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Facts
The assessee's case was selected for limited scrutiny due to large cash deposits compared to returned income. The Assessing Officer (AO) made additions for unexplained bank deposits, unexplained income, and loan repayments from undisclosed sources, assessing the income at INR 1,53,25,642/-. The Ld. CIT(A) allowed the assessee's appeal, finding that the AO had exceeded jurisdiction by conducting a comprehensive scrutiny without obtaining prior approval for conversion from limited scrutiny.
Held
The Tribunal upheld the Ld. CIT(A)'s decision, confirming that the AO had exceeded jurisdiction by converting a limited scrutiny case to a comprehensive scrutiny without the mandatory prior approval from competent authorities as per CBDT guidelines. Consequently, the additions made beyond the scope of limited scrutiny were deemed invalid.
Key Issues
The key legal issue was whether the Assessing Officer could expand the scope of a limited scrutiny assessment to a comprehensive scrutiny without obtaining prior approval from the competent authority, as mandated by CBDT instructions.
Sections Cited
Section 143(2), Section 142(1), Section 143(3), Section 250, Section 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DEHRADUN “DB BENCH: DEHRADUN
Before: SHRI YOGESH KUMAR U.S & SHRI MANISH AGARWAL
Year : 2017-18] ITO vs Rakesh Mohan Verma Ward-1(1)(3) 144, Neshvilla Road, Aaykar Bhawan, Dehradun, Uttarakhand- 13 A, Subhhash Road, 248001 Uttarakhand PAN-ABBPVCV4728J APPELLANT RESPONDENT Revenue by Shri A.S.Rana, Sr.DR Assessee by Shri Amit Arora, CA & Shri Vishal Mishra, CA Date of Hearing 09.12.2025 Date of Pronouncement 18.02.2026 ORDER
PER MANISH AGARWAL, AM :
1. The present appeal is filed by the Revenue against the order dated 15.05.2024 by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. CIT(A) Dehradun/10729/2019-20 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 27.12.2019 passed u/s 143(3) of the Act pertaining to Assessment Year 2017-18.
Brief facts of the case are that assessee filed his return of income, declaring total income 10,94,900/-. The case of the assessee was selected for scrutiny through CASS with the issue “Large Cash Deposits compared to returned income”. Notice u/s 143(2) was issued on 08.08.2018, followed by notices u/s 142(1) issued from time to time. In response, the assessee filed replies and produced all the information and supporting documentary evidences for examination. The AO vide order dated 27.12.2019 passed u/s 143(3) of the Act assessed the income of the assessee at INR 1,53,25,642/- wherein addition of INR 69,81,000/- is made as unexplained money u/s 69A of the Act towards the bank deposits and further INR 9,60,568/- added as unexplained income being difference between deposits and income declared. Further an addition of INR 62,89,172/- is made as one fourth payments against loan repayment of Rs.251,56,689/- repaid from undisclosed sources u/s 69A of the Act.
3. Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 15.05.2024, allowed the appeal of the assessee.
4. Aggrieved by the order of Ld.CIT(A), Revenue is in appeal before the Tribunal by taking following grounds of appeal:-
“On facts and circumstances of the case and in law, whether the CIT (A) was justified to cancel the assessment proceedings u/s 143 which has been passed on the underlying reason for selection of case which is well within the scope of limited scrutiny being 'Large cash deposits compared to returned income.
2. On facts and circumstances of the case and in law, whether the CIT (A) was justified to cancel the additions made on account of deposits made into bank accounts which have been treated as unexplained money in the hands of the assessee u/s 69A of the I.T. Act and have been added to the total income of the assessee which is based on underlying reason for selection of case which is well within the scope of limited scrutiny being 'Large cash deposits compared to returned income.
On facts and circumstances of the case and in law, whether the CIT (A) was justified to cancel the additions made on account of excess receipts claimed which have added to the total income of the assessee as understated income under the head Income from other sources covered u/s 69A of the I.T. Act, 1961 which is based on underlying reason for selection of case which is well within the scope of limited scrutiny being 'Large cash deposits compared to returned income.
On facts and circumstances of the case and in law, whether the CIT (A) was justified to cancel the additions made on account of payments made against loan repayments as these deposits have been partly explained and have been added to the total income as deposited/repaid from undisclosed sources u/s 69A of the I.T. Act, 1961 which is based on underlying reason for selection of case which is well within the scope of limited scrutiny being 'Large cash deposits compared to returned income'.
On facts and circumstances of the case and in law, whether the CIT (A) was justified to cancel the assessment proceedings u/s 143 which has been passed on the underlying reason for selection of case well within the scope of limited scrutiny being and there has been no requirement as per the provision of the Act to obtain prior approval from competent authority as per CBDT Instruction for conversion of case from limited to complete scrutiny.
That the appellant craves leave to add or amend any other more ground of appeal as stated above as and when need for doing so may arise.”
5. Heard the contentions of both parties and perused the material available on record. Grounds of appeal No.1 to 5 raised by the Revenue are that case of the assessee was selected for limited scrutiny for the reason, “large cash deposits compared to return of income”. However, from the perusal of the assessment order, it is observed that additions have been made on various counts which include deposits in the bank accounts alleging the same as undisclosed, repayment of loans alleging as made from undisclosed sources and on accounts of excess receipt not declared in the return of income filed by the assessee. Ld.CIT(A) after obtaining he Remand Report from the AO concluded that AO has completed the case by treating the case of the assessee as selected under comprehensive scrutiny and no approval was taken for conversion from limited scrutiny to complete scrutiny as per the CBDT guidelines. The relevant observations made by ld. CIT(A) in para 6.2.2 to para 6.2.10 of the order are reproduced as under:-
6. Admittedly before us, the Revenue’s only claim is that the reasons of limited scrutiny are “(i) cash deposit and (ii) Aggregate of following: Gross total income, exempt income /agriculture income”. However, as observed above, from the perusal of the assessment order, it is evident that AO has made the additions for entire deposits including cash as well as transfer entries and further additions were made on other issues which clearly depicts that the AO has proceeded to complete the assessment as complete scrutiny and not as limited scrutiny case. In the letter sent by the AO to ld. CIT(A), it is observed by the AO that no approval is taken from the higher authorities for conversion of limited scrutiny into complete scrutiny.
Thus, it is a case where the AO has exceeded his jurisdiction with any authority.
This view is supported by the order of Co-ordinate bench of the Tribunal in the case of M/s. Shivalik Educational and Placement Services (P) Ltd. vs AACIT in [Assessment Year 2015-16] order dated 21.12.2023 wherein the Co-ordinate Bench held as under:- 13. “Considering the above facts and circumstances and also the CBDT Circular and the Judicial Precedents, 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 Assessing Officer on the issues which are not inconsonance of the instruction of CBDT are liable to be quashed. The additions made by the Assessing Officer being beyond the scope of the limited scrutiny and the same is deleted.”
In the light of above facts, and further considering the fact that revenue has not been able to controvert the findings of ld. CIT(A) nor any evidence is produced before us by the revenue in this regard. Therefore, we find no error in the order of Ld. CIT(A) in holding that the AO has exceeded his jurisdiction in not obtaining the approval from the Competent Authority before making additions beyond the issue of limited scrutiny by converting the case from limited scrutiny to comprehensive scrutiny. Accordingly, we find no error in the order of ld. CIT(A) which is hereby, upheld.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open Court on 18.02.2026.