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Income Tax Appellate Tribunal, ‘’ SMC’’ BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-3, Ahmedabad, dated 08/02/2018 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2014-15.
2. The assessee has raised the following grounds of appeal:
1. The Id CIT(Appeals) erred both in law and on facts in confirming the addition of Rs. ,86,545/- ignoring the fact that the appellant was maintaining books of account on mercantile method and hence as explained, no addition could be made on the basis of details in Form No: 26AS . The Id CIT(A) failed to appreciate that the appellant had correctly declared income as per its method of accounting and as explained , the difference was also explained. The erroneous addition deserves to be deleted.
2. The Id CIT(Appeals) erred in law and on facts in confirming addition of Rs. 4,86,545/- towards alleged suppression of sales when certified ledger accounts explaining the party wise difference whereby higher income was declared as compared to Form No: 26AS were furnished.. The addition made by AO on wrong basis that the same was accepted is patently wrong and against the facts. It be so held now and addition be directed to be deleted. 3. The Id CIT(Appeals) further erred both in law and on facts in confirming addition of Rs. 41,450/- when the fact regarding payment of Rs. 40,181/-out of the said sum towards Service tax was not verified. The Id CIT(A) erred in presuming that amount paid to service tax Department is a penalty . The disallowance ought to have been deleted to the extent of payment to service tax Department. It be deleted now.
4. The Id CIT(Appeals) erred both in law and on facts in holding that order passed in a limited scrutiny without following the mandatory requirements was valid. On the facts of the case, the order passed by AO making huge addition being against the scheme of the Act and also incorrect on facts, ought to be cancelled. It be cancelled now.
5. On the facts and circumstances of the case, the appeal of the appellant ought to have been allowed in toto. It be so held now. 6. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.
3. The assessee in the ground no. 4 has challenged the validity of the Assessment framed u/s. 143(3) of the Act, on the reasoning that the AO has exceeded the jurisdiction by making the addition beyond the scope provided under limited scrutiny.
4. At the outset, the Ld. AR before us submitted that the case of the assessee was selected under limited scrutiny under CASS. It was alleged by the Revenue for taking up the case under limited scrutiny that turnover shown in the Income tax return was less than the amount of the turnover shown in the service tax return. However, the AO has not made any addition qua to such difference between turnover shown in service tax return vis-à-vis under the Income tax return. As such the addition was made by the AO on account of mismatching in the amount of turnover shown in the Income tax return vis-à-vis form 26AS generated by the revenue.
4.1 As per the Ld. AR the scope under the limited scrutiny was confined to the disputes mentioned therein and the AO has no jurisdiction to travel beyond the disputes specified under the limited scrutiny as evident from the letter dated 30/11/2017 which is placed on page 115 of the paper book.
4.2 The Ld. AR in support of his contention has also relied on the order of the Delhi Tribunal in the case of Urban Improvement Co.(P) Ltd. v/s Income tax Officer in for the Assessment Year 2015-16.
On the other hand Ld. DR vehemently supported the order of the authorities below.
We have heard the rival contention of both the parties and perused the materials available on record. Admittedly, the case was selected under limited scrutiny for the difference between turn-over shown in the Income tax return viz a viz service tax return. But the Revenue has not made any addition in the assessment framed u/s 143(3) of the Act qua to such difference. Rather, the AO made the addition on account of the difference between the turnover shown by the assessee vis-à-vis the turnover reported in form 26AS. To our understanding the AO has travelled beyond his jurisdiction by making the addition on the item which were not subject to the limited scrutiny.
6.1 At the time of hearing the Ld. DR was posed a question whether the limited scrutiny was converted into regular scrutiny under the provision of law. The Ld. DR has not controverted, rather the Ld. DR submitted that on perusal of the original assessment record, he could not find out any evidence justifying the limited scrutiny was converted into regular assessment u/s.143(3) of the Act. The CBDT vide [F.No. DGIT(VIG.)/HQ/SI/2017-18], dated 30/11/2017 has directed as under:
CBDT has issued detailed guidelines/directions for completion of cases of limited scrutiny selected through CASS module. These guidelines postulate that an Assessing Officer, in limited scrutiny cases, cannot travel beyond the issues for which the case was selected. The idea behind such stipulations was to enforce checks and balances upon powers of an AO to do fishing and roving inquiries in cases selected for limited scrutiny.
Further, the guidelines for proper maintenance of order sheets have been given in the Manual of Office Procedure issued by the Directorate of Organisation and Management Services. The Manual clearly lays down:— A. The minutes of the hearing must be entered with date, in the order-sheet. B. Make proper order-sheet entries for each posting, hearing and seeking and granting of adjournments. C. IT nobody attends a hearing or the request for adjournment comes after the hearing date, enter the facts in the order-sheet. Maintenance of a cursory and cryptic order sheet shows irresponsible, ad hoc and undisciplined working of any officer.
Instances have come to notice of CBDT where some Assessing Officers are travelling beyond their jurisdiction while making assessments in Limited Scrutiny cases by initiating inquiries on new issues without complying with mandatory requirements of the relevant CBDT Instructions dated 26-9-2014, 29-12-2015 and 14-7-2016. These instances have been viewed very seriously by the CBDT and in one case the Central Inspection Team of the CBDT was tasked with examination of assessment records on receipt of allegations of several irregularities. Amongst other irregularities, it was found that no reasons had been recorded for expanding the scope of limited scrutiny, no approval was taken from the PCIT for conversion of the limited scrutiny case to a complete scrutiny case and the order sheet was maintained very perfunctorily. This gave rise to a very strong suspicion of mala fide intentions. The Officer concerned has been placed under suspension.
In view of discussion in the preceding paragraphs it is once again reiterated that the Assessing Officers should abide by the instructions of CBDT while completing limited scrutiny assessments and should be scrupulous about maintenance of note sheets in assessment folders.
6.2 We also find that the ITAT in case of Urban Improvements Co. (supra) held as under:
Reliance is also being placed in the order of the Co-ordinate Bench of ITAT in the case of CBS International Projects Pvt. Ltd. Vs ACIT, New Delhi in and order of the Hon'ble Jurisdictional High Court in the case of Best Plastics Pvt. Ltd. 295 ITR 256 wherein it was held that the assessment order passed by the Assessing Officer disregarding the instructions of the CBDT are liable to the set aside and no substantial of law arises. The said judgment relied upon the decision of Hon'ble Supreme Court in the case of Commissioner of Customs Vs Indian Oil Corporation and also the judgment of Hon'ble Supreme Court in the case of UCO Bank Vs CIT: 237 ITR 889. Hence, we hold that the Assessing Officer can widen the scope of scrutiny even the case is selected for limited scrutiny under CASS, however, the condition precedent for such widening of the scope is that the Assessing Officer has to seek prior approval of the authorities mentioned. Such prior approval and the permission of the PCIT is lacking in the instant case. There was no satisfaction about the merits of the issue which necessitated complete scrutiny in the instant case. Hence, the assessment framed by the assesses on the issues which are not inconsonance of the instruction of CBDT are liable to be quashed. The addition u/s 43CA, since beyond the scope of the limited scrutiny is hereby ordered to be deleted.
6.3 In view of the above after considering the facts in totality we hold that the item of addition in disputes were not subject matter of limited scrutiny based on which the proceedings were initiated u/s 143(3) of the Act. As the assessment was framed by the AO u/s.143(3) of the Act, has been held as invalid, we are not inclined to adjudicate the other issues raised by the assessee on merit as such those issues becomes infructuous. Hence the other issues are dismissed.
In the result the ground of appeal of the assesse is partly allowed.
Order pronounced in the Court on 14/02/2022 at Ahmedabad.