BOTHRA FINANCIAL SERVICES,NEW DELHI vs. ITO, WARD- 5(4), NEW DELHI

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ITA 2023/DEL/2019Status: DisposedITAT Delhi02 March 2020AY 2015-164 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO exceeded the scope of limited scrutiny by making a disallowance under Section 14A without obtaining the necessary approval. Therefore, the assessment order was considered void ab initio.

What were the facts?

The assessee's case was selected for limited scrutiny based on AIR information regarding cash deposits. The Assessing Officer (AO) made a disallowance under Section 14A read with Rule 8D, which was not part of the original scrutiny points.

What were the issues?

Whether the AO can extend the scope of limited scrutiny to issues not originally specified without proper approval. Whether an assessment order is void ab initio if the AO exceeds the scope of scrutiny.

Which sections of the Income-tax Act were involved?

Section 14A,Section 115JB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘ SMC’ NEW DELHI

Before: MS SUCHITRA KAMBLE, & SHRI PRASHANT MAHARISHI

For Appellant: Ms. Kiran Kumari, Adv
Hearing: 25.02.2020Pronounced: 02.03.2020

ORDER PER SUCHITRA KAMBLE, JM

This appeal is filed by the assessee against the order dated 28/12/2018 passed by CIT(A)-2 New Delhi for Assessment Year 2015-16.

2.

The grounds of appeal

are as under:- 1. “That on the facts of the case and under the law, the Id. CIT(A) ought to had deleted the entire addition/disallowance of Rs.33,03,808/- made u/s 14A read with Rule 8D.

2. That on the facts of the case and under the law, the Id. CIT(A) has erred in restricting the addition / disallowance made u/s 14A read with Rule 8D, to the extent of Rs.4,27,000/- (which was the amount of dividend earned on the shares held as Stock-in-trade).

3. That on the facts of the case and under the law, the Id. CIT(A) has erred in J holding that Rs.4,27,000/- (which was the amount of dividend earned on the shares held as "Stock-in-trade") is to be included in the amount of Book "Profit u/s 115JB.'

3. The assessee e-filed its return of income declaring income of Rs.3,58,370/- on 27.09.2015. The assessment was held for limited scrutiny on the following points: (i) Sale of Property in Form 26QB (ii) Large Value sale of futures (derivatives) in a recognized stock exchange (STT code 5) (iii) Large Value of sale of share or unit which is settled otherwise than by the actual delivery or transfer (iv) Mismatch in sales turnover reported in Audit report and ITR (v) Low net profit or loss shown from large gross receipt (vi) Large squared up loans during the year (form 3CD) (vii) Large Value sale of option in securities (derivative) in a recognized stock exchange (STT code4) The Assessing Officer assessed the income of the assessee at Rs. 36,62,178/- vide assessment order dated 30.12.2017 passed u/s 143(3) and made an addition / disallowance of Rs. 33,03,808/- u/s 14A read with Rule 8D. The Assessing Officer also mentioned in the assessment order that this amount of Rs. 33,03,808/- will also be added in the computation of Book Profit u/s 115JB of the Act as per provisions of clause (f) below Explanation-1 to section 115JB of the Act.

4.

Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

5.

The Ld. AR pointed out that this case was selected for limited scrutiny and 14A disallowance was not at all mentioned in the said scrutiny. Therefore, the assessment itself is beyond the scope of scrutiny and hence void ab initio.

6.

The Ld. DR relied upon the assessment order and the order of the CIT(A).

7.

We have heard both the parties and perused the material available on record. It is an undisputed fact that the reason for which the case was picked up for limited scrutiny relates to the AIR information on the cash deposits in the savings bank account. It is also an undisputed fact that the Assessing Officer did not obtain the written approval of the concerned Commissioner before extending the scope of scrutiny in respect of disallowance under Section 14A of the Income Tax Act, 1961. Further, it is on record that the CBDT Instruction No.7/2014, dated 26-09-2014 did not permit the Assessing Officers to extend the scope of scrutiny to the issues other than the ones which are authorised by the Board in this regard under CASS. It is pertinent to note that this case was for limited scrutiny and in respect of Section 14A disallowance, no scrutiny was made by the Assessing Officer. This can be seen from the assessment order itself. Therefore, the assessment order itself is bad in law and void ab initio. Consequently, we find adjudication of other grounds by the assessee on merits becomes academic, hence not adjudicated at this juncture. Thus, the appeal of the assessee is allowed.

8.

In result, the appeal filed by the assessee is allowed. Order pronounced in the Open Court on 02nd March, 2020.

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