In case, it does that, the act of the department is bound to be struck down under Article 14 of the Constitution. In the facts of the case, it is not necessary for us to decide whether the intention of CBDT was to restrict the period of issuance of notice from the date of filing the return laid down under section 143(2) of the I.T. Act.” 6.6 The Co-ordinate bench of ITAT at Chandigarh in the case of Paya Kumari in ITA No.23/Chd/2011, vide order dated 24.02.2011, has held that even Section 292 BB of the Act cannot save the infirmity arising from infraction of CBDT Instructions dealing with the subject of scrutiny assessments where assessment has been framed in direct conflict with the guidelines issued by the CBDT. 6.7 Therefore, on an overall view of the factual matrix as well as settled judicial position, we are of the considered opinion that the instant conversion of the case from limited scrutiny to complete scrutiny cannot be upheld as the same is found to be in total violation of CBDT Instructions No.5/2016. Accordingly, it is our considered opinion that the entire assessment proceedings do not have any feet to stand on. Therefore, we hold the assessment order to be nullity and we quash the same.” 10. Similarly, the Co-ordinate Bench of Chandigarh in the case of Shri Vijay Kumar (supra) wherein it has been held as under: “3. The main contention of the Ld. Counsel for the assessee is that the Assessing Officer while making the impugned additions has exceeded his jurisdiction. That the case of the assessee was selected for limited scrutiny issue i.e. regarding security transaction. The Assessing Officer could not find any reason to make any addition in respect of issue for which the limited scrutiny was done. However, the Assessing officer made the certain other additions for which the Assessing Officer did not have any jurisdiction.

ITA No. 3270/KOL/2025 Majestic Dealmark P Ltd; A.Y. 2017-18 4. The Ld. D.R has been fair enough to admit that the impugned additions have been made by the Assessing Officer on certain other issues, whereas, the case of the assessee was selected for the purpose of limited scrutiny relating to security transactions.” 11. 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. 4 is allowed.” 6. We therefore respectfully following the decision of the co- ordinate bench and CBDT circular as stated above, set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. The additional ground raised by the assessee is allowed.

Order pronounced on 03.09.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 03.09.2026 Sudip Sarkar, Sr.PS

ITA No. 3270/KOL/2025 Majestic Dealmark P Ltd; A.Y. 2017-18

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//

(Manish Bhoi) Dy. Registrar Income Tax Appellate Tribunal, Kolkata