SMT. BRIDGET ANTHONY(LEGAL HEIR OF LATE MR. ELEVATHINGAL JOSEPH ANTHONY),BANGALORE vs. INCOME-TAX OFFICER, WARD-4(2)(1), BANGALORE

PER KESHAV DUBEY, JUDICIAL MEMBER:

This appeal by assessee is directed against order of NFAC for the assessment year 2015-16 dated 24.1.2024 passed u/s 250 of the Income Tax Act, 1961. The assessee raised following grounds of appeal: 1. That the Order of the learned Commissioner of Income-Tax (Appeals) in so far it is prejudicial to the interests of the appellant is bad and erroneous in law and against the facts and circumstances of the case. 2. That the learned Commissioner of Income-Tax (Appeals) erred in law and on facts in not adjudicating ground no. 6 raised in Form 35 regarding validity of assessment in converting the limited scrutiny into a full-fledged scrutiny without obtaining the approval of the Commissioner. 3. That the learned Commissioner of Income-Tax (Appeals) erred in law and on facts in not providing an opportunity of being heard by way of

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 2 of 28 video conferencing even though a specific request was made in the written and such action is violation of principles of natural justice. 4. That the learned Commissioner of Income-Tax (Appeals) erred in law and on facts in holding that the sale consideration received was only Rs. 57,75,000/- and not Rs. 2,00,00,000/- and such a finding is perverse in law as being contrary to the materials on record. 5. That the learned Commissioner of Income-Tax (Appeals) erred in law and on facts in giving credence to the oral statement of Sr. Parasmal Lodha instead of relying on the signed written document, authenticity of which has been accepted by Mr. Lodha himself. 6. That the learned Commissioner of Income-Tax (Appeals) erred in law and on facts in adding a sum of Rs. 1,42,25,000/- u/s. 69 of the Act even though the appellant had fully explained the source of investment. 7. That the learned Commissioner of Income-Tax (Appeals) erred in law and on facts in not providing a proper opportunity to cross-examine Mr. Parasmal Lodha and holding that there is no provision under the Income-tax Act to provide such opportunity and that makes the entire assessment proceedings bad in law.

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 3 of 28 3.1 We have heard the both the parties on admission of additional ground. In our opinion, all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of adjudication of above ground. Accordingly, by placing reliance on the judgement of Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC) we inclined to admit the additional ground for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and the action of the assessee is bonafide. 4. Facts of the case are that the appellant is the legal representative of Late Sri. Elavanthingal Joseph Anthony (“Late E J Anthony”, for short). Mr. E J Anthony had filed his return of income for the Assessment Year 2015-16. He died on 07.10.2016. A notice u/s. 143(2) of the Income Tax Act, 1961 (“Act”) was issued on 20.09.2016. The notice stated that it is a limited scrutiny assessment and the case has been selected to verify the deduction claimed under the hear Capital Gains. After hearing the appellant, the learned Assessing Officer made an addition of Rs. 1,42,25,000/- u/s. 69 of the Act. 4.1 Brief facts in respect of the above addition stating that during the lifetime, Mr. Anthony had entered into an Agreement for Sale on 26.03.2014 for sale of a residential property at 118/4, 1st Main Road, 1st Cross, Bazaar Street, Udayanagar, Bangalore – 560016 with one Mr. S. Parasmal Lodha. As per Agreement for Sale, the property was agreed to be sold for a sum of Rs. 2,00,00,000/-. The agreement itself recorded that a sum of Rs. 11,00,000/- was paid in cash on execution of the agreement. There is an endorsement in the agreement that a further sum of Rs. 60,00,000/- was paid in cash on 14th July 2014. The endorsement also states that the balance sum of Rs. 1,29,00,000/- will be paid before execution. A Deed of Absolute Sale was executed on 02.08.2014. The consideration

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 4 of 28 mentioned in the Absolute Sale Deed was only Rs. 57,75,000/- being the guidance value. 4.2 Late Mr. Anthony received the balance consideration in cash. The total consideration of Rs. 2,00,00,000/- was paid by Sri. S. Parasmal Lodha in the following manner: (a) Rs. 57,75,000/- by cheque. (b) Rs. 1,42,25,000/- by cash on various dates 4.3 Mr. Anthony died on 07.10.2016. After his death, the present appellant Smt. Bridget Anthony was brought on record as legal representative. The learned Assessing Officer, in order to verify the correctness of the declared sale consideration of Rs. 2,00,00,000/- summoned. Mr. Parasmal Lodha and examined him under oath. The appellant was present during the examination. The appellant was also examined on 16.11.2017. The appellant confirmed that the total consideration received was Rs. 2,00,00,000/-. But Sri Lodha denied that he has paid any amount in cash but accepted that he had entered into the Agreement for Sale on 26.03.2014. He stated that the sum of Rs. 2,00,00,000/- was mentioned only for the purpose of obtaining the bank loan. 4.4 Based on the statement of Mr. Lodha, the learned Assessing Officer held that the sum of Rs. 1,42,25,000/- invested in the construction of a new residential house was unexplained and added the same u/s. 69 of the Act to the returned total income of Rs. 10,62,390/-. He submitted that the learned assessing officer has not disputed about the value of investments of Rs. 1,42,25,000 in residential house and investment in Rural Electrification Corporation Bonds (REC Bonds) and National Highway Authorities of India (NHAI Bonds) amounting to Rs. 50,00,000/-. 5. First, we will deal with ground Nos.2 & 3 and additional ground no.1 which is with regard to Conversion from limited scrutiny to complete scrutiny.

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 5 of 28 5.1 The ld. A.R. submitted that the reason for selecting the appellant’s case for limited scrutiny and the issue considered in assessment proceedings are completely different. The issue involved in the assessment was “deduction claimed under the head capital gains”. However, the assessment was completed not only disallowing the deduction but making addition u/s. 69 and 69A of the Act which is beyond the scope of limited scrutiny. The assessment proceedings are not made as per the issues which have to be examined under limited scrutiny. Therefore, the entire assessment proceedings are liable to be quashed. 5.2 He further submitted that the learned assessing officer has not converted the limited scrutiny to complete scrutiny for completing the assessment as discussed above. The CBDT vide its Instruction no. 5/2016 has laid down the procedure for converting the limited scrutiny to complete scrutiny. (The Instruction is placed at page no. 33 to 40 of assessee’s paper book). As per the above instruction, the learned assessing officer has to form a reasonable view based on certain materials. Further, the approval of the jurisdictional Pr. CIT / CIT / Pr. DIT / DIT is required for converting the ‘limited scrutiny’ case to ‘Complete scrutiny’. The learned assessing officer ought to have followed the above procedure laid down by CBDT. In absence of such failure to follow the procedure as laid down in the above referred Instruction to convert the limited scrutiny to complete scrutiny, the entire assessment becomes null and void. Hence, he prayed that the Tribunal be pleased to hold that the assessment order is liable to be quashed. 5.3 He submitted that the appellant made an application under “FORM A” for seeking information under the Right to Information Act, 2005 seeking for any approval by the Principal Commissioner of Income Tax / Commissioner of Income tax for making scrutiny under section 69 of the Act. The appellant sought for this

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 6 of 28 information for the reason that the learned assessing officer had selected the appellant’s case for limited scrutiny, however, the learned assessing officer completed the assessment by making an addition under section 69 of the Act which is outside the jurisdiction of limited scrutiny. The copy of Order u/s. 7(1) dated 21.04.2022 of the Right to Information Act, 2005 placed at page no. 72 and 73 of assessee’s paper book which shows that the learned assessing officer has not taken approval to travel beyond the scope of limited scrutiny. 5.4 He submitted that the provisions of section 69 and 69A are invoked. Section 69 of the Act is invoked for unexplained investment and section 69A of the Act is invoked for unexplained money. The provisions are reproduced below for ready reference; “Unexplained investments. 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.

Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”

5.5 The above provisions clearly states that if the assessee does not explain the source of income or the explanation is not satisfied to the assessing officer, the provisions are invoked. Therefore, the requirements of provision have to be satisfied for making addition. It is submitted that every denial of exemption under capital gains

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 7 of 28 will not lead to addition u/s. 69 or 69A of the Act or it will not automatic. Therefore, for invoking such provisions, the learned assessing officer has to record his satisfaction and such process should begin with after obtaining approval for complete scrutiny as per the instructions referred above. In the present case, the learned assessing officer has not sought for any approval from the PCIT and therefore, the entire proceedings are liable to be quashed. 5.6 The ld. A.R. submitted that the appellant relied on the decision of Hon’ble Delhi Tribunal in Balvinder Kumar v. PCIT 187 ITD 454 wherein it was held that the assessing officer cannot go beyond the reason for which the matter was selected for scrutiny. The facts of this case are that the assessee filed an appeal before the Income Tax Appellate Tribunal challenging the order passed u/s. 263 of the Act wherein it was held that the assessing officer has accepted the computation of capital gains without considering the details of indexed cost of acquisition. The assessee’s case was selected for limited scrutiny for the verification of increase in capital. The order u/s. 263 of the Act was passed on the ground that assessing officer has not verified the claim u/s. 54 of the Act made by the assessee. The Hon’ble Tribunal held that the assessing officer cannot go beyond the reason for which the matter was selected for scrutiny. Therefore, it would not be open to Principal Commissioner of Income Tax to pass order u/s. 263 of the Act holding that there is a failure of the assessing officer to verify other aspects by rendering the assessment order as erroneous and prejudicial to the interests of the revenue. (Placed at Page No. 41 to 48 of assessee’s paper book). 5.7 The ld. A.R. relied on the decision of Hon’ble Jaipur Tribunal in Smt. Manju Kaushik v. DCIT 78 ITR (Trib) 564 wherein it has upheld the above proposition. The relevant portion of the judgment is as under; (Para 4 of page 570) [Page No. 49 to 63 of paper book] “The Assessing Officer is duty bound to follow the instructions in case limited scrutiny assessment proceeding are proposed to be converted into complete

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 8 of 28 scrutiny and without following said procedure and necessary approval of the competent authority conducting an enquiry on the issue which is outside the limited scrutiny would be beyond the jurisdiction of the Assessing Officer. This Tribunal has taken the consistent view on this issue in the series of decisions that if the Assessing Officer has taken up the issue of scrutiny without converting the limited scrutiny to complete scrutiny by taking a prior approval from the competent authority, then the said order passed by the Assessing Officer will be in nullity and beyond his jurisdiction.”

5.8 The facts of the above case are that the assessee’s case was selected for limited scrutiny under CASS. A notice u/s. 143(2) of the Act was issued with respect to examination of deduction claimed under the head ‘Capital Gains’. After satisfying himself on the above issue, the assessing officer issued another notice u/s. 142(1) dated 25.11.2016 seeking details of deduction claimed u/s. 54B of the Act. The assessing officer has requested for approval of the Pr. CIT for converting the case from limited to complete scrutiny. The approval was communicated to assessing officer on 29.11.2016. However, the assessing officer has issued notice u/s. 142(1) of the Act seeking details of deduction u/s. 54B of the Act on 25.11.2016 which is before the approval is granted. In this connection, the Hon’ble Tribunal held that without the necessary approval, the assessing officer has taken up the other issues for scrutiny and further the assessee was not communicated about the conversion of limited scrutiny to complete scrutiny. Hence, the disallowance u/s. 54B of the Act has to be deleted. The relevant portion of the judgment is reproduced below;

“Hence, we find that the Assessing Officer has taken up the issue and initiated proceedings for complete scrutiny without necessary approval with him. Therefore, the issue taken up by the Assessing Officer regarding disallowance of deduction under section 54B is prior to the necessary approval communicated to the Assessing Officer and therefore, in the absence of communication in writing to the Assessing Officer about the approval, the assumption of jurisdiction by the Assessing Officer is invalid. Consequently, the addition made by the Assessing Officer by denying the deduction under section 54B is not sustainable and the same is deleted.”

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 9 of 28 5.9 He further relied on the decision of Delhi Tribunal in CBS International Projects Pvt. Ltd. v. Asst. CIT (ITA No. 144/Delhi/2019 dated 28.02.2019) wherein it was held as under; (Placed at Page 64 to 71 of assessee’s paper book)

“16. A perusal of the aforesaid instruction shows that the Assessing Officer can widen the scope of scrutiny even if it is selected for scrutiny assessment under computer aided scrutiny selection. However, the condition precedent for such action of the Assessing Officer is that he has to seek prior approval of the higher authorities. A perusal of the assessment order shows that the Assessing Officer has not mentioned as to when the permission from the Principal Commissioner of Income-tax was sought to make further enquiries in the case of the assessee. Considering the facts of the case in totality, in the light of the Central Board of Direct Taxes Instructions mentioned hereinabove, qua notice under section 143(2) of the Act, we are of the considered opinion that the assessment order so framed by the Assessing Officer is not in consonance with Instruction of the Central Board of Direct Taxes and, therefore deserves to be quashed.”

5.10 The ld. A.R. further submitted that the reason for selecting the appellant’s case for limited scrutiny and the issue considered in assessment proceedings are completely different. The assessment proceedings are not made as per the issues which have to be examined under limited scrutiny. Therefore, the entire assessment proceedings are liable to be quashed. He relied on the decision of Hon’ble Delhi Tribunal in Balvinder Kumar v. PCIT 187 ITD 454 wherein it was held that the assessing officer cannot go beyond the reason for which the matter was selected for scrutiny. The facts of this case are that the assessee filed an appeal before the Income Tax Appellate Tribunal challenging the order passed u/s. 263 of the Act wherein it was held that the assessing officer has accepted the computation of capital gains without considering the details of indexed cost of acquisition. The assessee’s case was selected for limited scrutiny for the verification of increase in capital. The order u/s. 263 of the Act was passed on the ground that assessing officer has not verified the claim u/s. 54 of the Act made by the assessee. The Hon’ble Tribunal held that the assessing officer cannot go beyond the reason for which the matter was selected for scrutiny.

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 10 of 28 Therefore, it would not be open to Principal Commissioner of Income Tax to pass order u/s. 263 of the Act holding that there is a failure of the assessing officer to verify other aspects by rendering the assessment order as erroneous and prejudicial to the interests of the revenue. 5.11 He submitted that the learned assessing officer has not converted the limited scrutiny to complete scrutiny for completing the assessment as discussed above. The CBDT vide its Instruction no. 5/2016 has laid down the procedure for converting the limited scrutiny to complete scrutiny. As per the above instruction, the learned assessing officer has to form a reasonable view based on certain materials. Further, the approval of the jurisdictional Pr. CIT / CIT / Pr. DIT / DIT is required for converting the ‘limited scrutiny’ case to ‘Complete scrutiny’. The learned assessing officer ought to have followed the above procedure laid down by CBDT. In absence of such failure to follow the procedure as laid down in the above referred Instruction to convert the limited scrutiny to complete scrutiny, the entire assessment becomes null and void. Hence, he prayed that the Tribunal be pleased to hold that the assessment order is liable to be quashed. 5.12 He relied on the decision of Hon’ble Jaipur Tribunal in Smt. Manju Kaushik v. DCIT 78 ITR (Trib) 564 wherein it has upheld the above proposition. The relevant portion of the judgment is as under; (Para 4 of page 570) [placed at Page No. 49 to 63 of assessee’s paper book] The Assessing Officer is duty bound to follow the instructions in case limited scrutiny assessment proceeding are proposed to be converted into complete scrutiny and without following said procedure and necessary approval of the competent authority conducting an enquiry on the issue which is outside the limited scrutiny would be beyond the jurisdiction of the Assessing Officer. This Tribunal has taken the consistent view on this issue in the series of decisions that if the Assessing Officer has taken up the issue of scrutiny without converting the limited scrutiny to complete scrutiny by taking a prior approval from the competent authority, then the said order passed by the Assessing Officer will be in nullity and beyond his jurisdiction.

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 11 of 28 5.13 The facts of the above case are that the assessee’s case was selected for limited scrutiny under CASS. A notice u/s. 143(2) of the Act was issued with respect to examination of deduction claimed under the head ‘Capital Gains’. After satisfying himself on the above issue, the assessing officer issued another notice u/s. 142(1) dated 25.11.2016 seeking details of deduction claimed u/s. 54B of the Act. The assessing officer has requested for approval of the Pr. CIT for converting the case from limited to complete scrutiny. The approval was communicated to assessing officer on 29.11.2016. However, the assessing officer has issued notice u/s. 142(1) of the Act seeking details of deduction u/s. 54B of the Act on 25.11.2016 which is before the approval is granted. In this connection, the Hon’ble Tribunal held that without the necessary approval, the assessing officer has taken up the other issues for scrutiny and further the assessee was not communicated about the conversion of limited scrutiny to complete scrutiny. Hence, the disallowance u/s. 54B of the Act has to be deleted. The relevant portion of the judgment is reproduced below;

“Hence, we find that the Assessing Officer has taken up the issue and initiated proceedings for complete scrutiny without necessary approval with him. Therefore, the issue taken up by the Assessing Officer regarding disallowance of deduction under section 54B is prior to the necessary approval communicated to the Assessing Officer and therefore, in the absence of communication in writing to the Assessing Officer about the approval, the assumption of jurisdiction by the Assessing Officer is invalid. Consequently, the addition made by the Assessing Officer by denying the deduction under section 54B is not sustainable and the same is deleted.”

5.14 He further relied on the decision of Delhi Tribunal in CBS International Projects Pvt. Ltd. v. Asst. CIT (ITA No. 144/Delhi/2019 dated 28.02.2019) wherein it was held as under; (placed at Page 64 to 71 of assessee’s paper book)

“16. A perusal of the aforesaid instruction shows that the Assessing Officer can widen the scope of scrutiny even if it is selected for scrutiny assessment under computer aided scrutiny selection. However, the condition precedent for such action of the Assessing Officer is that he has to seek prior approval of the higher

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 12 of 28 authorities. A perusal of the assessment order shows that the Assessing Officer has not mentioned as to when the permission from the Principal Commissioner of Income-tax was sought to make further enquiries in the case of the assessee. Considering the facts of the case in totality, in the light of the Central Board of Direct Taxes Instructions mentioned hereinabove, qua notice under section 143(2) of the Act, we are of the considered opinion that the assessment order so framed by the Assessing Officer is not in consonance with Instruction of the Central Board of Direct Taxes and, therefore deserves to be quashed”

5.15 In view of the above submissions, he prayed that the Tribunal be pleased to hold that the assessment is null and void. 6. The ld. D.R. relied on the order of ld. CIT(A). 7. We have heard the rival submissions and perused the materials available on record. We find that the instructions of CBDT are very clear for examination of issue other than the reasons taken up in limited scrutiny case. The instructions of the CBDT are as under:

INSTRUCTION NO.20/2015 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block, New Delhi, the 29th of December, 2015

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 26-9-2014 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. 2. In order to facilitate the conduct of scrutiny assessments and to bring further clarity on some of the issues emerging from the aforesaid Instruction, following clarifications are being made: 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 all cases selected under CASS: The said Instruction is applicable where the case is selected

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 13 of 28 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 Officer, shall also confine the Questionnaire only to the specific issues pertaining to AIR/CIB/26AS data. Wider scrutiny in these cases can only be conducted as per the guidelines and procedures stated in Instruction No. 7/2014. 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 communicated to the assessee concerned. b. The Questionnaire under section 142(1) of the Act in ‘Limited Scrutiny’ cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the ‘Limited Scrutiny’ issues. c. These cases shall be completed expeditiously in a limited number of hearings. d. During the course of assessment proceedings in ‘limited Scrutiny’ cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs. five lakhs (for metro charges, the monetary limit shall be Rs. ten lakhs) requiring substantial verification on any other issue(s), then, the case may be taken up for ‘Complete Scrutiny’ with the approval of the Pr. CIT/CIT concerned. However, such an approval shall be accorded by the Pr. CIT/CIT in writing after being satisfied about merits of the issue(s) necessitating ‘Complete Scrutiny’ in that particular case. Such cases shall be monitored by the Range Head concerned. The procedure indicated at points (a), (b) and (c) above shall no longer remain binding in such cases. (For the present purpose, ‘Metro charges’ would mean Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Ahmadabad).

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 14 of 28 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 consideration shall be given to the submissions made by the assessee in response to the show-cause notice. 5. The contents of this Instruction should be immediately brought to the notice of all concerned for strict compliance.

(Ankita Pandey) Under Secretary to Government of India

7.1. Further, Instruction No. 5 of 2016 dated 14.07.2016 reads as under:

Instruction No. 5/2016 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block, New Delhi, the 14th of July, 2016

Subject: Direction regarding scope of enquiry in cases under ‘Limited Scrutiny’ selected through CASS 2015 & 2016-regd.-

Vide Instruction No. 20/2015 dated 29.12.2015 in File of even number, Board has laid down Standard Operating Procedure for handling of cases under ‘Limited Scrutiny’ which were selected through Computer Aided Scrutiny Selection in ‘CASS Cycle 2015’. In these cases, it was stated that the general scope of enquiry in scrutiny proceedings should be restricted to the relevant parameters which formed the basis for selecting the case for scrutiny. However, in revenue potential cases, it was further provided that ‘Complete Scrutiny’ could be conducted, if there was potential escapement of income above a prescribed monetary limit, subject to the approval of administrative Pr. CIT/CIT/Pr. DIT/DIT. 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

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 15 of 28 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. 3. Further, while forming the reasonable view, the Assessing Officer would ensure that: a. there exists credible material or information available on record for forming such view; b. this reasonable view should not be based on mere suspicion, conjecture or unreliable source; and c. there must be a direct nexus between the available material and formation of such view.

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 16 of 28 (Rohit Garg) Deputy Secretary to the Government of India

7.2 The crux of the instructions are summarized as under: i. The questionnaire u/s 142(1) shall be confined only to the issue of limited scrutiny. ii. Approval of PCIT/CIT concern iii. PCIT/CIT concern shall grant approval in writing and after being satisfied on the merits of the case. iv. Such cases shall be monitored by range head. v. In limited scrutiny cases enquiry shall be restricted only on the issues of limited scrutiny. vi. Only after conversion of case to complete scrutiny and after following the procedure outlined above the A.O. may examined the issues other than limited scrutiny issues. v. The A.O. shall intimate the assessee regarding conducting complete scrutiny. vi. The provisions of Sec. 144A should be invoked in suitable cases. vii. To prevent the roving and fishing enquiries, such cases should be picked up for review and inspection by administrative authorities.

7.3 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 ITA No. 144/Del/2019 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

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 17 of 28 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.

7.4 Before us, ld. A.R. submitted that assessee got a copy of order u/s 7(1) of the Right to Information Act, 2005 from CPIO & Income Tax Officer Ward-4(2)(1) Bangalore dated 21.4.2022 where it is stated as follows:

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 18 of 28

7.5 According to him there was no prior approval and permission of the ld. PCIT. As such there was no reason to convert the limited scrutiny in complete scrutiny. In our opinion, these facts required to be examined at the end of ld. AO as the lower authorities have not produced concerned records for our consideration. Hence, this issue is remitted to the file of ld. AO to decide the same in the light of above order of the Tribunal cited (supra). 8. The next ground Nos.3 to 7 for our consideration is with regard to Addition u/s 69 and 69C of the Act- Rs. 1,42,25,000/-. 8.1 The ld. A.R. submitted that the buyer Mr. S. Parasmal Lodha has not denied the validity of agreements for sale dated 26.03.2014. It is further submitted that Mr. S Parasmal Lodha has not denied the fact that he has paid amount of Rs.1,42,25,000 in cash to the appellant as per the agreement dated 26.03.2014. The buyer merely

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 19 of 28 states that the agreement for sale was made for the purpose of obtaining bank loan. However, does not denies the fact that he has not paid cash of Rs. 1,42,25,000/-. It can be seen from question no 4 of the statement of Mr. Parasmal Lodha wherein he acknowledges the agreed sale consideration as Rs. 2,00,00,000/-. This proves the sources of cash deposit made by the appellant in his bank account. Hence, the sources of the cash deposits and investment are proved. 8.2 He submitted that as per Agreement for Sale, the property was agreed to be sold for a sum of Rs. 2,00,00,000/-. The agreement itself recorded that a sum of Rs. 11,00,000/- was paid in cash on execution of the agreement. There is an endorsement in the agreement that a further sum of Rs. 60,00,000/- was paid in cash on 14th July 2014. The endorsement also states that the balance sum of Rs. 1,29,00,000/- will be paid before execution. The learned assessing officer or the buyer has not given any findings for the above issue. Therefore, the denial of paying cash is incorrect. 8.3 The bank statement shows the receipt of cash nearer to the dates of sale agreements, endorsement as per the sale agreement and sale deed. He submitted the details as under;

Details of amounts received as per above referred documents. Sl Events Date Amount No 01 Sale Agreement 26.03.2014 11,00,000 02 Advance Received 14.07.2014 60,00,000 03 Sale Deed (Through bank) 28.07.20214 57,75,000

Details of Cash deposits Sl Events Date Amount No 01 Cash Deposits (Out of advance received on 15.07.2014 48,00,000 14.07.2014) 02 Cash Deposits (Out of advance received on 26.07.2014 19,00,000 14.07.2014) 03 Cash Deposits (Out of final cash received 09.08.2014 23,00,000 on date of sale deed)

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 20 of 28 04 Cash Deposits (Out of final cash received 16.08.2014 8,00,000 on date of sale deed) 05 Cash Deposits (Out of final cash received 14.10.2014 20,00,000 on date of sale deed) 06 As per Sale Deed 02.08.2014 57,75,000 Total 1,75,75,000 The copy of bank statement is placed with her written submissions and the same was filed with AO. He submitted that the above details show that the appellant has received cash of Rs. 2,00,00,000/- from the buyer as consideration of sale of property. Hence, the Hon’ble Tribunal be pleased to consider the sale consideration as Rs. 2 crore and not Rs. 57,75,000/-. 8.4 Further, he submitted the following details which shows the investments in NHAI and REC Bonds for claiming exemption u/s. 54EC of the Act. Date Amount 06.08.2014 (After sale deed) 25,00,000 07.08.2014 (After sale deed) 25,00,000 Total 50,00,000

He placed a copy of NHAI and REC certificates in her written submissions and the same was filed with AO. 8.5 He further submitted that the learned assessing officer has not given any opportunity to cross examine the buyer. If the assessing officer is drawing an adverse inference from the statement of the buyer, an opportunity ought to have been given to the appellant to cross examine the buyer even if the assessee does not seek for the same during the assessment proceedings. Once the statements of the buyer and seller are contradictory, the cross examination should have been provided to the assessee to clear the facts and the assessing officer was duty bound for the same. In absence of such opportunity to cross examine, the statement of Mr. Parasmal Lodha cannot be relied upon and the assessment is liable to be quashed since the same has been drawn based on the above

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 21 of 28 statement. He relied on the following decisions for the above proposition.

• Andaman Timber Industries v. CCE (324) ELT 641 • Kirloskar Investments & Finance Ltd Vs ACIT 67 ITD 504 • ACIT Vs Best Infrastructure (India) (P.) Ltd 397 ITR 82 • Fateh Chand Charitable Trust Vs CIT (Exemptions) 49 IR (Trib) 276 • Obulapuram Mining Company Pvt. Ltd Vs DCIT 2016 (7) TMI 1435 8.6 He relied on the decision of Hon’ble Bangalore Tribunal in Sri Devaraj Urs Educational Trust ITA Nos. 500 to 506/Bang/2020 for the above proposition. The relevant portion of the judgment is reproduced below; “231. The AO failed to respond to the assessee’s letter. It is admitted fact that in every year 150 MBBS students were admitted to the college in addition to 68 post graduate students. The total number of students in college admitted during the last 7 years was approximately 1526 persons. The ld. AO alleged in the assessment order that assessee has been collecting the capitation fees from around 800 students for admission in various courses. Out of 800, 5 students/parents responded to the AO’s letter and out of them 2 persons have given statement. There is no discussion in Assessment order with regard to other 3 persons. In our opinion the statement of 2 cannot be basis for making such huge additions on collection of capitation fees. It cannot be considered as appropriate sample to frame the assessment on the basis of their statement. Further, the assessee requested for cross examination of all the parties whoever have given the statements against the assessee, if any, which was not provided at all. In view of this, such statements cannot be relied upon. The department despite its attempts failed to collect any corroborative information regarding collection of capitation fees, except relying on uncorroborated entries in the loose papers/Excel sheets, wants to frame the assessments in all these assessment years relying upon the same which is not acceptable. The revenue authorities bound to follow the principle of natural justice and ought to have given proper opportunity of examination and cross examination of the parties concerned whose statements are relied upon to frame the assessment. In our opinion the discovery of documents not only sufficient to conclude the collection of unaccounted capitation fees, cross examination of concerned parties is also important.”

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 22 of 28 8.7 We further rely on the observations of the Hon’ble Tribunal in para 234 at page 128 of the order and the relevant portion is reproduced below; “We are of the opinion that the department cannot rely on those statements, more so when it was not confronted to the assessee for cross-examination and the same cannot be relied upon.”

8.8 In the above case, the learned Departmental Representative relied on certain decisions stating that the case can be remanded to the lower authorities to provide an opportunity of being heard and assessment order should not be set aside. However, the Tribunal relied on the decision of Hon’ble Supreme Court in Andaman Timber Industries v. CCE (324) ELT 641 and held as under; “246. Further it is to be noted that we have already relied on the Supreme Court judgment in Andaman Timber Industries v. Commissioner of Central Excise, 281 CTR 241 (SC) wherein it was held that opportunity of cross examination not given leads to nullity and assessment order to be quashed. It is also pertinent to mention herein the decision of Special Bench of the Tribunal in ACIT v. Vireet Investments (P) Ltd. 165 ITD 27 (Delhi – Trib.) (SB) wherein it was held that when two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted, which is in line with the Supreme Court judgment in the case of CIT v. Vegetable Products, 88 ITR 192 (SC). This is a well accepted construction recognized by various courts. Accordingly, we also reject this argument of the ld. DR.”

8.9 He submitted that the agreement for sale, bank statements etc clearly show the sources of funds for making the investments. Hence, the circumstantial evidences produced by the assessee proves the sources of funds. Therefore, merely on the statement of the other party, addition cannot be made. He relied on the decision of Hon’ble Allahabad High Court in the case of Commissioner of Income Tax Vs Intezar Ali, 372 ITR 651 wherein the Hon’ble High Court held that when the circumstantial evidences submitted by the assessee, which goes to prove that the amount received by the seller towards the sale of the property, will be sufficient proof for discharging the burden cast on the assessee. In the instant case, the seller received the sale consideration for sale of agriculture land

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 23 of 28 for Rs. 1,20,00,000/- and deposited the same in the bank account, whereas the buyer had declared the cost of acquisition at Rs. 22,00,000/-The assessing officer determined the addition of Rs. 77,80,000/- as unexplained income being the difference in the value as per sale deed and sale consideration declared by the assessee. The Hon’ble High Court accepted the sale consideration at Rs. 1,20,00,000/- as declared by the assessee. The relevant portion of the judgment is reproduced below herein the findings of the Tribunal has been accepted by the High Court; “8. The Income-tax Appellate Tribunal considered the submissions and found that the evidence led in the light of the explanation submitted by the assessee, source of deposit in question in the bank is sale of land by him. The reasons shown by the authorities below for deposit and the explanation of the assessee are wholly arbitrary. The assessee had explained that the land was sold for Rs. 1.20 crores out of which Rs. 20 lakhs was paid in advance and remaining sale consideration was paid to him at the time of registration of sale deed. Out of which Rs. 93 lakhs was paid in cash and Rs. 7 lakhs by demand draft. In this manner total amount of Rs. 1,20,00,000 was paid. The amount of Rs. 22,40,000 is shown in the sale deed out of which Rs. 20 lakhs was paid in advance pertaining to the financial year 2006-07. The appellate authority, thereafter, accepted the explanation of the assessee and recorded its findings as follows:

"Besides Shri Gulzar and Shri Gaffar who were shown as witnesses in the sale deed had also stated that at the time of registry, the purchasers had in their presence made the payment of Rs. 1,00,00,000 to the assessee, i.e., Rs. 7,00,000 by DD and Rs. 93,00,000 in cash and that the bank manager had collected the money from the assessee. The bank manager, of the concern branch of Syndicate Bank in his statement has also supported this fact that an amount of Rs. 90,00,000 was deposited by the assessee to his branch with this information that it was out of the sale receipt of the land sold by him. It is a prevalent practice in the land transaction that real sale consideration is not shown in the sale deed. There was also sufficient reason for the purchasers to conceal actual sale consideration in the sale deed to evade tax and stamp duty since it is paid by the purchasers only. Ignoring the above documents, circumstantial evidence and the prevalent practice in the land transaction, we are of the view that the authorities below were not justified in doubting the explanation of the assessee for the source of deposit in question mainly on the basis that the registered sale deed signed by the assessee himself shows a sale value consideration of only Rs. 22,20,000 and that there is no full proof evidence on record that the purchasers had given total consideration of Rs. 1,20,00,000. There was also nothing on record to suggest either that assessee was having any other source of income which has been given more weightage by the authority below than the explanation of the assessee that the source of the deposit in question was sale receipt of the land sold by him as the selling of land

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 24 of 28 and deposit made out of the sale receipt made on the same day, when sale deed was registered has not been disputed. We thus find that preponderance of probability is more in favour of the explanation of the assessee. In its remand report which was furnished before the learned Commissioner of Income-tax (Appeals) on the submission of the assessee made before him, the Assessing Officer has also failed to contradict the explanation furnished by the assessee with some positive evidence. On the basis of documents, explanation of the assessee and others and the prevalent practice in the land transaction it can be safely inferred that whatever the assessee had explained about the source of the deposit cannot be doubted especially in the absence of contrary material on record.

We, thus, while setting aside orders of the authorities below in this regard, direct the Assessing Officer to delete the addition in question made at Rs. 77,80,000 on account of income from undisclosed sources. The grounds involving the assessee are, thus, allowed." 9. We have gone through the orders passed by the Assessing Officer, Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal and find that the questions of law as raised do not arise for consideration inasmuch as findings recorded by the Income-tax Appellate Tribunal are findings of fact, which do not call for consideration or reconsideration of this court.”

8.10 In view of the above submissions, he prayed that the Hon’ble Tribunal be pleased to allow the appeal. 9. The ld. D.R. submitted that these grounds of appeal are against the addition of Rs.1,42,25,000/- unexplained money and unexplained investment. These grounds are taken up together for the sake of clarity and brevity. The ld. AO has given detailed reasons for makings this addition in the Assessment Order. The assessee's LR was given due opportunity to present her case with facts and evidence. Statements of the LR herself, the purchaser of the property, Shri Parasmal Lodha and the person to whom Sri Lodha had in tur sold the property, Shri Noratanmal were recorded. As per sale deed registered on 2.8.2014, the property was sold for a sale consideration of Rs.57,75,500/-. However, as per an unregistered sale agreement dated 26.3.2014 made with Shri Parasmal Lodha (to whom the property was sold vide above referred registered sale deed), the sale consideration for the property was mentioned as Rs. 2,00,00,000/-. In response to summons issued

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 25 of 28 for examination, Shri Lodha stated that the said unregistered sale agreement was made to obtaining loan from bank and that the property was purchased by him as per the registered sale deed for Rs. 57,75,000/-. He also informed that the property was subsequently sold by him to Shri Noratanmal and Smt. Manju Bai on 01.02.2015 for a Sale consideration of Rs. 69,44,000/- due to some 'defect in vaastu' and short term capital gains (STCG) of Rs. 36,278/- was shown on the transaction by him in his ROI. On being confronted with the issue the assessee's LR reiterated that the property was sold for Rs. 2,00,00,000/- as per unregistered agreement. The AO again examined the buyer Shri Lodha and the assessee's LR together and their statements was recorded. In her statement, the assessee's LR stated that a total of Rs. 1,42,25,000/- was paid to the assessee in cash by the buyer as per agreement to sell, while Rs. 89,06,344/- was paid by cheque on 05.08.2014. For Rs. 71,00,000/- cash stated to have been received the assessee's LR said the amounts were mentioned in the unregistered agreement. However, for the balance Rs. 71,25,000/- he had no proof. The AO also confronted the LR with the fact of return of Rs. 31,31 ,344/- (Rs. 89,06,344/- - Rs. 57,75,000/-) to Shri Lodha by the assessee via cheque dated 7.8.2014 to which the assessee's LR stated that it was the excess payment returned to him. Shri Lodha in his statement admitted having entered into the unregistered sale agreement for the purpose of obtaining loan from bank, but denied making any cash payments. The AO found that he had taken loan of Rs.90,00,000/- from L&T Housing Finance Ltd. against property purchase of 57,75,000/-. Further, as mentioned above, the assessee had received cheque of Rs. 89,06,344/of L&T Housing Finance Ltd. through ICICI Bank from Shri Lodha, of which Rs. 31,31,344/- was returned to Shri Lodha via cheque. The assessee thus retained Rs.57,75,000/- which is the sale amount shown in the registered sale deed. The ld. D.R. stated that the AO also

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 26 of 28 recorded statement of Shri Noratanmal (to whom Shri Lodha had said to have sold the property) and found that the property was sold to him for Rs. 69,44,000/-.

9.1 He also submitted that the AO found that the sale consideration of the immoveable property could be substantiated at Rs.57,75,000/- and concluded that the assessee had tried to introduce his unexplained money in the garb of sale consideration and avoided paying tax on the same by claiming exemption u/s 54 of the Act. The assessee had utilized the differential amount of Rs.1,42,25,000/- for construction of house property and the same was treated as unexplained and added.

9.2 He submitted that in submissions during appellate proceedings the assessee's LR has reiterated the contentions raised in grounds of appeal and made during assessment proceedings. No new fact or evidence has been brought on record to controvert the findings of the AO based on the facts of the case, statements recorded etc.

9.3 He submitted that on the basis of the specific facts of the case as discussed above, the surrounding circumstances, the findings of the AO elaborated in the Assessment Order and material on record the ld. NFAC found no reason to interfere with the Order and he dismissed the grounds of appeal of the assessee.

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 27 of 28 him. In our opinion, when the assessee asked for cross examination of the third party whose statement was relied upon, it is incumbent upon the ld. AO to give an opportunity of cross examination to the assessee as held by Hon’ble Supreme Court in the case of Andaman Timber Industries cited (supra). Without prejudice to this, we are of the opinion that there is a difference between sales consideration considered for registration of property which is at Rs.57,75,000/- and the sale consideration shown by the assessee at Rs.2 Crores. Thus, there was a difference of Rs.1,42,25,000/-, which has been considered as unexplained income of the assessee. In support of the claim of assessee, the assessee furnished the unregistered sale agreement dated 26.3.2014 made with Parasmal Lodha. On questioning, the assessee stated that the assessee received a sale consideration of Rs.2 Crores instead of Rs.57.75 lakhs shown in the sale deed. The ld. AO not ready to accept this contention of the assessee. However, the claim of assessee supported by the unregistered sale agreement. This fact has been accepted by Parasmal Lodha. However, he stated that the said sale agreement has been made for limited purpose of availing housing loan from L&T Housing Finance Ltd. against which he has taken Rs.90 lakhs from L&T Housing Finance Ltd., however, stopped the enquiry at this stage and not carried to the logical conclusion. In our opinion, it is appropriate to remit the issue to the file of ld. AO to carry out necessary enquiry on this issue and provide an opportunity of cross examining Parasmal Lodha to know what was the exact amount in respect of property bearing 118/4, 1st Main Road, 1st Cross, Bazaar Street, Udaynagar, Bangalore 560 016. Accordingly, the issue in dispute is remitted to the file of ld. AO for fresh consideration at the end of ld. AO. These grounds of appeal of the assessee are partly allowed.

ITA No.509/Bang/2024 Smt. Bridget Anthony, Bangalore Page 28 of 28 11. In the result, appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the open court on 5th Aug, 2024

Sd/- Sd/- (Chandra Poojari) (Keshav Dubey) Accountant Member Judicial Member

Bangalore, Dated 5th Aug, 2024. VG/SPS Copy to:

Asst.Registrar, ITAT, Bangalore.