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Facts
The assessee, Bimal Arya, filed an appeal against the CIT(A)'s order, contesting an addition made under section 143(3) of the Income Tax Act, 1961. Both parties contended that this addition was beyond the scope of limited scrutiny. The Tribunal considered a precedent order that similarly addressed additions made beyond limited scrutiny without proper conversion to complete scrutiny.
Held
The Tribunal found no change in the factual matrix and legal proposition compared to the precedent. It held that the addition made on account of disallowance of expenses was beyond the purview of limited scrutiny, lacking prior PCIT approval for conversion to complete scrutiny. Consequently, the addition by the AO was directed to be deleted, and the appeal was allowed.
Key Issues
Validity of additions made under section 143(3) beyond the scope of limited scrutiny, without prior approval from PCIT for conversion to complete scrutiny.
Sections Cited
143(3), 250, 193, 194A
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Income Tax Appellate Tribunal, DELHI BENCH ‘H’,
Before: Dr. B. R. R. Kumar, Sh. Sudhir Kumar
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
1. The present appeal has been filed by the assessee against the order of ld. CIT(A)-10, New Delhi dated 14.06.2019.
At the outset, both the parties fairly brought to our notice that addition made u/s 143(3) of the Income Tax Act, 1961 is beyond the scope of the limited scrutiny and covered by the order of the Tribunal. The said order of the Tribunal is as under: IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI Before Sh. C. M. Garg, Judicial Member Dr. B. R. R. Kumar, Accountant Member : Asstt. Year: 2016-17
Assessee by : Ms. Nivedita, Adv. Revenue by : Ms. Smita Singh, Sr. DR Date of Hearing: 19.07.2023 Date of Pronouncement: 31.07.2023
ORDER Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of ld. CIT(A)-10, New Delhi dated 14.06.2019.
2. The assessee has raised the following grounds of appeal: “1. That On the facts and circumstances of the case, the order passed by the Ld. CIT(A) under section 250 of the Act is bad both in the eyes of law and on facts.
2. That On the facts and circumstances of the case, the order passed by the Ld. CIT(A) under section. 250 of the Act is bad both in the eyes of law and on facts as the assessment order was passed on issues not covered under the reasons for selection for Limited Scrutiny and is therefore in contravention of the circular issued by the CBDT.
3. That the Ld. CIT(A) has erred on facts and in law in upholding the order passed by the Ld. AO under Section 143(3) of the Act.
4. That the Ld. CIT(A) has erred on facts and in law in sustaining the disallowance expenses made by the Ld. Assessing Officer to the tune of Rs. 11,44,075/- incurred by the appellant as interest income.
5. That the Ld. CIT(A) has erred on facts and in law in enhancing the income assessed by the Ld. AO under Section 143(3) of the Act, to the tune of Rs.4,25,570/-.
6. On the facts and circumstances of the case, Ld. CIT(A) has erred, both on facts and in law, in sustaining the additions without appreciating the explanations and evidences brought on record by the appellant.
7. That the impugned CIT(A) order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.”
3. Apropos, the relevant facts of the appeal are that the return was selected for limited scrutiny for the following issues:
Gross receipts shown in Schedule OS of ITR is less than receipts reported in 26AS u/s 193 and 194A.
2. Large balance in foreign bank account (Schedule FA of ITR)
3 Bimal Arya 4. We find that the addition has been made on account of disallowance of expenses which is beyond the purview of limited scrutiny. There was no approval of the ld. PCIT on record or on order to convert the case of limited scrutiny to complete scrutiny as required by the directions of the CBDT and hence, the addition made by the AO is directed to be deleted.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 31/07/2023.