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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
1. This appeal has been filed by the assessee against the order passed by the Ld. CIT (Appeals), National Faceless Appeal Centre (in short “NFAC”), Delhi in Order No. ITBA/NFAC/S/250/2021- 22/1032309218(1) vide order dated 09.04.2021 passed for Assessment Year 2017-18.
The assessee has taken the following grounds of appeals:-
“1. The learned CIT(A) erred on facts as also in law in dismissing the appeal holding that no submission was filed by the Maganbhai Bachibhai Rupapara vs. ITO Asst.Year –2017-18 appellant. The submission uploaded by the appellant may kindly be considered.
2. The learned CIT(A) erred on facts as also in law in confirming the addition of Rs. 5,07,150/- made by treating agricultural income as unexplained. The addition made u/s. 68 of the Act may kindly be deleted.”
The assessee has also taken the following additional Grounds of appeal: “3. Limited Scrutiny Assessment was initiated to verify source of cash deposit. Addition made on account of agricultural income of Rs. 5,07,150/- is out of the purview of limited scrutiny assessment. The addition may kindly be deleted.
This ground of appeal was not before the first appellate authority. Being a legal ground, the appellant requests your honour to admit the same and oblige.”
4. The brief facts of the case are that the assessment for the year under consideration was selected under CASS scrutiny for “limited scrutiny” purposes. In the notice under section 143(2) of the Act, there is only one selection criteria which was mentioned i.e. “cash deposit during the demonetisation period”. During the demonetisation period, the assessee had deposited cash of ₹ 3 lakhs in his bank account. During the assessment, the AO made enquiry on this aspect and the assessee submitted that the aforesaid deposit was made out of cash withdrawals of Maganbhai Bachibhai Rupapara vs. ITO Asst.Year –2017-18 ₹ 1,625,000/- made by the assessee from the same bank account. Therefore, during the course of assessment proceedings, before the AO, the assessee submitted that the source of cash deposit is fully explained as it is from the cash withdrawals made from the same bank account in which the cash deposit was made. Accordingly, the AO did not make any addition on account of cash deposited by the assessee during demonetisation period. However, during the course of assessment, the AO initiated enquiry on agricultural income and asked the assessee to furnish details of agricultural income. In response to the same, the assessee furnished certain details viz. agricultural Forms in 7/12, 8A, agricultural produce sale bills etc. However, the AO treated agricultural income as unexplained income of the assessee and made addition in respect of the same. In appeal before Ld. CIT(Appeals), he dismissed the appeal of the assessee with the following observations:
2. On a perusal of the facts of the case it is observed that the appellant in his return of income claimed exempt agricultural income of Rs. 5,07,150/-. The AO during the assessment proceedings required the assessee to furnish all the supporting evidences to justify the agricultural income. However, the appellant chose to be non-compliant and no details were filed before the AO. Even during the appellate proceedings, no fresh argument has been taken, neither any supporting evidences have been filed. This clearly shows that the appellant has not corroborative evidence to furnish so as to justify his alleged agricultural income. Maganbhai Bachibhai Rupapara vs. ITO Asst.Year –2017-18 3. In the case of agricultural income the entire onus lies with the assessee, as has been held by Hon’ble Supreme Court in the case of CIT V Ramkrishna Deo 35 ITR 312. Hon’ble court held as under “It is for the assessee to prove that income sought to be taxed is agricultural income exempt from taxation under the Income Tax Act.
In the light of the aforesaid discussion on the facts of the case I have no reason to disagree with the order passed by the AO and hence his order in treating the agricultural income of Rs. 5,07,150/- as unexplained credit u/s 68 of the I.T. Act is upheld.
1. The appeal is treated as dismissed.”
The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) confirming the additions made by the AO in respect of agricultural income. The primary contention of the counsel for the assessee before us is that the case was opened under limited scrutiny for examination of “cash deposited during demonetisation period”. However, while the AO did not make any addition in respect of cash deposited during the demonetisation period, after satisfying himself that the assessee has been able to explain the source of such cash deposit, the AO travelled beyond the scope of “limited scrutiny assessment” and made additions in respect of agricultural income, which is clearly beyond the scope of “limited scrutiny” assessment. Accordingly, the counsel for Maganbhai Bachibhai Rupapara vs. ITO Asst.Year –2017-18 the assessee has challenged the jurisdiction of the AO in passing the aforesaid order by travelling beyond the scope of “limited scrutiny assessment” and submitted that in light of the aforesaid facts, the assessment order is liable to be set aside. In response, the DR relied upon the observations made by the AO and Ld. CIT(Appeals) in their respective orders.
We have heard the rival contentions and perused the material on record. We observe that though the assessment proceedings were initiated under “limited scrutiny assessment” to examine the cash deposits made during the demonetisation period, however, the AO did not make any addition on this aspect and made additions in respect of agricultural income, which was not the subject matter of “limited scrutiny assessment”. Accordingly, the assessment order has been passed in respect of issues which were not the subject matter of “limited scrutiny assessment” notice section 143(2) of the Act. In the case of Shri Narendrakumar Rameshbhai Patel vs. DCIT in the co-ordinate bench held that the jurisdiction of the Assessing Officer in such cases where the notices are issued for limited scrutiny is confined to the claims he has set out in the notice for verification. Further ITAT Ahmedabad in the above case held that the entire issue should have been limited to the extent of the dispute raised in the notice under section 143(2) of the Act for the limited scrutiny but the AO in the present case has exceeded his jurisdiction. In the case of Chaitanya Bansibhai Nagori Vs Principal Commissioner of Income Tax (ITAT Ahmedabad)in ITA number 377/Ahd/2020, the Maganbhai Bachibhai Rupapara vs. ITO Asst.Year –2017-18 Ahmedabad ITAT held that in limited scrutiny, AO cannot go beyond dispute raised in section 143(2) notice. In the case of Dharmin N. Thakkar v. ITO in ITA Number 1378/Ahmedabad/2019, Ahmedabad ITAT quashed the assessment order on the ground that the order was passed beyond the scope of limited scrutiny as there was no question the said notice for the limited scrutiny under section 143(2) of the Act, for the cash balance. In the case of Rajesh Jain v. ITO 162 Taxman 212 (Chd.) (Mag.), the ITAT held that the jurisdiction of the Assessing Officer in such cases where the notices are issued for limited scrutiny is confined to the claims he has set out in the notice for verification. In the case of Balvinder Kumar v. PCIT [2021] 125 taxmann.com 83 (Delhi - Trib.), the ITAT held that in case of limited scrutiny, Assessing Officer could not go beyond reason for which matter was selected for limited scrutiny thus, it would not be open to Principal Commissioner to pass revisionary order under section 263 on other aspects and remit matter to Assessing Officer for fresh assessment. This position of law was further elaborated by the CBDT in its Circular No. 8/2002, dated 27-8-2002. In the case of Duckwoo Autoind Pvt. Ltd. Vs PCIT (ITAT Chennai) in ITA No. 232/Chny/2021, ITAT Chennai held that it is not open for the Assessing Officer to travel beyond the reasons for selection of the scrutiny. In the case of Danone Asia Pte Limited Vs ACIT (ITAT Delhi)ITA No.376/Del/2021, the Delhi ITAT held that as per CBDT Instruction nos. 20/2015 and 5/2016 read with DGIT(Vigilance) letter dated 30th November, 2017 before venturing into other issues outside the scope of limited scrutiny, the Assessing Officer should have taken prior Maganbhai Bachibhai Rupapara vs. ITO Asst.Year –2017-18 approval of PCIT/CIT. Failure of prior approval would render the assessment order bad in law.
In view of the above, since the assessment order has clearly travelled beyond the scope of notice issued under section 143(2) of the Act, the additional Ground of Appeal of the assessee is allowed and the assessment is set aside.