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Facts
The assessee filed a return of income declaring Rs. 2,57,600. The case was selected for limited scrutiny to examine investments and income from securities. The AO made an addition of Rs. 10,39,513.13 on account of unexplained cash credits from bank deposits, which the assessee claims was outside the scope of the limited scrutiny.
Held
The Tribunal held that the Assessing Officer exceeded his jurisdiction by expanding the scope of limited scrutiny to complete scrutiny without following the prescribed procedure and obtaining necessary approvals. The addition made was therefore outside the scope of the limited scrutiny and deserved to be deleted.
Key Issues
Whether the AO exceeded the scope of limited scrutiny by making additions on account of cash deposits without converting to complete scrutiny and obtaining prior approval.
Sections Cited
144, 68, 143(2)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 687/JP/2025
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ,o Jh ujsUnz dqekj] U;kf;d lnL; ds le{k BEFORE: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 687/JP/2025 fu/kZkj.k o"kZ@Assessment Year : 2016-17 cuke Smt. Suman Choudhary ACIT, Vs. E-74, Power House Road Circle-01, Opp Railway Station Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ADQPC7048F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Tarun Mittal, CA & Sh. Harshit Agrawal, CA jktLo dh vksj ls@ Revenue by : Sh. Gautam Singh Choudhary, Addl.CIT lquokbZ dh rkjh[k@ Date of Hearing : 28/08/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 30/09/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM
By way of a present appeal, the assessee challenges the order of the Commissioner of Income Tax, (A)- 07, Mumbai [ for short ‘CIT(A)’] passed u/s 250 of the Act on 20.02.2025 for Assessment Year 2016-17. The said order of the ld. CIT(A) arises as against the order dated 02.02.2019 passed under section 144 of the Income Tax Act, 1961 [ for short Act ] by ITO, Ward 3(2), Jaipur [ for short AO].
1. On the facts and the circumstances of the case and in law the Ld. CIT(A) has grossly erred in passing order ex-parte without providing adequate opportunity of being heard to the assessee which is against the principle of justice. Therefore impugned order so passes is against the law and the said order deserves to be quashed.
On the facts and in the circumstances of the case and in law, ld. CIT(A) has grossly erred in confirming the action of ld. AO by travelling beyond jurisdiction in converting the Limited scrutiny in Full scrutiny without complying with the requirements as prescribed by CBDT. Thus, the order passed by ld. AO deserves to be held void ab initio being passed without jurisdiction. 2.1 That, the ld. CIT(A) has further erred in confirming the action of ld. AO in making addition on account of bank deposits when as per notice, the only issue for selection in scrutiny was to examine whether the investment and income relating to securities transactions were duly disclosed in the return of income, thus making additions on the issue other than recorded for limited scrutiny without mentioning any single reason for the same is bad in law, thus the addition so made deserves to be deleted. Without prejudice to legal grounds of appeal
No. 1 & 2.1 on merits:
3. On the facts and in the circumstances of the case and in law, ld. CIT(A) has grossly erred in confirming the action of ld. AO in making addition of Rs.10,39,513/- u/s 68 of the Income Tax Act, 1961 on account of deposits made in bank account of assessee, arbitrarily.
4. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal.
Succinctly, the fact as culled out from the records is that the assessee e-filed return of income for the year under consideration on 31.03.2017 declaring total income of Rs.2,57,600/-. The case was selected for limited scrutiny under CASS to examine the issue as whether the investment and income relating to securities transactions are duly disclosed in the return of income. Accordingly, notice under section 143(2) dated 18.09.2017 was issued and served upon the assessee through the postal authorities. As it required sufficiently the assessee remained non-compliant and there the ld. AO had not option but to complete the assessment in accordance with the provision of section 144 of the Act. In that process the ld. AO on examination of details available on records noticed that the assessee is engaged in the activity of Sale & Purchase of equity shares. During the year under consideration the assessee purchased equity shares for Rs.15,93,66,461/- and sold equity shares for Rs.15,88,67,434/-. Thus, the assessee has incurred loss of (-) Rs.4,99,027/-. Accordingly, the assessee has declared the said loss (-) Rs.4,99,027/- as Short Term Capital Gains under the head 'Capital Gains'.
Ld. AO in that proceeding also noted the assessee deposited a sum of Rs. 10,39,513.13 in the bank account maintained in the HDFC, Ashok Marg, Jaipur account. Since the assessee has not furnished any explanation of above cash deposit made in the bank accounts and the source thereof therefore, that amount was treated as unexplained cash credits and added to the income of the assessee.
Aggrieved by the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:
Smt. Suman Choudhary vs. ITO 3. Decision 3.1 I have carefully considered the case. In this case, appellant was given several opportunities to make submissions during appellate proceedings to present its side by issuance of notices u/s 250 as mentioned in para 2.2 supra. These notices were served at the e-mail addresses of the appellant as registered on ITBA Portal. No e-mailed notice u/s 250 was returned unserved. However, no written submissions were made by the appellant in response to the notices issued by Commissioner of Income Tax (Appeals), NFAC and by the office of the undersigned. Though the appellant has not furnished any submission in response to the notices issued, the appeal cannot be kept pending for indefinite period without reasonable cause. It is observed that the appellant is not interested in prosecuting the appeal filed by him. All grounds of appeal are adjudicated together.
3.2 Hon'ble Punjab & Haryana High Court in the case of Shahbad Cooperative Sugar Mills Ltd., 38 taxman.com 204 (P&H) have held that when notices were not received back, it raises a presumption of service under section 27 of General Clause Act, 1897. In such a situation when the notices have been served upon the assesee at the addresses specified in the Appeal filed by the Appellant, it is clear that the Appellant has no intention to effectively pursue the Appeal.
3.3 In CIT vs B.N. Bhattacharya (1977) 118 ITR 461 (SC), the Hon'ble Supreme Court while dealing with the issue of prosecution of appeal has stated that "preferring an appeal means more than formally filing it but effectively pursuing it". For the sake of reference, the relevant extract of the judicial pronouncement rendered by the Hon'ble High Court of Mumbai quoting decision of Hon'ble Supreme Court in case of Nandramdas Dwarkadas, AIR 1958 MP 260, is reproduced below: "Now the Act does not give any power of dismissal. But it is axiomatic that no court or tribunal is supposed to continue a proceeding before it when the party who has moved it has not appeared nor cared to remain present. The dismissal, therefore, is an inherent power which every tribunal possesses."
3.4 The principle that every court that is to decide on a matter of dispute, inherently possesses the power to dismiss the case for default, has been upheld by the Hon'ble Supreme Court in case of Dr. P. Nalla Thampy Vs. Shankar (1984 (Supp) SCC 63 and the case of New India Assurance vs. Srinivasan (2000) 3 SCC 242. In the latter case, the Apex Court has held as under:-"That every court or judicial body or authority, which has a duty to decide a list between two parties, inherently possesses the power to dismiss a case in default. Where a case is called up for hearing and the party is not present, the court or the judicial or quasi-judicial body is under no obligation to keep the matter pending before it or to pursue the matter on behalf of the complainant who had instituted the proceedings. That is not the function of the court or, for that matter of a judicial or quasi-judicial body. In the absence of the complaint for non prosecution. So also, it would have the inherent power and jurisdiction to restore the complaint on good cause being shown for the non appearance of the complainant."
3.5 The Hon'ble Bombay High Court has also laid down the proposition that where the appellant in spite of notice is persistently absent and the tribunal on facts of the case is of the view that the appellant is not interested in prosecuting the appeal, it can exercise its inherent power to dismiss the appeal for non- prosecution. In the instant case, total non-compliance on the part of the appellant leaves me with no option other than to decide the appeal ex-parte, on merits of the case. 3.6 This appeal has been filed by the appellant against 201(1) & 201(1A) order d ated 19/03/2018, claiming that the action of the Assessing Officer is not supported by facts and unjust in law and arbitrary. In this case, it is the appellant who has made the claim by filing the appeal. Thus, in cases where a particular receipt is sought to be taxed in terms, the initial onus is on the assessing officer to prove that it is taxable. Where, however, the appellant claims exemption, the burden is on the appellant to prove it to be exempt. Same is the position in cases of all allowances, deductions, claims or loss, etc. since an appeal is nothing but the claim of the appellant to prove its claim. The appellant has not availed any opportunity to do so. 3.7 Since the appellant has not presented any arguments or submissions or any details filed in support of its claim, the appeal is decided judiciously based on materials available on record. 3.8 During the course of appellant proceedings, the appellant has not given any submissions as how the AO has exceeded the scope of limited scrutiny. Taking into account the entire conspectus of this case, I see no reason to disturb the categorical findings of the assessing officer regarding the assessment order u/s 144 dated 10/12/2018 assessing total income at Rs. 12,97,110/- 4 In the end result, the appeal is DISMISSED.
Since the ld. CIT(A) has dismissed, the appeal of the assessee, the assessee preferred the present appeal on the ground as stated hereinabove. In support of the various grounds raised the ld. AR of the assessee filed the following written submission:
Brief facts of the case are that assessee is an individual and had filed Return of Income for the year under consideration on 31.03.2017 declaring total income at Smt. Suman Choudhary vs. ITO Rs.2,57,600/-. Subsequently, case of assessee was selected for Limited scrutiny under CASS to examine ‘Whether the investment and income relating to securities transactions are duly disclosed’ (WS PB 13-16). On examination of records of assessee, ld. AO observed that during the year under consideration assessee traded in securities and incurred a loss which is duly declared in the return of Income. However, subsequently ld. AO observed that assessee has deposited cash of Rs. 10,39,513/- in his bank account and made the addition of same by treating it as unexplained cash credits in the hands of assessee. Aggrieved of the additions so made, assessee preferred appeal before ld. CIT(A). At this juncture, kind attention of your honours is invited to the fact that ld. CIT(A) completed first appeal proceedings without properly considering the matter on legal front. Thus it is humbly requested that appeal may please be decided on legality of the case. Reliance is placed on the following case laws: Hon’ble Gujrat High Court in the case of ‘Saurashtra Packaging (P.) Ltd v. Commissioner of Income-tax [1993] 204 ITR 443 (GUJ.)’ Section 254, read with section 41(1) of the Income-tax Act, 1961 - Appellate Tribunal – Order of – Assessment year 1984-85 – Assessee-company took over running business of a firm in which it was a partner – During relevant accounting period assessee received refund of sales-tax – ITO held that said refund was assessable as income of assessee – On appeal, Commissioner (Appeals) held that since deduction was allowed to partnership firm, section 41(1) was not applicable and amount was not assessable as income of assessee – Tribunal observed that deed of dissolution was not on record and that it would be necessary to examine relevant provisions of State Sales Tax Act and Rules to know as to who would be entitled to refund – Accordingly, Tribunal remanded matter to Commissioner (Appeals) – However, a copy of dissolution deed was on record, which provided rights and liabilities of assessee – Whether Tribunal could have easily looked into relevant provisions of State Act and Rules, if that was found necessary, and decided appeals – Held, yes – Whether, therefore, Tribunal was not justified in setting aside order of Commissioner (Appeals) and sending matter back to him for a fresh decision holding that it was unable to decide point in controversy finally in absence of relevant materials – Held, yes Zuari Leasing & Finance Corporation Ltd. Vs ITO, 18(4), Delhi (2008) 112 ITD 205 (Del) (Trib.) "10. It is clear from above that primary power, rather obligation of the Tribunal, is to dispose of the appeal on merits. The incidental power to remand, is only an exception and should be sparingly used when it is not possible to dispose of the appeal for want of relevant evidence, lack of finding or investigation warranted by the circumstances of the case. Remand in a casual manner and for the sake of remand only or as a short cut, is totally prohibited. …………. Having regard to aforesaid principle, it is necessary to look into records to see whether there is sufficient material on record to dispose of the issue on merit and there is no need to remand the issue to provide a fresh inning to the Revenue." Shrimanta Shankar Academy Vs. ITO, 2(2), (2007) 107 ITD 99 (Gauhati) (Trib.)
"10. It is true that remand of a matter is discretionary but such discretion is required to be shown to be exercised in a judicial manner In the case of Saurashtra Packaging (P) Ltd vs CIT (1996) 131 CTR (Guj) 40 (1993) 204 ITR 443 (Guj), their Lordships of Gujarat High Court have observed that where matter can be disposed of by the Tribunal on the basis of material already on record, a remand should not be resorted to. It is always necessary to avoid multiplicity of proceeding and to save time." With this background, ground-wise submission is made as under: Grounds of Appeal
No.1 & 2 to 2.1: In these grounds of appeal assessee has challenged the action of ld.AO in making additions of Rs. 10,39,513/- u/s 68 of the Act on account of cash deposit in bank Account and it was not covered by the reason for selection of Limited scrutiny. At this juncture reason for selection of scrutiny as stated in Notice dated 18.09.2017 (WS PB 13-16) and same is also mentioned at Page 1 of Assessment Order, is reproduced again for the sake of ready reference— “i. Whether the investment and income relating to securities transactions are duly disclosed.” On perusal of above, it is evident that basically case was selected for scrutiny assessment to examine that whether assessee has duly disclosed the income earned on trading done in securities market. Subsequently ld. AO himself on the basis of information available with him concluded that (page 2 & 3 para 4 of Assessment order) : “On examination of details available on records it was noticed that assessee is engaged in the activity of Sale & Purchase of Equity Shares. During the year under consideration the assessee purchased equity shares forRs. 15,93,66,461/- and sold equity shares for Rs. 15.88.67.434/-. Thus, the assessee has incurred loss (-) Rs. 4,99,027/-. Accordingly, the assessee has declared the above loss (-) Rs. 4,99,027/- as Short Term Capital Gains under the head ‘Capital Gains’. ” Thus, ld.AO himself admitted that assessee duly declared the Short Term Capital loss of Rs. 4,99,027/- incurred on trading of equity shares and no discrepancy whatsoever has been pointed out. Thereafter, the learned AO at para 5 & 6 of page 3 of the assessment order has observed as under—
5. During the course of assessment proceedings it has been found that assessee has deposited following amount in his following Bank Account:- S. No Account No. Bank & Branch Amount 1. 00541600008405 HDFC Bank, Jaipur Ashok Marg Rs. 10,39,513.13
6. The assessee has not furnished any explanation in respect of above cash deposits made in the bank accounts and the source thereof. Since the assessee has not offered any explanation in respect of the aforesaid cash deposits in her Bank accounts, the above-mentioned cash deposits are liable to be added to the total income of the assessee. Accordingly, cash deposits of Rs. 10,39,513.13 in the above Bank Accounts of the assessee is hereby treated as unexplained cash credits and added to the total income of the assessee.” On perusal of aforesaid paras it is evident that addition in the hands of assessee has been made on account of cash deposit, however assessee case was selected for limited scrutiny under CASS to examine the investments and income relating to securities transction. It is thus submitted that ld.AO has exceeded his Smt. Suman Choudhary vs. ITO jurisdiction in making such addition without converting Limited Scrutiny to Complete Scrutiny, which can be done only after seeking approval from designated authority. It is further submitted that ld. CIT(A) has confirmed the addition by observing that assessee has not given any submissions as how the ld. AO exceeded the scope despite the fact same is evident from the assessment order. Your honours would appreciate that assessee case was selected to examine whether the investment and income relating to securities transactions are duly disclosed or not and therefore, scope of enquiry to be made by ld.AO for A.Y. 2016-17 was restricted to this extent only and enquiries made beyond that are definitely outside the scope of Limited Scrutiny. Whereas in the instant case, ld.AO in para 3 admitted that assessee has duly disclosed the Short Term loss incurred on trading of equity shares under the Capital Gain and subsequently travel beyond the jurisdiction by conducting other enquiries, which are in the nature of complete Scrutiny. Even otherwise, it is further submitted that ld. AO further erred in making addition of Rs. 10,39,513/- which is entire deposits in the bank account of assessee by treating it as unexplained cash credit u/s 68 of the Act, while the reason limited scrutiny is to examine the investments and in that case addition could be made of is undisclosed investment u/s 69 of the Act. At this juncture, kind attention of your goodself is invited to the CBDT Instruction No.05/2016 dated 14.07.2016 (APB 40-42) which was issued in partial modification to Instruction No.20/2015 dated 29.12.2015 defines the “Direction regarding scope of enquiry in cases under “Limited Scrutiny” selected through CASS 2015 & 2016”. Para 4 of such instruction clarifies that “……..in cases under Limited Scrutiny, the scrutiny assessment proceedings would initially be confined 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.” Further, para 2 of such Instruction lays down procedure for conversion of Limited Scrutiny cases in Complete Scrutiny, which reads 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.” From perusal of above, it is evident that a case selected for Limited Scrutiny can be converted in Complete Scrutiny only after following the procedure laid down Smt. Suman Choudhary vs. ITO and not otherwise that too with the prior approval of the Pr. CIT/CIT as the case maybe, whereas in the instant case :- - No reasonable view was formed by ld.AO regarding possibility of under assessment of income if case was not assessed under Complete Scrutiny. - No approval was sought by ld.AO from Pr. CIT/CIT/Pr. DIT/DIT, as the case may, be before conducting enquiries on the issues other than those specified under CASS. - The inquiries made by ld. AO with reference to deposit of Rs. 10,39.513.13/- in his HDFC Bank Account is also without jurisdiction and same is contrary to specific mandate given by CBDT in case of limited scrutiny. It is therefore submitted that ld.AO has exceeded his jurisdiction in converting Limited Scrutiny to Complete Scrutiny without following the procedure laid down by the Hon’ble CBDT. In this regard further reliance is placed on the following judicial pronouncements:- Principal Commissioner of Income-tax vs. Sukhdham Infrastructures LLP [2024] 165 taxmann.com 84 (Calcutta)[14-08-2023] Where Assessing Officer had initially issued notice under section 143(2) for a limited scrutiny of return filed by assessee on three aspects, Assessing Officer could not have expanded scope of scrutiny prior to obtaining approval for acomplete scrutiny from appropriate authority Rahul Bajpai vs. Deputy Commissioner of Income-tax [2025] 171 taxmann.com 500 (Raipur - Trib.)/[2025] 211 ITD 580 (Raipur - Trib.)[29-01-2025] Where case of assessee was selected for limited scrutiny for examination of specific issue, Assessing Officer could not have ventured into a different issue (difference in purchase consideration of property) that did not form basis for taking up case for such scrutiny assessment without getting said limited scrutiny converted into complete scrutiny as per CBDT Circular No.20/2015 dated 29.12.2015 Sitac Re (P.) Ltd. vs. DCIT [2025] 174 taxmann.com 428 (Delhi - Trib.) [31-12- 2024] Where additions made under section 41(1) on account of cessation of liability and disallowance of transmission charges were admittedly beyond scope of limited scrutiny and no requisite approval from Pr. CIT was obtained for converting case from limited scrutiny to complete scrutiny, those additions were to be deleted ACIT vs Trehan Promoters and Builders Pvt. Ltd. in CO No.9/Del/2020 dated 19.10.2022 Additions made by ld.AO beyond the scope of Limited Scrutiny held to be beyond jurisdiction and deleted Shri Sagar Uttam Murhe in dated 24.08.2022 Case was selected for Limited scrutiny on the sole issue of “interest income mismatch”, whereas assessment u.s 143(3) was completed after making addition u/s 68 on account of Unexplained Cash Credit, that too without converting it into Complete Scrutiny in accordance with CBDT Circular. Accordingly, assessment order passed was held as non est in the eyes of law and thus quashed. Atul Gupta vs ACIT in ITA No. 3384/Del/2019 dated 31.08.2020 Case was selected for Limited scrutiny under CASS for following reasons:
Smt. Suman Choudhary vs. ITO “i. unsecured loans from persons who have not filed their return of income. ii. Sales consideration of property in ITR less than sales consideration reported in Form 26QB.” Eventually no addition was made on any of the above issues and assessment was completed after making addition by invoking provisions of section 50C and also by disallowing cost of acquisition of other land sold by assessee. Appeal of assessee in this regard was allowed by holding the action of ld.AO as beyond jurisdiction. Shri Prabir Das, Karimganj Vs. Income-tax Officer, Ward-Karimgan in dated 26.06.2020 The legal issue before us is whether the AO could have made this addition when the fact remains that the assessee’s case was selected for Limited Scrutiny only for the reason that whether stock has been valued correctly or not. We note that the AO has not taken approval in writing from the Pr. CIT/CIT in this case before he ventured to expand the scope of assessment from ‘Limited Scrutiny’ to complete scrutiny as prescribed in the CBDT circular which is admittedly binding on him. Since the CBDT Circular issued u/s. 119 of the Act is binding on the department/AO as held by the Hon’ble Apex court and High Courts, the AO was bound by it and without taking approval in writing from Pr CIT/CIT could not have enquired into other issues other than the issue for which the assessment was selected for Limited Scrutiny. Here, the AO without following the procedure as stated, supra has expanded his jurisdiction without approval which action of AO is held to be without jurisdiction and, therefore, is bad in law and, therefore, the assessee succeeds and the addition made by the AO Rs.59,19,909/- is null in the eyes of law and, therefore, it has to be deleted and we order accordingly. The other grounds not pressed by the Ld. AR, therefore, the grounds raised by the assessee are dismissed. Dev Milk Foods Pvt. Ltd. Vs. Add. CIT, Special Range
3. New Delhi. dated 12.06.2020 In the assessment order, the Assessing Officer noted that the assessee’s case was selected for limited scrutiny with respect to long term capital gains but it was noticed that the assessee had claimed a short term capital loss of Rs.4,20,94,764/- which had been adjusted against long term capital gains. 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. 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. Sh. Sitaram Swami, Jaipur vs ITO in ITA No. 73/JP/2020 dated 27.02.2020 Case was selected for Limited Scrutiny on the issue of “whether capital gain/loss of sale of property has been correctly shown in the return of income by Smt. Suman Choudhary vs. ITO assessee.” Actually assessee had not sold any property, so there was no question of showing capital gain/loss. Subsequently, ld.AO made further enquiries, including if assessee has purchased any property and ultimately addition was made u/s 69 by alleging investment made in property as unexplained, which was held beyond his jurisdiction. Assessment order passed u/s 143(3) was set aside and quashed. Shri. H. N. Ravindra, Prop : Akshaya Bar and Restaurant, Thaneeruhalla Vs. The Income Tax Officer, Ward – 2, Hassan. ITA No. 1065/BANG/2019 dated 10.01.2020 From the para reproduced from the Assessment Order, it comes out that the only point on which the assessee’s case was selected for limited scrutiny was regarding cash deposit in bank and cash in hand shown in the return of income and hence, the disallowance under section 43B of the IT Act, 1961 for non- payment of VAT is not within the scope of limited scrutiny. Under these facts, in my considered opinion, even if some other issue comes to the notice of the AO, he cannot make any other addition / disallowance without obtaining prior approval from concerned CIT/Pr. CIT. I also feel that in the absence of such approval from the CIT/PCIT, even the voluntary offer of the assessee also cannot give the AO jurisdiction to make any other addition although such offer by the assessee can be a basis for the AO to seek approval of CIT/PCIT. On this aspect, argument was made before the learned CIT(A) also but in para 5 of his order, he has not decided this aspect. He has simply stated in this para that submission was made before him on the technical issue and the case was selected for scrutiny assessment under the CASS system of selection “limited type” and no prior approval was taken from the higher authorities, have been considered and found that the AO has rightly examined as to whether the cash deposit has been made from disclosed sources and whether cash in hand shown in the return of income is correct for which purpose the case was selected for scrutiny. But after observing so, he has not given any finding as to how the other addition made by the AO under section 43B of the IT Act, 1961 is justified under these facts. Respectfully following this Tribunal order cited by the learned AR of the assessee, I delete the disallowance made by the AO. Manju Kaushik vs DCIT in ITA No, 1419/JP/2019 dated 09.12.2019 Addition made on a issue beyond the scope of reason for Limited Scrutiny stood deleted. Late Smt. Gurbachan Kaur, Through L/H Shri Dilpreet Singh Narang Vs. Dy. Commissioner of Income Tax, Circle-2, Jaipur in ITA No. 692/JP/2019 dated 05.12.2019 Held that “Thus, if the A.O. has taken up the issue of determining fair market value of the property in question as on 01/4/1981 without converting the limited scrutiny to comprehensive scrutiny by taking the prior approval of the competent authority then the said order passed by the A.O. will be nullity as beyond his jurisdiction. The AO neither in the assessment order nor in the assessment proceedings sheet has mentioned about any proposal of converting the limited scrutiny to comprehensive scrutiny and consequential approval of the Competent Authority being Principal CIT/DIT. The ld. Counsel for the assessee has Smt. Suman Choudhary vs. ITO produced the certified copy of the assessment proceedings sheet which does not contain any such proposal of the AO for expanding the limited scrutiny to complete scrutiny. Further, the revenue has also not produced anything to show that the AO has obtained the necessary approval from the Competent Authority for conversion of the limited scrutiny to comprehensive scrutiny. Accordingly, the issue which is taken up by the AO in the proceedings under section 154 is illegal and void being beyond his jurisdiction to frame the limited scrutiny assessment. Accordingly, we set aside and quash the order passed by the AO under section 154 of the Act.” Shri Vijay Kumar Vs. The ITO, Ward-1, Patiala in ITA No. 434/Chd./2019 dated 12.09.2019 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. I find that the additions made by the Assessing Officer, thus, being exceeding his jurisdiction are not sustainable in the eyes of law and the same are accordingly ordered to be deleted. Suresh Jugraj Mutha vs ACIT in ITA No. 5/PUN/2016 dated 04.05.2018 Case taken up for Limited Scrutiny for scrutinizing the source of “cash deposits in savings bank a/cs as per AIR information”. However eventually no addition was made on this count and addition was made addition on account of Interest income and disallowed deduction claimed u/s 54, which were outside the scope of Limited Scrutiny that too without taking approval of conversion of Limited Scrutiny into Complete Scrutiny. Accordingly, assessment order passed by ld.AO was held as bad in law and void ab initio. NITIN KILLAWALA & ASSOCIATES MUMBAI Vs. ITO 11(3)(1) MUMBAI in ITA No. 1611/M/2013 dated 16.09.2015 The undisputed fact in this case is that the case was selected for scrutiny under CASS. It is also undisputed that the CASS information was regarding the receipt/payment of fees for professional/technical services etc. and in relation to interest other than securities. Apart from the aspects of AIR information, the AO widened the area of inquiry in respect of the expenses incurred by the assessee on the education of its employee and foreign tour expenses. The action of the AO in widening the scope of the inquiry without obtaining the necessary permissions as per the Board’s instruction was without jurisdiction and the same is accordingly set aside and consequently the additions made beyond the scope of AIR information are ordered to be deleted. In view of above, addition of Rs. 10,39,513/- being made in respect of cash deposits is not at all connected to Investment in Securities transaction undertaken by assessee in any manner, and thus outside the scope of Limited Scrutiny, deserves to be deleted outrightly. Without prejudice to above on merits Ground of Appeal No.3: In this ground of appeal, assessee has challenged the action of ld. CIT (A) in confirming the addition of Rs.10,39,513/- made by ld.AO u/s 68 of the Act.
In this regard, yours honours kind attention is again invited to Para 5 & 6 of the Assessment order, wherein ld. AO alleged that assessee has made the cash deposit of Rs. 10,39,513/- in her bank account maintained with HDFC Bank bearing account no. 00541600008405. Relevant para of the order is reproduced as under— “6. The assessee has not furnished any explanation in respect of above cash deposits made in the bank accounts and the source thereof. Since the assessee has not offered any explanation in respect of the aforesaid cash deposits in her Bank accounts, the above-mentioned cash deposits are liable to be added to the total income of the assessee. Accordingly, cash deposits of Rs. 10,39,513.13 in the above Bank Accounts of the assessee is hereby treated as unexplained cash credits and added to the total income of the assessee.” In this regard, it is submitted that on perusal of bank statement of assessee which is at Page No. 17 – 23 of Written Submission, it is evident that assessee in the year under consideration has made cash deposit of Rs. 1,12,000/- in her bank account. Details of which is tabulated as under— Date Amount Page No. of Written Submission 03.09.2015 45,000/- 20 03.10.2015 47,000/- 20 15.02.2016 20,000/- 22 Total 1,12,000/-
In this regard, it is submitted that the ld. AO acted in a whimsical and arbitrary manner. Firstly, he exceeded his jurisdiction by converting the case from Limited Scrutiny to Complete Scrutiny without adhering to the procedure prescribed under the Act. Secondly, he made an addition of ₹10,39,513/- towards alleged cash deposits, whereas the actual cash deposit made by the assessee in her bank account was only ₹1,12,000/-. It is pertinent to note that this is not a case where the ld. AO did not have access to the assessee’s bank statement. On the contrary, the assessment order itself reveals that the bank statement formed part of the assessment record, as the ld. AO has specifically mentioned the bank account number of the assessee in the order. In these circumstances, the action of the learned CIT(A) in mechanically confirming the preconceived findings of the ld AO is unjustified and therefore addition Rs. 10,39,513/- sustained in the hands of assessee deserves to be deleted.
To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions:
S. PAGE PARTICULARS No. NO.
S. PAGE PARTICULARS No. NO.
Copy of Acknowledgement of Return of Income and Computation filed u/s 01-02 139(1) of the Act. 03-05 2. Copy of CBDT Instruction No. 5/2016 guidelines regarding limited scrutiny Copy of order of Hon’ble High Court Of Calcutta in the case of Principal 06-08 3. commissioner of Income-tax vs Sukhdham Infrastructures LLP reported in [2024] 165 taxmann.com 84 (Calcutta) dated 14.08.2023 4. Copy of order of Hon’ble ITAT, Raipur Bench, Raipur in the case of Rahul 09-20 Bajpai vs DCIT in dated 29.01.2025 5. Copy of order of Hon’ble ITAT, Delhi Bench “G” Delhi in the case of Sitac Re 21-27 (P.) Ltd vs DCIT in dated 31.12.2024 Copy of order of Hon’ble ITAT, Delhi Bench “H”, New Delhi in the case of ACIT Vs Trehan Promoters and Builders Pvt. Ltd in ITA No. 9872/Del/2019 28-35 6. dated 19.10.2022
Copy of order of Hon’ble ITAT, “B” Bench, Pune in the case of Shri Sagar Uttam Murhe vs DCIT, Circle-8, in & 1329/PUN/2018 dated 36-38 7. 24.08.2022
Copy of order of Hon’ble ITAT, Delhi Bench “A”, New Delhi in the case of Sh. 39-53 8. Atul Gupta vs. ACIT in dated 31.08.2020
Copy of order of Hon’ble ITAT, Guwahati Bench, "E Court" at Kolkata in the case of Shri Prabir Das, Karimganj vs Income Tax Officer in 9. 395/Gau/2019 dated 26.06.2020
Copy of order of Hon’ble ITAT, Delhi Bench “B”, New Delhi in the case of Dev Milk Foods Pvt. Ltd. Vs ACIT ITAT Delhi in dated 60-68 10. 12.06.2020
Copy of order of Hon’ble ITAT, Jaipur Benches “A”, Jaipur in the case of Shri Sita Ram Swami Jaipur vs ITO Ward 2 in dated 69-85 11. 27.02.2020
Copy of order of Hon’ble ITAT, “SMC-C” Bench: Banglore in the case of Shri H.N. Ravindra Hassan vs ITO Ward 2 in dated 86-90 12. 10.01.2020
Copy of order of Hon’ble ITAT, Jaipur Benches “A”, Jaipur in the case of Manju Kaushik Jaipur vs The DCIT in dated 91-108 13. 09.12.2019
Copy of order of Hon’ble ITAT, Jaipur Benches “B”, Jaipur in the case of Late 109-122 14. Smt Gurbachan Kaur vs DCIT in dated 05.12.2019
Copy of order of Hon’ble ITAT, Chandigarh Bench in the case of Sh Vijay 123-125 Kumar Patiala vs ITO Ward 1, Patiala in dated
S. PAGE PARTICULARS No. NO.
12.09.2019 Copy of order of Hon’ble ITAT, Pune Bench in the case of Suresh Jugraj 126-135 16. Mutha vs ACIT-ITAT in dated 04.05.2018
Copy of order of Hon’ble ITAT, Mumbai Bench “B”, Mumbai in the case of 136-142 17. Nitin Killawala & ITO 11(3)(1) in dated 16.09.2015
The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the ld. AO have travelled beyond the scope of limited scrutiny to full scrutiny without following the required guidelines to extend the scope of the scrutiny and thereby the assessment made on a reasons which was not subjected to scrutiny no addition can be made and thereby we prayed that the addition so made by the ld. AO is required to be deleted. He also submitted that the amount of cash deposit derived by the ld. AO is not correct but it is Rs. 1,12,000/- only When the matter carried before the ld. CIT(A) he did not gave his finding on that factual issue raised by the assessee.
Per Contra, ld. DR heavily relied upon the finding so recorded in the order of the lower authority and emphasized the finding that the assessee thereby he supported the order of the ld. CIT(A).
We have heard the rival contentions and perused the material placed on record. Vide ground no. 2 the assessee challenges the action of the ld. CIT(A) in confirming the action of ld. AO whereby ld. AO traveled beyond jurisdiction in converting the Limited scrutiny in Full scrutiny without complying with the requirements as prescribed by CBDT and thereby he prayed that the order passed by ld. AO deserves to be held void ab initio being passed without jurisdiction.
Record reveals that the case of the assessee was selected under CASS to examine the issue as whether the investment and income relating to securities transactions are duly disclosed in the return of income or not and thereby the case of the assessee was selected for this limited issue. Record further reveals that on this issue the ld. AO has examined the issue and recorded his findings at page 4 of his order, and he has accepted all the explanations furnished by the assessee on the issue of CASS. While conducting those proceeding ld. AO also added a sum of Rs. 10,39,513.13 being the amount deposited in the bank account maintained in the HDFC, Ashok Marg, Jaipur account no.
00541600008405. Since the assessee failed to furnish any explanation of AO made that addition as unexplained cash credits and added to the income of the assessee.
As is evident from the above facts that on the issue upon which the case of the assessee was selected no addition was made and thereby ld.
AO should have stopped further enquiries into the matter. If he intended to verify the other issues he should have adopted the procedure as per CBDT Instruction No.05/2016 dated 14.07.2016. That instruction were issued in partial modification to Instruction No.20/2015 dated 29.12.2015 defines the “Direction regarding scope of enquiry in cases under “Limited Scrutiny” selected through CASS 2015 & 2016”.
Para 4 of such instruction clarifies that “……..in cases under Limited Scrutiny, the scrutiny assessment proceedings would initially be confined 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.” Further, para 2 of such Instruction lays down procedure for conversion of Limited Scrutiny be converted in Complete Scrutiny only after following the procedure laid down and not otherwise that too with the prior approval of the Pr. CIT/CIT as the case maybe, whereas in the instant case we note that no reasonable view was formed by ld.AO regarding possibility of under assessment of income if case was not assessed under Complete Scrutiny having not done so he has not sought the necessary approval from Pr. CIT/CIT/Pr. DIT/DIT, as the case may, be before conducting enquiries on the issues other than those specified under CASS. The inquiries made by ld. AO with reference to source of cash deposited is without jurisdiction. Even otherwise the assessee submitted that the assessee has deposited Rs. 1,12,000/- only whereas ld. AO without doing proper enquiry made the addition and that too without obtaining valid jurisdiction as per CBDT instructions. Thus, we are of the considered view that ld.AO has exceeded his jurisdiction in converting Limited Scrutiny to Complete Scrutiny without following the procedure laid down by the hon’ble CBDT. Based on this observation’s addition of Rs.10,39,513.13 being contrary to the reasons for selection of the case for limited scrutiny and thereby the said addition was outside the scope of Limited Scrutiny, deserves to be deleted. Based on these observations and considering the various case laws cited by the ld. AR of assessee, and accordingly assessment order is set aside.
Ground no. 1, 2.1 and 3 raised by the assessee deal with the issue of proper opportunity and on merits of the dispute but since we have directed to delete the addition made in the order of assessment on technical ground these grounds becomes academic at this stage. Ground no. 4 being general does not require our findings.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 30/09/2025.
Sd/- Sd/- ¼ujsUnz dqekj½ ¼jkBkSM+ deys'k t;UrHkkbZ½ (NARINDER KUMAR) (RATHOD KAMLESH JAYANTBHAI) U;kf;d lnL;@Judicial Member ys[kk lnL; @Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 30/09/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Smt. Suman Choudhary, Power House Road, Opp. Railway Station izR;FkhZ@ The Respondent- ITO, Ward-3(3), Jaipur 2. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 687/JP/2025) 6. vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत