HAZELNUT CONSTRUCTIONS PVT. LTD.,,MUMBAI vs. ITO, WARD-3(1)(4),, MUMBAI

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:

Specific questionnaire/ show-cause notice shall be sent giving you another opportunity in case any adverse view is contemplated.

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.

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).