DIPALI TRADELINKS PRIVATE LIMITED,KOLKATA vs. ITO, WARD 2(1),, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA Before ShriRajesh Kumar, Accountant Member and ShriPradip Kumar Choubey, Judicial Member ITA No.128/Kol/2026 Assessment Year: 2017-18 Dipali Tradelinks Pvt. Ltd.………………………….………………………….Appellant FE-83, Sector- III, Salt Lake City, Kolkata- 700106 [PAN No. AADCD0305K] Vs. ITO, WARD 2(1),……………………..…………….………... Respondent, Aayakar Bhavan, P-7, Chowringhee Square, West Bengal- 700069 Appearances by: Shri Miraj D Shah, A.R., appeared on behalf of the Appellant. Shri, Raman Garg, CIT, DR,appeared on behalf of the Respondent. Date of concluding the hearing : April 07, 2026 Date of pronouncing the order : June 01,2026 ORDER Per Pradip Kumar Choubey, Judicial Member: This appeal filed by the Assessee is directed against the order dated 12.12.2019 of the Office of the Income Tax Officer passed under Section 143(3) of the Assessment Year 2017-18 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”).

ITA No.128/Kol/2026 Assessment Year- 2017-18 3. The brief facts of the case of the assessee is that assessee being a private limited company, filed its return for AY 2017-18 on 30.10.2017. The return was processed u/s 143(1) of the I.T Act.The return was selected for scrutiny through CASS. Accordingly, notices u/s 143(2) and 142(1) were issued and served upon the assessee. In response to the same, the assessee had submitted necessary details and documents from time to time. Subsequently, during the course of assessment proceeding, Ld. A.O observed that the under non- currents investments of the appellant had increased substantially by Rs. 7,64,70,348/-(Rs. 17,43,91,068 - Rs.9,79,20,720) during the A-Y 2017-18 as compared to F-Y 2016-17. Thereafter show- cause notice issued to the appellant as on 06.12.2019 for the genuineness and credibility of the transactions made. In response the said notice the assessee had filed online submission and submitted necessary details and documents as on 10.12.2019 by showing that the during the year under consideration, current investment were transferred into non- current investment. Subsequently, the Ld. A.O was not satisfied with the assessee and add back a sum of RS. 7,64,70,348/- as unexplained investment in u/s 69 of the I.T Act, 1961, and also made an addition of Rs. 8, 36, 03,698/- as unexplained cash credit u/s 68 of the I.T Act, 1961.

Aggrieved by the said order, assessee preferred appeal before the CIT(A) wherein appeal of the assessee has been dismissed.

Being aggrieved by and dissatisfied the assessee preferred appeal before us. The Ld. AR challenges the very impugned order by taking additional ground which is as follows: -

For that the Assessing Officer could not have made any variation/addition on issues that were not covered under the Limited Scrutiny notice. Accordingly, all such additions deserve to be deleted.

ITA No.128/Kol/2026 Assessment Year- 2017-18 3. The Ld. AR by filing decision passed by the Apex Court in the case of National Thermal Power Co. Ltd. CIT (1998) 229 ITR 383 (SC)has submitted that the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. Keeping in view the decision of the Apex Court we admitted the additional ground and taken it for adjudication. 4. The Ld. AR submits that the sole basis in the case of the assessee to select for scrutiny was the expenses debited in P&L account for earning exempted income as per schedule BP of ITR as significantly lower as compared to investment made to earn exempted income and secondly low income in comparison to high loans/advances/investments in shares appearing in the balance sheet,but the AO has gone beyond the scope of the issue for which limited scrutiny has to be under taken and added the amount U/s 68 of the Act that makes the entire assessment erroneous. He has cited a decision passed by Kolata ITAT in ITA No. 392/Kol 2023 reported in 2023 (11) TMI 1319. Contrary to that Ld. DR supports the impugned order. 5. Upon hearing the submission of the counsel of the respective parties and on perusal of the order passed by the AO we find that the case of the assessee was selected for scrutiny through CASS treating as limited scrutiny on the following issues- (i) expenses debited in profit and loss account for earning exempted income as per schedule BP of ITR as secondly lower as compared to investments made to earn exempted income and (ii) Low income in comparison to high loans/advances/investment in shares appearing in balancesheets. 3

ITA No.128/Kol/2026 Assessment Year- 2017-18 The Ld. AO added the amount U/s 68 and 69 of the Act by holding that on perusal of available record of AY 2016-17 and AY 2017-18 it is revealed that during the financial year 2016-17 the assessee had increase of Rs. 7,64,70,348/- under head non-current investment in unlisted equations. AO has further added Rs. 8,36,03,698/- by holding that it is revealed that during the financial year 2016-17 assessee had realized of Rs. 8,36,03,698/- under the current investment and unlisted equities. There is no denying to this fact that case of the assessee was selected for limited scrutiny and reason for the scrutiny has been assigned as discussed above.There was no reason for the scrutiny was mentioned as unexplained money as Ld. AO has held in its assessment order. We have gone through the order passed by the ITAT Kol in ITA No. 392/2023 and the Hon’ble Bench has discussed this issue and held thus:-

This appeal filed by the assessee is against the revision order of Ld. Pr. CIT, Kolkata-5 vide Order No. ITBA/REV/F/REV5/2022-23/1050143438(1) dated 27.02.2023 uls. 283 Income-tax Act, 1961 (hereinafter referred to as the "Act"), passed against assessment order by ITO, National e-Assessment Centre, Delhi u/s. 143(3) read with sections 143(3A) & 143(38) of the Act dated 10.03.2021 for AY 2018-19.

ITA No.128/Kol/2026 Assessment Year- 2017-18 3. Brief facts of the case are that assessee filed its return of income on 25.09.2018 reporting total income at nil. Case of the assessee was selected through CASS for limited scrutiny assessment under the eassessment scheme, 2019 on the issue of business expenses'. In the impugned assessment order it is stated that the present case pertains to the issue "large sales promotion expenses vis-à-vis gross receipts" and selected under limited scrutiny.

3.1. In the impugned assessment order passed u/s. 143(3) read with section 143(3A) and 143(38), Ld. AO has thoroughly examined the claim of the assessee towards sales promotion expenses and various other expenses which have been discussed resulting into certain disallowance made u/s. 40(a)(b). Subsequently, Ld. Pr. CIT on examination of assessment order and assessment record observed that in Form 26AS, assessee has received professional charges amounting to Rs.2,55,29,550/- from nine different parties and contractual income amounting to Rs.10,38,526/- from two different parties thus. totalling to Rs.2.65,68,076/-,

3.2. From the statement of P&L Account, in the impugned order, Ld. Pr. CIT observed that revenue from operations for the period is only Rs.1,12,93,000/- whereas total receipts as per Form 26AS is Rs.2,65,68,076/-, According to him, assessee has suppressed its taxable income to the tune of Rs. 1,52,75,076/- and the aforesaid amount has not been taken into account while computing the total income in the year under consideration. He thus, drew a consideration that assessment order is erroneous in sofar as it is prejudicial to the interest of revenue and thus, it requires a revision.

3.3. A show cause notice dated 15.12.2022 was issued u/s. 263 against which the assessee furnished a detailed reply explaining its case. Ld. Pr. CIT has acknowledged the submissions made by the assessee on the issue raised by him in respect of receipts reported in Form 26AS. Despite this, he observed that the claim of the assessee requires verification since the assessment order was passed without making necessary enquiries or verification as to how the receipt has been accounted for and how the same has been taken into account while computing the total income for AY 2018-19. 5

ITA No.128/Kol/2026 Assessment Year- 2017-18 According to him, claim of the assessee in this respect should have been verified by the Ld. AO at the time of assessment and accordingly, the assessment order is erroneous in sofar as it is prejudicial to the interest of revenue. He thus, directed the Ld. AO to verify the aforesaid facts. Aggrieved, the assessee is in appeal before the Tribunal.

4.1. To buttress his contention, Ld. Counsel placed reliance on the decision of Hon'ble jurisdictional High Court of Calcutta in the case of PCIT Vs. Naga Dhunseri Group Ltd. in ITAT 186/2022 IA No. GA/2/2022 dated 18.11.2022 wherein it was held that a bare reading of Instruction No. 7 of 2014 dated 26.09.2014 clearly shows that the Ld. Pr. CIT cannot make a roving enquiry in the guise of limited scrutiny and as such the Instruction

ITA No.128/Kol/2026 Assessment Year- 2017-18 issued by CBDT is binding on the department. The relevant extraction from the said judgment is reproduced as under:

"The short question involved in this case is whether the assumption of jurisdiction by the Principal Commissioner of Income Tax under Section 263 of the Act was justified. The learned Tribunal has analysed the factual position and found that the case of the assessee was selected for limited scrutiny under CASS and the issue which the Commissioner sought to reopen namely, the issue of disallowance under Section 14A of the Act, read with Rule 8D in respect of the exempt income was not one of the issues which was selected for scrutiny. The learned Tribunal in paragraph 2 of its order has set out the three items which have been selected for scrutiny namely, i) Introduction of capital in NBFC/investment company; ii) large deduction claimed u/s. 57 of the Act; and iii) Mismatch of amount paid to related persons u/s. 40A(2)(b) reported in audit report and ITR.

If that is the undisputed factual position, we find the reasoning given by the learned Tribunal is fully justified. That apart, the learned Tribunal has rightly pointed out that the CBDT has issued instructions as to the manner in which the limited scrutiny should be carried out. In CBDT Instruction No.7 of 2014, dated 26th September, 2014, the relevant portion of the said Instruction reads as follows.

"3. The reason(s) for selection of cases under CASS are displayed to the Assessing Officer in AST application and notice u/s. 143(2), after generation from AST, is issued to the taxpayer with the remark "Selected under Computer Aided Scrutiny Selection (CASS)". The functionality in AST is being modified suitably to flag the reasons for scrutiny selection in AIR/CIB/26AS cases. This functionality is expected to be operationalised by 15th October 2014. Further, the Assessing Officer while issuing notice under section 142(1) of the Act which is enclosed with the first questionnaire would proceed to verify only the specific aspects requiring examination/verification. In such cases, all efforts would be made to ensure that assessment proceedings are completed expeditiously in minimum possible number of hearings without unnecessarily dragging the case till the time-barring date." 7

ITA No.128/Kol/2026 Assessment Year- 2017-18

A bare reading of the of the above Instruction clearly shows that the PCIT cannot make a roving enquiry in the guise of a limited scrutiny and as such the instruction issued by the CBDT is binding on the Department.

Thus, we find that on facts the learned Tribunal has granted relief in favour of the assessee.

The learned counsel appearing for the respondent points out that the PC IT in its order has relied upon a decision of the Learned Single Bench of the High Court of Kerala in the case of Sunrise Academy of Medical Specialities (India) Pvt. Ltd. vs. ITO Corporate Ward 2(1), Range-2, Kochi reported in WP(C) No.3485 of 2018 dated 22.05.2018.

On a reading of the said order, we find that the said order supports the case of the assessee rather than the revenue. Thus, we find there is no question of law much less substantial question of law arising for consideration in this appeal.

Accordingly, the appeal fails and is dismissed."

4.2. He also placed reliance on the decision of Hon'ble High court of Orissa in the case of PCIT Vs. Shark Mines & Minerals Pvt. Ltd. in ITA No. 1 of 2023 dated 02.03.2023 wherein also it was held that it was not open to the Ld. Pr. CIT while exercising suo moto revisional power u/s. 263 of the Act to find fault with the assessment order of the Ld. AO on the ground of it being erroneous on an issue not covered by the limited scrutiny when the AO could not have possibly occassion to examine such issue.

ITA No.128/Kol/2026 Assessment Year- 2017-18 assessee was selected for limited scrutiny assessment under the e- Assessment Scheme, 2019 on the sole issue of business expenses as evident from the assessment order passed u/s. 143(3) of the Act. From the perusal of the said assessment order, we note that there is no whisper in the said order for expanding the scope of limited scrutiny after obtaining the permission from the competent authority. Further, Ld. CIT, DR has not brought anything on record contrary to the arguments and submission made by the Ld. Counsel for the assessee.

6.1. Before delving on the issue, we take note of the CBDT Instruction referred by the Ld. Counsel. Combined reading of instructions issued by CBDT and particularly, the CBDT Instruction NO.20/2015 dated 29.12.2015, sub- clause (b) of Clause (3) categorically states that questionnaire issued u/s. 142(1) of the Act, in a limited scrutiny case, shall remain confine 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. Sub clause (d) of Clause-3 further reads the expansion of the scope of limited scrutiny and there are certain conditionality. The conditionality are that during the course of assessment proceedings, in a limited scrutiny case, if it comes to notice to the AO that there is a potential escapement of income exceeding Rs.5 lakhs for normal CIT charge and for metro CIT charge, monetary limit shall be Rs. 10 lakhs requiring substantial verification on any other issue, then the case may be taken up for complete scrutiny with the prior approval of the PCIT/CCIT concerned. The another condition put forth by the CBDT is that such approval thereof accorded by the PCIT in writing after being satisfied about imports of the issues necessitating complete scrutiny in that particular case. Further condition that such cases shall be monitored by the Range Head and procedure indicated in Sub-clauses (a) (b) (c) above no longer be remain pending in such cases, which means and reading together clause (b) and (d) itself clarified that in case, the limited scrutiny cases are picked up for scrutiny assessment, the AO shall remain confine to the only reasons/issues for which case has been picked up for scrutiny and the scope of enquiry be restricted to the limited scrutiny issues only. The expansion of scope of scrutiny from

ITA No.128/Kol/2026 Assessment Year- 2017-18 limited scrutiny to complete scrutiny is that during the course of assessment proceedings, which comes to the notice of the AO that the potential escapement of income exceeding Rs.5 lakhs for normal CIT charge and exceeding Rs.10 lakhs for monetary limits for metro CIT charge. The case can be taken up for complete scrutiny with the approval of the PCIT/CCIT concerned, which means that the AO is empowered to enlarge the scope of limited scrutiny case to the complete scrutiny assessment in view of the above condition only and that also through quasi-judicial powers. 6.2. In view of the above discussion, considering the CBDT Instruction and judicial precedents stated above and the uncontroverted facts relating to limited scrutiny assessment on the sole issue of business expenses, we are of the view that once the AO cannot examine any other issue except the issue as selected for limited scrutiny assessment, the Ld. Pr CIT can examine only that issue which was before the Ld. AO during the course of scrutiny assessment and not any other issue which has not been subject matter of the assessment in a limited scrutiny assessment. Hence, we quash the revisionary order and allow the appeal of the assessee. In the result, appeal of the assessee is allowed. 7.

As a result, the Appeal of the assessee is hereby allowed. Kolkata, the 1st June, 2026.

Sd/- Sd/- [Rajesh Kumar] [Pradip Kumar Choubey]

ITA No.128/Kol/2026 Assessment Year- 2017-18 Accountant Member Judicial Member Dated:. . 01.06.2026. DC, PS

Copy of the order forwarded to: 1. Appellant - 2. Respondent - 3. CIT(A)- 4. CIT- 5. CIT(DR)

//True copy// By order Assistant Registrar, Kolkata Benches

ITA No.128/Kol/2026 Assessment Year- 2017-18