M/S. SHANTI VYAPAR PVT. LTD.,,KOLKATA vs. ITO, WARD 9(1),, KOLKATA

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ITA 299/KOL/2025Status: DisposedITAT Kolkata24 April 2025AY 2014-159 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessment framed by the Assessing Officer was invalid. The Tribunal noted that the notice under Section 143(2) clearly indicated 'Limited Scrutiny' and was selected under CASS. However, the subsequent notice under Section 142(1) along with a questionnaire contained 16 detailed queries, effectively treating the case as a complete scrutiny. The Tribunal found merit in the assessee's argument that if the AO intended to conduct a detailed examination beyond the scope of limited scrutiny, proper procedure, including recording satisfaction and converting it to complete scrutiny, should have been followed. The Tribunal relied on the decisions of coordinate benches in Shri Vijay Kumar and Dev Milk Foods Pvt. Ltd., which supported the view that a limited scrutiny assessment cannot be converted into a full scrutiny assessment without following due process. Therefore, the assessment order was quashed as bad in law. The issue regarding the applicability of Section 56(2) was not decided as the assessment itself was set aside.

What were the facts?

The assessee, M/s. Shanti Vyapar Pvt. Ltd., filed its return of income for Assessment Year 2014-15 on 30.12.2014, declaring a total income of ₹44,840. The case was selected for limited scrutiny under CASS. During the assessment, the Assessing Officer (AO) noted that the assessee purchased a plot of land for ₹38 lakhs, while the stamp duty valuation was ₹1,19,39,631. The AO added the difference of ₹81,31,691 as undisclosed income, treating Section 56(2) as applicable. The assessee contended that Section 56(2) was not applicable to private limited companies. The AO framed the assessment under Section 143(3) on 30.12.2016. The CIT(A) upheld the AO's order, as the assessee failed to respond to notices during appellate proceedings.

What were the issues?

1. Whether the assessment framed by the Assessing Officer is invalid and non-est in law, given that the case was selected for limited scrutiny but the proceedings were conducted as if it were a complete unlimited scrutiny, thereby violating the principles of limited scrutiny as per Section 143(2) and Section 142(1) of the Income Tax Act, 1961. Assessee's Contention: The assessee argued that the notice under Section 143(2) was issued for limited scrutiny without specifying the points of examination. Subsequently, a comprehensive questionnaire with 16 queries was issued under Section 142(1), treating the case as a complete scrutiny. The assessee contended that if the AO believed thorough scrutiny was necessary, they should have recorded satisfaction and followed the procedure to convert limited scrutiny into complete scrutiny. Reliance was placed on the decisions in Shri Vijay Kumar vs. ITO and Dev Milk Foods Pvt. Ltd. vs. Addl. CIT. Revenue's Contention: The revenue argued that although the initial notice indicated limited scrutiny without specific examination points, the AO examined the relevant point and made an addition. The revenue contended that the assessee's argument regarding the conversion of limited scrutiny to complete scrutiny is devoid of merit.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 142(1),Section 56(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, KOLKATA

Before: SHRI GEORGE MATHAN, JM & SHRI RAJESH KUMAR, AM

For Appellant: Shri Saumitra Choudhury, AR
For Respondent: Shri Sailen Samadder, DR
Hearing: 22.04.2025Pronounced: 24.04.2025

This is an appeal preferred by the assessee against the order of the Income Tax Officer, Ward 9(1), (hereinafter referred to as the “Ld. CIT(A)”] dated 04.02.2025 for the AY 2014-15.

2. At the time of hearing, the ld. counsel of the assessee raised a legal issue challenging the assessment framed by the ld. AO on the ground that the case of the assessee was selected for limited scrutiny however, the scrutiny proceedings were conducted as if this was a complete unlimited scrutiny and therefore, the assessment was framed is invalid and may be quashed.

3. The facts in brief are that the assessee filed the return of income on 30.12.2014 declaring total income at ₹44,840/-. The case of the assessee was selected for limited scrutiny under Computer Assisted

4.

In the appellate proceedings, the ld. CIT (A) upheld the order of ld. AO when the assessee failed to respond to the various notices issued during appeallte proceedings.

5.

The ld. Counsel for the assessee vehemently submitted before us that the assessment framed by the ld. AO is invalid and non-est in the eyes of law as the notice u/s 143(2) of the Act dated on 04.09.2015 was issued by the ITO Ward 9(4), Kolkata for limited scrutiny without mentioning the point of examination in the limited scrutiny and thereafter, the notice u/s 142(1) of the Act was issued dated 06.06.2016, along with questionnaire raising therein 16

6.

The ld. DR on the other hand relied on the orders of authorities below by submitting that though the case of the assessee was selected for limited scrutiny vide notice dated 04.09.2015 mentioning that type of scrutiny as limited scrutiny with no details as to the examination given therein. However, during the assessment proceedings ,the point to be examined by the ld. AO in limited scrutiny was examined and added to the income of the assessee though it was not specifically mentioned either in the notice u/s 143(2) of the Act or in the assessment order itself. The ld. DR therefore, prayed that the argument of the counsel of

7.

After hearing the rival contentions and perusing the materials available on record, we find that in this case the assessee is selected for limited scrutiny as is apparent from the notice issued u/s 143(2) of the Act dated 04.09.2015, which is extracted below:-

“ ” 08. Thereafter, we note that the notice u/s 142(1) of the Act dated 06.06.2016, issued along with questionnaire was issued to the assessee and served upon it, wherein the ld. AO called upon the assessee to

9.

On perusal of the above notice and questionnaire we observe that though the case of the assessee was selected for limited scrutiny, however, the questionnaire has been issued by the AO as if it were a complete scrutiny. In our opinion, the said action on the part of the ld.

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.

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

11.

In the result, the appeal of the assessee is allowed on legal issue.

Order pronounced in the open court on 24.04.2025.

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