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Income Tax Appellate Tribunal, “SMC-II” BENCH, MUMBAI
O R D E R महावीर स िंह, उपाध्यक्ष / PER MAHAVIR SINGH, VP: This appeal of assessee is arising out of the order of the Commissioner of Income Tax (Appeals)]-8, Mumbai, [in short CIT(A)], in dated 19.02.2019. The assessment was framed by the Income Tax Officer, Ward 3(1)(4), Mumbai (in short ACIT/ITO/ AO) for the A.Y. 2015-16 vide order dated 30.11.2017 under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The first issue raised by assessee in its appeal is as regards to the assumption of jurisdiction by the Assessing “1. The learned Commissioner of Income Tax (Appeals) failed to understand that the order passed by assessing officer is beyond jurisdiction as being a limited scrutiny case, the learned officer has travelled beyond the issue for which the case was selected and the same therefore, deserves to be quashed.”
Brief facts of the case are that the assessee filed its return of income electronically on 28.09.2015 declaring total income / loss of (-) ₹10,76,308/-. As per the assessment order, the case was selected for scrutiny assessment under CASS and statutory notice under section 143(3) of the Act dated 20.09.2016 was issued and duly served on the assessee. A further notice under section 142(1) of the Act calling for details were issued and duly served on the assessee. The relevant assessment year involved in Assessment Year 2015-16 and assessment order under section 143(3) of the Act was passed vide order dated 30.11.2017. This ground of appeal challenges the assessment framed by the Assessing Officer on the issue that the Assessing Officer has had travelled beyond the issues for which the case was selected under the scheme of limited scrutiny. The assessee before CIT(A) and even now before us filed the copy of “(i) Minimum Alternate Tax (MAT) Liability mismatch (ii) Unsecured loans”
4. The relevant text of the notice issued reads as under: - “This is for your kind information that the return of income for Assessment year 2015-16 filed vide ack no. 827599031280915 on 28/09/2015 has been selected for Scrutiny. Following issues have been identified for examination:
i. Minimum Alternated Tax (MAT) liability mismatch ii. Unsecured Loans
2. In view of the above, we would like to give you an opportunity to produce or cause to be produced, any evidence which you feel is necessary support of the said return of income on 26.09.2016 at 11.00 AM in the office of the undersigned.
3. Sending a communication to the undersigned in this regard shall also be
Specific questionnaire/ show-cause notice shall be sent giving you another opportunity in case any adverse view is contemplated.
5.# The assessment proceeding in your case is proposed to be conducted through email based communication. The email provided in the said return of income shall be used for communication for this purpose. In case you wish to communicate through any other alternate email, the same may kindly be informed. A brief note regarding benefits of this facility and procedure is enclosed overleaf. In case you do not wish to participate in this tax payer friendly initiative, you may convey your refusal to the undersigned by the above mentioned date. In case, you wish to opt out from this scheme at any subsequent stage due to any technical difficulties faced by you, the same can be done with prior intimation to the undersigned.
“Subject: Scrutiny Assessments-some important issues and scope of scrutiny in cases selected through Computer Aided Scrutiny Selection ('CASS')-reg:-
The Central Board of Direct Taxes ('CBDT'), vide Instruction No. 7/2014 dated 26 09.2014 had clarified the extent of enquiry in certain category of cases specified therein, which are selected for scrutiny through CASS. Further clarifications have been sought regarding the scope and applicability of the aforesaid Instruction to cases being scrutinized. i. Year of applicability : As stated in the Instruction No. 7/2014 , the said Instruction is applicable only in respect of the cases selected for scrutiny through CASS-2014 ii. Whether the said Instruction is applicable to al l cases selected under CASS : The said Instruction is applicable where the case is selected for scrutiny under CASS only on the parameter(s ) of AIR/CIB/26AS data . If a case has been selected under CASS for any other reason(s)/parameter (s) besides the AIR /CIB/26AS data, then the said Instruction would not apply. iii. Scope of Enquiry : Specific issue based enquiry is to be conducted only in those scrutiny cases which have been selected on the parameter(s ) of AIR/CIB/26AS data . In such cases, the Assessing iv. Reason for selection: In cases under scrutiny for verification of AIR/CIB/26AS data , the Assessing Officer has to intimate the reason for selection of case for scrutiny to the assessee concerned.
3. As far as the returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial Year - one is 'Limited Scrutiny' and other is Complete Scrutiny'. The assessees concerned have duly been intimated about their cases falling either in 'Limited Scrutiny' or 'Complete Scrutiny' through notices issued under section 143(2) of the Income-tax Act, 1961 ('Act'). The procedure for handling 'Limited Scrutiny' cases shall be as under:
a. In 'Limited Scrutiny ' cases, the reasons/issues shall be forthwith
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
The contents of this Instruction should be immediately brought to the notice of all concerned for strict compliance.”
But the CIT(A) after considering the arguments and submissions of the assessee rejected this ground noting that this ground do not have any merits by observing in Para 3.13 which read as under: - “3.13 I have considered the submissions and contentions made in this regard carefully. The appellant has contended that the Assessing Officer should have confined the assessment to the two issues of MAT and verification of Unsecured Loans, as per the Limited Scrutiny notice under section 143(2) as generated through the system. Since, he has gone beyond that, the assessment order needs to be quashed and annulled. I have considered the entire factual and legal matrix in this contention. I find that apparently there are no legal restrictions per se in the provisions of section 143(2), limiting the powers of the Assessing Officer as indicated by the appellant, which might have attracted the harshest action of
The learned Counsel for the assessee Shri. Chetan Karia reiterated the same argument has made before CIT(A) and stated that once the Central Board Of Direct Taxes issued circular under section 119 of the Act which is binding on the jurisdictional assessing authorities in view of the decision of Hon’ble Supreme Court in the case of UCO Bank Vs. CIT (1999) 237 ITR 889 (SC). He also pointed out the case law of Hon’ble Calcutta High Court in the case of Amal Kumar Ghosh Vs. ACIT (2014) 361 ITR 0458, wherein Hon’ble Calcutta High Court has considered exactly the very same issue and held that the Circular issued by CBDT under section 119 of the Act is binding on the Revenue authorities. Further, he relied on the Hon’ble Andhra Pradesh High Court in the case of CIT Vs. Smt. Nayana P. Dedhia (2004) 270 ITR 0572 (AP), wherein Hon’ble Andhra Pradesh High Court has also considered the similar circular wherein the issue of limited scrutiny converted into a complete scrutiny by the Assessing Officer, which was held as invalid and ab initio void. On the other hand, the learned Sr. DR Akhtar Ansari, only relied on the order of CIT(A) but he could not controvert the argument made by the learned Counsel for the assessee.
We have heard the rival contentions and gone through the facts and circumstances of the case. Admitted facts are that the notice under section 143(2) of the Act Notice No. ITBA/AST/S/143(2)/2016-17/1000395286(1) dated 20.09.2016 clearly spell out the reasons for scrutiny assessment selection “12. We do not see any inconsistency or contradiction between the circular so issued and section 145. In fact, the circular clarifies the way in which these amounts are to be treated under the accounting practice followed by the lender. The circular, therefore, cannot be treated as contrary to section 145 or illegal in any form. It is meant for a uniform administration of law by all the income-tax authorities in a specific situation and, therefore, validly issued under section 119. As such, the circular would be binding on the department.
The other judgment on which reliance was placed by the department was a judgment of a Bench of two Judges of this Court in Kerala Financial Corpn. v. CIT [1994] 210 ITR 129/ 75 Taxman 573, where this court, following the majority view in State Bank of Travancore's case (supra) held that interest
Further, this issue is squarely covered exactly on identical issues of conversion of limited scrutiny into a complete scrutiny by the decision of Hon’ble Andhra Pradesh High court in the case of Smt. Nayana P. Dedhia (supra) and Calcutta High court in the case of Amal Kumar Ghosh (supra).